Among Amazon sellers, there’s the great debate over the best fulfillment method: Seller Fulfilled Prime (SFP) vs Fulfillment by Amazon (FBA). In one corner, you have SFP, free of fees but with more responsibilities. In the other corner you have FBA, a 3PL service that handles your logistics for you, but at a steep cost.
So, which is better? There are a lot of determining factors, including geography, product type, and sales volume, so the “best” choice will be different for each ecommerce brand. Below, we explore the topic in more detail so you can make the best decision for you. Let’s start by analyzing each one individually.
What is Seller Fulfilled Prime (SFP)?
Seller Fulfilled Prime is an Amazon Prime program where merchants fulfill their own orders. You store your own inventory, print your own shipping labels, pack your own boxes, and hand off deliveries to an Amazon-supported carrier. Sure, that sounds like a lot of extra work, but at least you cut costs by not paying someone else to do it.
While that sounds like the ultimate independence, SFP merchants still have to abide by Amazon’s rules. First and foremost, deliveries must reach customers in two days, keeping with the parameters that Amazon Prime promises. There’s also a blanket list of requirements before you can even enroll:
- over 99% of orders shipped on time
- order cancellation rate less than 0.5%
- use Amazon Buy Shipping Services for at least 99% of orders
- agree to Amazon Returns Policy
- offer Premium shipping options
- allow customer service inquiries to be handled by Amazon
On top of those requirements, you have to complete a trial period where you must process orders with a zero-day handling time. Until you complete the trial, your Amazon Prime Badge won’t be displayed.
What is Fulfillment by Amazon (FBA)?
Available to all Amazon sellers (not just Prime), the Fulfillment by Amazon program takes care of shipping and storage for you, but not for free. There are many different pros and cons of FBA, but by far the biggest drawback are the fees, which include:
- a flat monthly fee of $39.99 per month (for Professional sellers)
- a selling fee of $0.45 – $1.35 per unit plus 99¢ per each item sold (for individual sellers)
- storage fee of $0.48 – $2.40 per cubic foot of space
- fulfillment fees based on size & weight tiers (small and large standard; small, medium, and large oversize; special oversize) ranging from a per-unit minimum of $2.50 to a maximum of $137.32 + $0.91/lb above first 90 lb.
- stock removal fee of $0.50 – $0.60 per unit
- labeling fee of $0.20 per unit (if you don’t label your own products properly)
- prep service fee of $1.00 – $2.20 per unit
- returns processing (original fulfillment fee plus repackaging)
- long-term storage fee for products unsold after 365 days: $6.90 per cubic foot or $0.15 per unit, whichever is greater.
- additional fulfillment fees for clothing and apparel, starting at an extra $0.42 per item
- special handling fee for televisions and similar fragile items ($40 for 42” or larger)
- hazardous materials fee from $3.43 to $6.39 + $0.38/lb above first 3 lb (much, much more for special oversize)
- shipping fees to customer
- shipping fees of inventory to Amazon’s warehouse
Although there are ways to lower your FBA fees, you should always calculate to see whether you’d save more money by fulfilling orders yourself.
FBA is expensive, no doubt, but remember that you’re paying for a service. You don’t have to give a second thought to warehouse overhead, shipping logistics, or getting deliveries out on time, although you do have to keep an eye on stock levels to make sure you don’t sell out.
When to Use SFP?
Let’s get down to it. When is Seller Fulfilled Prime best and who should use it?
Your Products are Large/Heavy (or Require Special Handling)
Above, you’ll notice Amazon charges extra for both size and weight, as well as products that need extra care. Their “per cubic foot” fees penalize larger stock, so a single big item could cost more than dozens of tiny items. Similarly, heavy products are also penalized, even with “per pound” charges at higher levels. All and all, if you sell big and heavy products, you can find cheaper storage and shipping options on your own.
You Sell on Multiple Channels
Multichannel retail has many advantages, like reaching new audiences and targeting specific customer groups. Unfortunately, FBA’s multichannel fees are expensive, not to mention that some outlets don’t even allow it.
Your Products Move Slowly
Different industries move at different speeds. A trendy fashion retailer will see a faster inventory turnover than an expensive antique seller. Considering FBA’s long-term storage fees, if your products are likely to remain in the warehouse for over a year, it’s better if you house them yourself.
Your Products are Mostly Seasonal
Similarly, seasonal products spend more time in the warehouse than on the shelves, so your FBA storage fees will undercut your profits.
When to Use FBA?
Conversely, sometimes Fulfillment by Amazon is the better option. Consider FBA if…
You Don’t Qualify for Amazon Prime
Not every seller on Amazon has an on-time shipping rate over 99% or an order cancellation rate under 0.5%, so SFP may not even be an available option. If Amazon is your primary sales channel and you can’t quite qualify as a Prime seller, FBA makes more sense.
You Serve a Large Geographical Area
FBA offers better shipping fees and storage centers around the world. If you’re handling your own shipments through Seller Fulfillment Prime, you may end up paying exorbitant fees for long-distance shipping, even from one North American coast to the other.
Amazon’s Buy Box is Crucial to your Sales Strategy
One great perk of FBA is that you get a small advantage for winning the coveted Buy Box. Some Amazon sellers build their entire marketing strategies around that Buy Box, so FBA would help them more than SFP.
You Sell a Lot of Small Products Quickly
Considering the nature of their fees, FBA is more attuned to small, lightweight products with a quick turnaround: easy to pack, in-and-out fast. These products avoid FBA’s penalties for heavy products, large products, and long-term products.
Should You Use SFP or FBA?
Which is better, Seller Fulfilled Prime or Fulfillment by Amazon? There’s no one right answer, and in fact they’re each built for different circumstances — after all, they’re both designed by Amazon, so why would they offer both unless both are necessary? There are also other options for ecommerce fulfillment, like the newly popular micro fulfillment centers. But before you decide on your preferred method, consider carefully your product line, turnover speed, geographical markets, and marketing strategies to reveal which one will help you most.