Preparing Your Distribution Network to Support Seller Fulfilled Prime’s New May 2021 Requirements
March 30, 2021
Matt Snyder is the Senior Director of Amazon at Vari, a workspace innovation company and active office furniture manufacturer. Matt is also a consultant who specializes in helping Amazon sellers with Seller Fulfilled Prime setup, Amazon APIs, and omni-channel integrations.
Prior to joining Vari, Matt was the e-Commerce Account Executive at Woot.com, where he managed multi-channel daily deal promotions. He is also currently the Co-founder and President of Lovepacs, a nonprofit that provides meals to students who would otherwise go hungry during school holidays.
Here’s a glimpse of what you’ll learn:
- Matt Snyder explains why he joined the Seller Fulfilled Prime (SFP) program and how it has benefited Vari
- What Amazon sellers need to know about the new metrics and requirements of SFP
- How to determine whether a product qualifies for one-day or two-day shipping
- Matt’s advice for managing expectations with 3PL partners and finding the right software for fulfilling orders
- How setting up good shipping logistics has benefited the non-Amazon part of Matt’s business
- The approach Vari’s finance team uses to calculate shipping costs for individual SKUs
- How to choose between SFP and Fulfillment By Amazon (FBA)
- Matt’s predictions for May 2021, when the new SFP policies come into effect
- The challenges Matt faced when setting up the SFP program
In this episode…
Upon joining the Amazon marketplace, third-party sellers have the option to either fulfill their own orders or to use Fulfillment by Amazon (FBA). With FBA, your products are stored in an Amazon fulfillment center and shipped by the Amazon team. However, due to complications in 2020, FBA orders have experienced shipping delays, causing major problems for Amazon sellers.
Because of this, it may be time to consider another option: the Seller Fulfilled Prime (SFP) program. SFP was recently introduced into the Amazon marketplace, and it lets sellers fulfill their own orders to Prime customers. With this program, you have more control over your shipping logistics, meaning you don’t have to wait for Amazon to replenish inventory. So, what do you need to know in order to get started with SFP in 2021?
In this week’s episode of the Buy Box Experts podcast, James Thomson is joined by Matt Snyder, the Senior Director of Amazon at Vari, to discuss the ins and outs of Amazon’s Seller Fulfilled Prime (SFP) program. Matt explains why his company joined the program and how it has benefited the business on and off of Amazon. He also talks about the new SFP requirements, how he evaluates 3PL partners, and his advice for finding the right fulfillment software for your company. Stay tuned.
Resources Mentioned in this episode
- Buy Box Experts
- Controlling Your Brand in The Age of Amazon: The Brand Executive’s Playbook For Winning Online by James Thomson and Whitney Gibson
- James Thomson on LinkedIn
- Vari on Amazon
- Matt Snyder on LinkedIn
- Matt Snyder’s email: [email protected]
- Seller Fulfilled Prime
- Fulfillment by Amazon
- Amazon DSP
- Amazon Business
- Disruptive Advertising
Sponsor for this episode…
Buy Box Experts applies decades of e-commerce experience to successfully manage their clients’ marketplace accounts. The Buy Box account managers specialize in combining an understanding of their clients’ business fundamentals and their in-depth expertise in the Amazon Marketplace.
The team works with marketplace technicians using a system of processes, proprietary software, and extensive channel experience to ensure your Amazon presence captures the opportunity in the marketplace–not only producing greater revenue and profits but also reducing or eliminating your business’ workload.
Buy Box Experts prides itself on being one of the few agencies with an SMB (small to medium-sized business) division and an Enterprise division. Buy Box does not commingle clients among divisions as each has unique needs and requirements for proper account management.
Learn more about Buy Box Experts at BuyBoxExperts.com.
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Welcome to the Buy Box Experts Podcast. We bring to light the unique opportunities brands face in today’s e-commerce world.
