Third-party sellers using Amazon’s (NASDAQ: AMZN) marketplace have become used to the rules the e-commerce giant has implemented. The company changed the rules of e-commerce delivery with its Prime offering several years ago, and now the benchmarks it created for Amazon customers with Prime are quickly becoming the standard for all sellers in its platform.
Amazon already tightened the screws a bit on Feb. 1 when it required sellers to meet “delivery speed targets” for packages. As of June 1, those targets are getting even tighter.
“Obviously those guys at Amazon are maniacally focused on the customer experience and Prime was a home run for them,” Steve Denton, CEO of Ware2Go, told Modern Shipper. “You can’t ignore it; 38% of all U.S. e-commerce went through Amazon last year.”
Amazon defines its delivery speed targets using delivery speed metrics that measure the “percentage of customer page views that display a one- or two-day delivery promise when the SFP (Seller Fulfilled Prime) offer was the featured offer, regardless of whether a purchase was made.”
Third-party sellers operating under the SFP business model, which allows them to fill their own orders, need to meet these delivery promises — and execute on them. On Feb. 1, that meant that 20% of standard-size shipments had to display and meet a one-day-or-less shipping guarantee; 55% needed to meet two days or less. As of June 1, those numbers change to 30% and 70%, respectively. Oversize items, which are 5% and 30% currently, will increase to 15% and 60%.
Denton said this includes Saturday and Sunday, so sellers need to be cognizant of their warehouse partners and their capabilities, and whether those facilities can ship out goods on a Saturday.
“It’s probably going to make it hard to make some of these small and midsized sellers meet the standards,” he said.
Ware2Go is an end-to-end supply chain company that offers warehousing and logistics services to companies that sell their products on Amazon and other platforms like Walmart (NYSE: WMT) and Shopify (NYSE: SHOP). It is a UPS (NYSE: UPS) company.
According to the company, SFP provides a big boost to sellers and they often see a 30% increase in sales because they are able to display the Prime shipping badge on their pages.
“There’s no doubt that the Prime badge draws in loyal shoppers and drives conversions. In fact, Prime members spend almost twice as much money on Amazon each year as non-members,” a Ware2Go blog notes.
As Amazon has tightened the requirements for SFP membership, Denton said companies like Ware2Go have had to take the lead in helping their customers meet the requirements.
“The requirements came out and it was our mandate to solve that,” he said. “If you think about 2020, the lessons we learned on the supply chain side — the resiliency, the flexibility and the need to have a dynamic supply chain that was not only dynamic in cost, but the ability to flex up and down [based on demand] — was that ability to make that pivot and respond to that at scale was critical and also do it at a variable cost model.”
Denton said all of Ware2Go’s customers are ready for the June 1 requirements, but it wasn’t about just preparing them for Amazon, but setting them up for success on other selling channels as well.
“What does the consumer expect? They expect access to the world’s inventory, they expect transparency on the pricing … two-day delivery or less and they don’t want to pay for that,” he said. “These consumers shop across multiple platforms and their expectations are the same [on each].”
Because of that, while Ware2Go designed its solutions to meet Amazon’s SFP program, it kept in mind other platforms as well.
“We looked at [the requirements] and asked, how do we help our merchants thrive on Amazon? And if we can meet the need for that, it sets them up for success on the other channels they sell,” Denton said.
Ware2Go has approximately 50 warehouses spread across the country, but it made the decision to designate 13 of them as facilities capable of handling SFP’s requirements. Most sellers utilize only two or three warehouses, but Ware2Go works with them to identify in which warehouses product should be placed. The result is that 97% of the country is within a two-day drive of a Ware2Go warehouse.
The company utilizes its NetworkVu technology to help sellers identify the best warehouses.
“It brings in one or two years of sales and shipping history and maps that against warehouses and SFPrequirements and identifies where products should be based on meeting those requirements,” Denton said, adding that it will show what impact inventory placement will have on cost and transit times.
The benefit of such a system, he added, is that sellers can offer the same experience to customers regardless of the platform on which they are selling.
“These new SFP requirements are raising the bar for customer service and customer expectations. The new requirements are forcing a higher percentage of orders to be delivered overnight,” Denton said, adding that consumers don’t differentiate platforms. “To get it right for SFP means you will get it right for others, and that should [open up opportunities to improve sales].”