The Shift Marketplace Guide to SFP
5 reasons why you should consider using SFP
One of the most crucial decisions you’ll need to make when selling products on Amazon is what fulfilment method you’re going to use to get those products to your customers.
As it stands, you have three options:
- Fulfilment by Amazon (FBA): Amazon stores and ships your products
- Merchant Fulfilled Network (MFN): You store and ship your products
- Seller Fulfilled Prime (SFP): You store and ship your products, Amazon assists with the courier options
Now, 9 times out of 10 we would recommend FBA as the best and most convenient fulfilment method.
Which begs the question: what about the remaining 1 time out of 10? Should you be using MFN or SFP?
Both fulfilment methods come with their individual perks and challenges, but if you want to experience the full benefits of selling on Amazon, then there’s a number of reasons why you might prefer SFP.
1 – The Prime Badge
First and foremost, the main benefit with SFP is that it’s the only other fulfilment method you can use on Amazon (aside from FBA) which grants you access to that all important Prime Badge. This badge immediately tells customers that you can deliver your products to their doorstep in the next day shipping times they have come to expect from Amazon.
But the Prime Badge does more than just provide you with exclusive Prime shipping privileges. It also gets you in front of more customers. Think about it. There are well over 150 million Amazon Prime members across the globe, and 53.5% of British households are now Prime members. Many of these loyal customers will use search filters to exclusively seek out Prime products. If you don’t have the Prime Badge, then you’ve immediately lost out on a huge chunk of the Amazon audience.
2 – Splitting your stock
One of the most useful perks which comes with SFP is that it makes it much easier to share your stockholdings across multiple sales channels. This is especially useful for businesses who sell their products through their own ecommerce site or other marketplaces alongside Amazon.
A case in point. Say you have 100 units of stock. You could send 50 into an Amazon fulfilment centre to sell on Amazon, and then keep 50 in your own warehouse to sell on your website. Great, you’ve covered both bases, but what if one of the channels underperforms? You could potentially sell out on your website, sell nothing on Amazon, and end up with 50 units of stock which you can’t budge – no matter how much demand your website is receiving.
By storing all your stock centrally in your own warehouse, SFP means you can allocate stock more effectively to the channels which need it most, as and when they need it. The majority of businesses I see moving into SFP do so for this very reason: the fact that they don’t want to commit too much stock into FBA.
3 – High standards?
There are 3 main performance metrics you will need to hit in order to fulfil your orders through SFP.
1 – Ship over 99% of your orders on time
2 – Have an order cancellation rate of less than 0.5%
3 – Use Amazon Buy Shipping Services for at least 99% of orders
On the surface, these criteria might seem strict, but it’s actually easier than you think. When using SFP, you set a collection time with an SFP approved courier, they collect and scan it, and the shipping is confirmed on Amazon. The courier is going to come everyday as long as you’re telling them that there’s orders to collect so, in theory, the on time shipment rate should never drop below that benchmark.
The only metric you really need to worry about is the cancellation rate, as that’s mainly down to your stock and how well you’re managing it. Thankfully, there are a number of measures you can take to ensure that your back end is running like clockwork and to avoid making unnecessary order cancellations.
Plus, it’s unlikely that Amazon will cut you off the second you fall short of these metrics. You’ll be given time to rectify the issues, so just make sure you act quickly if they do arise.
4 – Beneficial to most
Since it’s quite a flexible fulfilment method, there isn’t really a specific mould in terms of what kind of businesses SFP works best for. But, in general, Amazon advises that SFP is most suitable for businesses selling:
- High-value items
- Products with seasonal or unpredictable demand
- Items with variations
- Slow-moving goods
- Inventory that requires special handling or preparation
The only businesses we would never really suggest SFP to is those selling low price items. It’s a simple maths question at the end of the day. If you sell low price products with small profits, the Buy Shipping labels necessary to use SFP could cost more than what an FBA fee would be. In order to bring those Buy Shipping rates down, you’ll need to be shipping a much larger volume of orders.
The other consideration would be if you’re selling heavy or bulky items such as furniture or electrical goods. There are weight and size restrictions to what you can ship through SFP (max 15kg with Royal Mail, max 31kg and 100cm x 70cm x 60cm with DPD); anything over that will have to be shipped through FBA or MFN. Remember, if you use FBA, then those storage fees are also going to be inflated due to the size and weight.
5 – A smoother process
It has become a lot easier to enroll in SFP over the years. All you have to do is complete a trial period where you complete one of two milestones: 1) ship 25 shipments with 99% on-time shipping rate 2) have 5 separate collections with a Prime approved carrier. On top of that, you’ll need to purchase shipping from approved Prime carriers for all of your trial orders, and have less than 0.5% pre-fulfilment order-cancellation rate throughout the whole trial period.
Those metrics might seem ambitious at first, but consider them as a win-win opportunity to test the strength of your fulfilment capabilities. Even if you fail the trial period, then at least you know that SFP wasn’t the right option for you in the first place. You can even use the learnings from the trial to improve your operational management in the long-term.
So, is it for you?
There are some drawbacks to SFP, and there have been some recent changes to the programme in the US which could have considerable impact elsewhere down the line, but SFP is a valuable alternative to FBA.
You can start steady or as quickly as you want. If you’ve got 1000 products in your account, you can choose just one product to enroll on SFP, and you can also change cut-off times and order thresholds if you’re worried about fulfilling orders.
There’s no reason why you can’t have 5 products on MFN, 5 products on SFP, and then everything else on FBA. In fact, for most clients the ideal scenario would be that you hold everything in FBA, and then if there’s any stock gaps you can quickly transition to SFP and continue selling through that.
Unsure whether SFP is the right option for you? Just get in touch and we can walk you through the process.