James Thomson 0:18
Hi, I’m James Thomson, one of the hosts of the Buy Box Experts Podcast. I’m a partner with Buy Box Experts and the former business head of the selling on Amazon team at Amazon, as well as the first account manager of the Fulfillment by Amazon program. I’m the co-author of a couple of books on Amazon including the recent book, Controlling Your Brand in the Age of Amazon. Today’s episode is brought to you by Buy Box Experts. Buy Box Experts takes ambitious brands and makes them unbeatable. When you hire Buy Box Experts, you receive the strategy optimization and marketing performance to succeed on Amazon. We also support investors with due diligence services. Go to buyboxexperts.com to learn more. And before I introduce our guest today, I want to send a big shout out to the team at Disruptive Advertising. For off Amazon advertising, Disruptive Advertising offers the highest level of service in the digital marketing industry. Focusing on driving traffic, converting traffic and enterprise analytics, Disruptive helps their clients increase their bottom line month after month. Check out disruptiveadvertising.com to learn more. Our guest today on the podcast is Matt Snyder, a consultant who specializes in helping Amazon sellers with Seller Fulfilled Prime setup, as well as Amazon API’s and omni channel integrations. Matt is also the Senior Director of Amazon at Vari, an active office furniture manufacturer. Prior to joining Vari, Matt worked at Woot.com, an Amazon subsidiary, as the e-commerce account executive and managed multichannel daily deal promotions. Matt, welcome and thank you for joining us today on the Buy Box Experts Podcast.
Matt Snyder 1:56
Hey, James, great to be with you today and excited to talk about some Amazon Seller Fulfilled Prime and other services here. So
Matt Snyder 2:52
Yeah, great question here. So, you know, kind of take a step back here and talk about first, you know, why, why did we originally join the program? I know and look over the last 12 months, or there were a lot of benefits to it. And really those benefits were part of our initial decision. But something that, you know, what we’ve learned in the last 12 months, definitely added that, you know, we saw our brand start off as a direct to consumer brand. So, we went out initially built out kind of the the back end operations and logistics to become Seller Fulfilled Prime and then for a long time the program was viewed more as a seller who happened to have their own warehouse and carrier account and you know, is it an opportunity for them to take advantage of, you know, that prime axis? Yeah, it adds some bad benefits there. This list lasts 12 months, though, what we saw as you kind of talked about is we also in with COVID, we saw a huge consumer demand increase, especially in our category, but across many categories. And says, you know, sellers were in a great position because they also had to move a lot of volume. But then the other issues popped up and we started having challenges with one just getting inventory from China or from Asia, wherever your supplier was. But then it’s the names that started limiting how much inventory you put into FBA and then your CV time started getting extended. And so all these things that really were impacting opportunity, you know, the the sellers were in a great position, they had all these customers want to buy, but they were then faced with challenges getting the product yet so they really there was a lot of money left on the table by the sellers. And with the Seller Fulfilled Prime customer, I would say, you know, the areas where it really benefited us was the speed replacement. You know, like all sellers, we had challenges with maintaining inventory in stock. But where we gain that advantage is when we did have that inventory come back in stock. We weren’t faced with that shipping time to Amazon fulfillment centers, when we’re faced with that receiving time, which was pushed in some cases beyond 30 to 45 plus days. Yes. into the event. The thing then is the inventory that you have locked up. Well, that’s not that’s not sellable. So that’s additional inventory that’s, you know, sellers are having to plan for and pay for. So that increases your cash flow. So, as we were kind of looking back and evaluating, you know, Seller Fulfilled Prime, and, you know, we’re gonna talk about some of the changes that’s occurring with that. Those are the things that we kind of added into what are the added values of this program. And it’s, and that really was a highlight for us, it’s understanding that, you know, it reduces our on hand inventory levels, frees up cash flow, and it’s that speed of replenishment, and not having that three day period. And we’ve we’ve all had the experience with replenishing with Amazon where it gets to one facility, and it’s getting cross docked and shipped to five or 10, other ones, and you’re sitting there waiting for that inventory to come in and into sellable conditions that you can take advantage of it. And those were really some of the key things that we took away from this last 12 months, as the key advantages for the Seller Fulfilled Prime program.
James Thomson 6:02
So even if we put sorrowful prime behind us, just the process of having products distributed across the country, to be able to do fbm, or non Amazon shipments, I mean, there’s a lot of mechanics and specialization that needs to happen to get that part, right. As you think about the process of now moving towards the new performance requirements of SFP, starting in May 2021. Talk to us a little bit more about what sellers are going to need to do and what that means in terms of the back end, logistics and warehousing setup that you need to have.
