You likely saw Amazon's latest results. If you didn't, here's the headline: profits doubled to $1.6bn. Of course, this success isn't purely the result of e-commerce sales. In fact, $1.4bn of that profit figure came from its cloud computing division, Amazon Web Services (AWS), which hosts Netflix and the CIA amongst others.
Far from the bookseller that it started out as, it's now got its fingers into a lot of different pies. Which is one of the reasons they gave for upping their Prime subscription price in the USA from $99 to $119, with CFO Brian Olsavsky saying that Amazon, "continue to increase the value of Prime...[including through] digital benefits."
Inevitably, this price change won't turn consumers away. It's estimated that between 60 and 90 million US households (depending on who you ask) have at least one Prime account under their roofs. Massive.
All of this really draws a line under just how much Amazon refuses to be ignored. For many brands, Amazon forms a role in their e-commerce plans. The question, really, is how they choose to dictate the terms of their relationship with the giant. Here, there are two main options: Fulfilled by Amazon and Seller Fulfilled Prime.
In the following video, I explain why I believe that more and more companies are going to be heading down the Seller Fulfilled Prime route. Scroll down for more information about how Fulfilled by Amazon and Seller Fulfilled Prime differ, hopefully useful if you're new to either offering:
What's the difference between Fulfillment by Amazon and Seller Fulfilled Prime?
Fulfillment by Amazon (FBA)
Around since 2006, FBA essentially means that sellers send their goods to Amazon warehouses where Amazon looks after everything for them.
- Amazon looks after everything. You don't need to worry about much if you're not
- In Amazon's own words, "buyers favor products fulfilled directly by Amazon due to the superior delivery promise." There's an assurance with having Amazon sort everything out; the consumer doesn't have some of the worries that they might have when shopping with an unknown third party vendor.
- Eligible products get given a Prime badge, increasing the chances that these products will be sold.
- This isn't a free service, nor is it a charity. You're sacrificing some of your profits by paying for storage and fulfilment fees.
- You're also handing over a lot of control in your business to Amazon. While some people may be comfortable with this, it's understandable that a large number of people are not.
- What if your stock doesn't move? Or if it's slow? You pay fines. And these fines come on top of the normal service charges that you pay, whether or not you're selling stock.
Seller Fulfilled Prime
The clue here is very much in the name. Instead of sending stock to Amazon, you're looking after your own fulfilment. But you need to make sure that it's up to Amazon standards, in terms of delivery times/ packaging/ branding...the whole Amazon experience. Because this is tied to the 'Prime' experience, this means that companies that are enrolled in the Seller Fulfilled Prime scheme need to be able to facilitate rapid shipping and speedy deliveries.
- Here, you have higher visibility with Prime members than you would do as ordinary sellers. And because the Prime badge is as solid a mark of convenience that you're going to get, it's likely that goods are going to be shifted quicker.
- There aren't any Amazon storage or fulfilment fees. Nada.
- You don't just have a tighter control over the goods that they despatch; you also regain control over your returns. Which means that you have a better idea about what went wrong and are more able to sift out any fraudulent returns.
- Because this approach involves fulfilling orders yourself, you'll need a warehouse space. You'll have more overheads, which could potentially be an issue if you're exclusively selling through Amazon.
- Prime shipping restrictions are no joke. Your processes need to be absolutely seamless in order to guarantee that you're able to actually deliver each and every parcel on time, every time.
- Amazon also give you a really short window through which refunds can be processed. 2 days. So, again, you really need to be running a tight ship.
So, Seller Fulfilled Prime is a good option if you're confident that your warehouse, and your staff, are able to cope with the demand. The ones that are will have a strong tech ecosystem in place to help them succeed; in the warehouse, this means having a Warehouse Management System (WMS).
There's no sign that Amazon's dominance is going to diminish any time soon. The question remains: how are brands going to choose to work with, or work against, it?