Regulators Force Amazon to Re-open SFP, Creating New Opportunity for Sellers

May 9, 2024 Re-open SFP, Creating New Opportunity for Sellers

In late 2022 Amazon weathered a significant legal battle in the EU that could have seen it fined $47 Billion dollars. Following these legal proceedings, the company made notable concessions, including allowing customers flexibility of shipping carriers. Now in 2023, Amazon is under scrutiny again, this time from the FTC for giving preferential treatment to FBA sellers. All these events might have influenced Amazon’s decision to reopen its Seller Fulfilled Prime (SFP) program, as announced by the company in June 2023.

Why was SFP paused?

SFP was paused as the program didn’t meet shopper expectations. In an interview, Amazon CEO Andy Jassey remarked that 3rd party sellers could not meet the timelines that Amazon does and that outsourcing Prime order fulfillment had the potential to “significantly degrade” or even “eradicate” the quality of Amazon’s delivery experience.

How have regulatory pressures forced Amazon to reopen Seller Fulfilled Prime (SFP)? 

Here are some key events that might have influenced Amazon to make this decision-: 

The Antitrust war between Amazon and FTC  

  • The FTC, headed by Lina Khan who is a long-time critic of Amazon, recently filed a lawsuit against them for manipulating consumers into using its hugely popular “Amazon Prime” subscription. 
  • Above all, The FTC is preparing “The Big One”, a lawsuit centered around the preferential treatment that Amazon affords FBA sellers.
  • FTC is investigating Amazon for using its coveted “buy box” algorithm to disadvantage merchants who don’t use FBA services.
  • It has amassed evidence and intends to file the case before August. 
  • Additionally, in May the FTC sued Amazon in two separate cases for violation of user privacy through Alexa and Ring doorbell cameras. 
  • Amazon agreed to pay the $30 Million dollars fine, citing they disagree with FTC’s claim and just want to close the matter.

Landmark EU ruling, faced threat of $47B fine 

  • In 2020, the EU filed a lawsuit on Amazon for using non-public seller data to launch its own competing private labels. 
  • In 2022, the EU accused Amazon of giving preferential treatment to Fulfilled by Prime (FBA) sellers, making it difficult for non-FBA sellers to win the “buy box” and sell products. 
  • Amazon agreed to make concessions for both settlements to avoid a $47 Billion dollars fine. 
  • Amazon confirmed it will no longer use non-public seller data to develop its private label products. 
  • It also agreed to give equal treatment to sellers for its “buy box” feature, promising to show a second competing offer to consumers.
  • Lastly, Amazon also agreed to let Prime sellers choose any carrier for their logistics or delivery services.

Start by understanding the differences between FBA and SFP: 

  • This bill prohibits certain large online platforms like Amazon from engaging in anti-competitive acts, such as preferential treatment of their own products and unfairly limiting the availability of competing products. 

What is Amazon trying to do with SFP? 

  • The reopening of Seller Fulfilled Prime (SFP) has been timed strategically by Amazon – their answer to anti-competitive accusations.
  • EU and FTC cases accuse Amazon of using preferential practices to benefit FBA sellers. By reopening SFP, Amazon can claim that it’s leveling the playing field by allowing merchants to use any fulfillment partner of their choice while giving more options to the end customer for 2-day delivery.
  • SFP might be the exact defense Amazon needs against FTC allegations and can be the right alternative for Amazon FBA sellers, as they can have more autonomy over their logistics, save money, and still retain the coveted Prime badge that FBA comes with.

How can sellers prepare to win on Seller Fulfilled Prime (SFP)?

While both programs allow you to feature the coveted Prime badge, each option comes with its own set of benefits and implications. With FBA, you get a fixed price per SKU (which you can calculate using the FBA revenue calculator). On the other hand, you pay different fees on every order with SFP because you need to pay your 3PL and the shipping carriers. You can learn more about this in the Comprehensive Guide to Selling and Winning on Amazon Seller Fulfilled Prime, which covers the latest program requirements, tips, tricks, and tools.

With FBA warehouses being constrained for space, SFP represents a better, more economically viable option that shields your margins from the impact of long-term storage fees. Therefore, FBA is great for fast-moving items, whereas SFP is better for big and bulky, slow-moving, and seasonal SKUs. 

Lastly, if you attempt to fulfill orders originating outside Amazon using FBA, you need to use Amazon Multi-Channel Fulfillment (MCF). MCF charges a higher fee for non-Amazon orders. If you have SFP infrastructure in place, you can use those warehouses and inventory to fulfill orders across every sales channel at the same price. 

Sellers should understand the cost implications of the FBA policy changes such as long term storage restrictions, restock limitations, storage surcharges and fee hikes, and evaluate if FBA still makes fiscal sense. 

To win in SFP, you should have a deep understanding of the program. Cahoot has created a guide to sell and win on Amazon Seller Fulfilled Prime (SFP), that will help you with everything you need to know about the SFP program.

Your fulfillment partner is critical to winning on SFP. To achieve nationwide delivery you need a partner with a 3PL warehouse network or multiple USA fulfillment centers. Even within that network, you need a partner who can distribute your inventory closer to the end consumer to meet and achieve the 1-2 day delivery requirements. It takes as many as nine (9) warehouses to confidently meet the new SFP metrics. Make sure your SFP partner has a vast footprint and a proven track record of managing this program.

Leave a Reply

Your email address will not be published. Required fields are marked *