Matt Snyder 6:40
So, you know, I think it’s first it’s important to understand what these new metrics mean, and how our seller is going to be judging are being upgraded by Amazon. And so there are some variations to these metrics based off of your product. And so it’s I think it’s important to understand that from, you know, from is your product, standard size is your product oversize, because there’s two different metrics then based on how that product is and where standard product is going to be required to have that national coverage. So same day shipping, one to two day service, nationwide, that creates a lot of conflicts, there’s probably a lot of sellers here prior to this program that shifted just their their small area, and maybe another competing seller for that same product was, you know, on the other side of kind of the US and they were selling just their product in their small region. Right, right. So that’s going to create some conflict now between these two different sellers with oversize you do have the option to continue to offer regional service. And it’s really key to know that it makes sure that your products are in the right or condition, right. Because if you do have that oversized product, your shipping costs are going to be a lot higher than than a smaller standard sized product. And so being able to reduce your prime coverage, there is going to help reduce a lot of costs as well, too. So make sure your products are doing the right sizing condition. And then but then, from there, there’s been some confusion around what are the actual metrics for, you know, we’re looking at this, these percentages of one day and two day shipping. And it’s important to understand that, but Amazon’s actually measuring your pageviews. So it doesn’t mean that you’re going to have those percentages going to equal actual overnight and second day shipping, but it’s pageviews. So as an example, no customer could see could go and be your page at 10am they get pulled into a meeting there, and they don’t actually get to get back to their computer to make their purchase till three o’clock. Okay. But that’s going to count as your one day view of your one day delivery, because the customer first looked at your product at 10am. But when that order comes to you, it’s going to come as a two day delivery. So you’re gonna so it’s understanding the differences. And that’s where we’re doing a lot of just testing; monitoring is understanding kind of the customer purchasing timelines. So we’re you know, we’re looking at customer insights and understanding when customers view when customers purchase. And that helps us understand how to set our appropriate shipping templates. Because, you know, dialing, it’s easy to if you don’t pay attention to where your costs are going to really, really skyrocket. But understanding how those metrics are going to be measured by Amazon. And then using your settings and within your shipping templates can help manage that overnight, and second day service.
James Thomson 9:39
So let me ask you, where do I go in Seller Central to measure when the first page view happened on my product, so that I know whether this product is going to have to qualify for one day or two days. I’m not familiar with that type of reporting today.
Matt Snyder 9:53
So it’s gonna be for us. Based on our marketing investments, we use Amazon DSP a lot and within Amazon DSP you get some insights into customer audiences when they are viewing your products. And you don’t see we’re not seeing this at a customer level. But we can see, when new customers, we do have higher volumes of customers reading our pages, and what are they actually purchasing? We’re just looking at those and trying to find trends. But then it’s really more just kind of a testing, it will go in on a weekly basis, and we’re just our shipping templates. And then when I say, what we’re doing is you have the option which with regional automation, sorry, automated region settings, to adjust your zones, right. And those, what those zones are doing is saying, how far from your point of shipping? And we’ll talk about here if you know, if you have one location or multiple locations, it’s going to be based off of where the customer is closest to that warehouse facility? And then seeing your zones? And how far out are you going to offer one day in two days services there? So it’s really each week kind of taking a look at that, did I fall short? Did it exceed those metrics, I’m exceeding it, well, then let’s go let’s dial back on those on the zones. And where we’re really making sure we’re just, we’re just hitting those who are not going too far over. And that’s that’s a great way to and then just continue to make sure you’re not, you know, increasing your costs when you don’t really have to.
James Thomson 11:23
So during the initial testing of Seller Fulfilled Prime up to this point, many sellers have gone with the regional prime. And they’ve said, Okay, I’m based in California, I can do ground shipping one day to you know, these four or five states, that’s going to be the area that I’m prepared to do Seller Fulfilled Prime from now for, for most companies, if they’re selling standard sized products, they’re going to have to be able to do prime nationally, they’re not going to be able to exclude certain geographies. You talked about in your company’s particular particular case, with oversize there are some exemptions, but for most companies, it will be national prime coverage needed to do that cost effectively. How does a brand start to think about where they need to locate their products? Where these warehouses are how many of these warehouses they need to have. Because Gosh, if I’m in California, and I got to get stuff to Florida tomorrow, that’s, that’s pretty darn expensive. Unless I’m selling $300 watches, I don’t see how that’s going to work.
Matt Snyder 12:23
You’re right yet the cost can get away from you really quickly here, if you don’t pay attention, or if you don’t have the right bottle setup. So I would say there’s kind of three different models that I’ve found that can work. So one would be if you’re going to own your own facilities, you want to own this from having going out and and either renting warehouse space across the US, building up your own carrier partnerships, finding the right technology from a software point, and that’s it, I will say it’s very labor intensive, you’re gonna have a lot of costs to do this. And I’m gonna say for most sellers out there, this isn’t going to be the right approach for them. The second would be to work with a third party logistics company. That’s what we currently do, we have a common network of different three PL partners that we work with. It’s worked really well for us. We’ve worked with them, too. When we first launched, we had two different locations. So we had one that was central and one that was on the east coast. Yep. And we kind of service the West Coast and from Central as is that we start getting more volume on the west coast, we we, at a later point added a third location that kind of gave us then kind of all touching all bases of the US when when we learned these new metrics coming out, we went ahead and made the decision to add a fourth kind of more on the southeast location. That gives us a really broad coverage of 3PL locations because this is close to customers. It’s just like the FBA approach, right? You’re trying to get your product as close to that customer as you can. And that’s going to ultimately lower your shipping cost.
James Thomson 14:03
So let’s just talk about some of the real tactics here. If I’m looking at multiple 3PL companies, lots of these 3PL networks will say, Oh, well, I’ve got a facility here. I’ve got a facility there. Well, that’s great. But do I need my location to be in Atlanta or Nashville versus Dallas versus Houston? I mean, some of these differences don’t seem significant. And yet, how does the average seller figure out what makes sense?
Matt Snyder 14:29
So we, for us, our primary carrier is FedEx. And so when we were looking at locations, we were also thinking about which which location is going to align best with our carrier where our carriers have the closest hubs because you know, getting that order out the door is step one, but then step two is making sure that your carrier gets the customer time and so to help ensure that that happens, you want to be in a location where either FedEx or UPS and even the location of your vehicle. 3PL within that region, that was the proximity to the local local hub, because, again, we’re talking 24 hour delivery, 48 hour delivery, you know, an hour or 30 minutes is a big deal to ensure the packages get delivered. So that was a big factor for us thinking about, you know, where FedEx has good coverage. And so we went and worked with our FedEx carrier as well, our account manager there, and had them help us look about or think about, what would be the best location for us, because you’re right, you know, there’s a lot of different options out there. Based on locations, you know, you may have a price that’s lower, you know, in North Carolina versus Atlanta, but Atlanta has that, you know, a bigger hub for FedEx or UPS are actually gonna end up doing better, paying a little bit more and having that proximity to, to your carrier locations.
James Thomson 15:52
So are the carriers getting sophisticated about letting you say, I have warehouses in these four places, show me the actual one day or two day coverage, you can you can cover,
Matt Snyder 16:05
you know, for our company, were able to get that access, and I’m sure part of that is just because of the size we are, it’s gonna be a bit more challenging for for some sellers. But it’s, it’s you can find that information out there, you know, a lot of information and this is posted on on the FedEx website. So there’s it’s, you can go out and kind of understand where they’re there their hubs are. So they’re, they’re probably some, some homework you’d have to do as a seller to go out. And, again, kind of overlay the maps of here the considerations I have for three PL partner. And if my opponent can use both FedEx and UPS, that’s going to help give you some some more flexibility, I really would recommend partner with one because the more of all you can build up with with one. And the better, right you’re going to have,
James Thomson 16:50
As I think about this process of 3PLs evolving to be able to be able to support SFP the conversation I’ve had with a lot of warehouse owners is, you know that they focus more on the macro issues of, we have a big location, it’s centrally located. Okay, but can you tell me? Can you get orders out the door by 3:30? Can you get them out the door by four o’clock? Can you get them out the door by 4:30? These are very specific questions that not every 3PL has necessarily thought down to that level of granularity. When you start talking about working with 3PL networks that have already figured out where to locate and get the macro coverage. How do you then evaluate whether they’re doing the micro evaluation of the specific times and abilities within a warehouse to meet certain cut offs? For SMP?
Matt Snyder 17:45
Yeah, great, great question. And good thing to really focus on as you’re having these conversations with the 3PL, you know, we were fortunate we work with only two. So it’s it’s much easier to manage those type of expectations, when you would you can work with with smaller, or fewer number of 3PL partners, as you’re thinking about this, you know, it may be cost effective to think about, Okay, I’m gonna work with, you know, this partner here and have multiple different partners, I believe I would stay away from that or guide people away from that, because a big key factor in your success here is going to be closely having close monitoring, monitoring over these threepio partnerships and the day to day activity. So the more you can focus in on just a specific relationship versus several, it’s gonna make it much easier. And then with that, you know, what we’ve kind of what we did early on is we’ve we have a process, you know, a documented process of just making sure that they’re understand what the timelines are here, and we work it back from, hey, here’s our order cutoff time. based on our order volume, we kind of sit back, look about six months back and show them here’s Twitter, all I mean, has been, here’s what the products most frequently purchased are. These are the products most frequently purchased together, they’ll help them kind of put a plan together, where should your products be staged in a warehouse? And how much staffing are they going to need? And how frequently can we get the orders? So that was another big, you know, key piece of this is we don’t send orders once a day, we’re seeing orders four times a day to the partner so that the first thing in the morning, they’ve got an order file by 10am, they’ve got another order file, noon, and then again, at once they’re getting these throughout the day. So there are there’s no downtime, there’s no somebody sitting there waiting on us to get them orders, it’s constantly getting put to them. And that ensures then that, you know, we can hit those tight windows of operations. And then it kind of the the outside factor that’s within tos is you know, your 3PL partner can execute perfectly, have the orders ready to go but if your carrier doesn’t show up on time, all right, and that and we’ve had those challenges time where you know Chuck doesn’t show up well, that’s that’s another key piece of this. So it’s coordinating both with your, your three PL partners, but then also keeping that close communication and process documents with your with your carriers as well.
James Thomson 20:16
So you’ve got the right partner now. Now you’re looking at software, and the software needs to be able to do a number of different things, you’ve got to figure out where to locate inventory. And then when an order comes in, where do you fulfill that order? From? What software? Have you? Have you evaluated? What software? Have you looked at it? What are the kinds of issues that we’re not talking about, that we should be talking about when we’re looking at how to make the software, be flexible, so that you put inventory in the right place, but also minimize your shipping costs?
Matt Snyder 20:50
Sure, so if we kind of think about this first, you know, what was the problem we’re trying to solve here? So we’re trying to think about where we need to have products at where, you know, where’s? Where are more products or more orders coming for a specific product? How are we going to get that order from Amazon to our 3PL partners, and then back to us? So, you know, what, how we started this is we just kind of map this out? So you know, think about Okay, what am i solving for here? One, I need to have an understanding of how much inventory I need to have in each location? How do I get that inventory feed then sent to Amazon? And once the order is made on Amazon? How am I getting that back into either my accounting system finances system, and then back out to two or 3PLs? Once the product shipped? Well, now we gotta get that data flow back to our system, and then back into Amazon’s. So you kind of if you kind of map that out, and then you can then begin to plug in the different resources for you. And so there isn’t a one solution that’s going to really fit everybody. You know, it’s going to be dependent on you know, what do you have? What are kind of your legacy software tools that you’re already using? For our example? We use NetSuite here. And so I had to go out and find solutions that were specific to NetSuite. One great tool that we’ve leveraged has been a great tool for us as far as, as far as works on many different platforms, it works on many different channels, and what that serves as, the data transfers back between Amazon and us, so it pulls over order files for us. And then once we have tracking, it sends all that order information back. There’s functionality then within NetSuite that allows us to then spread that inventory across. And then you know, we built some logic into our programming, then that says, okay, the customer is in Nevada, so it’s going to go to our California location there. But there may be occurrences where that particular product is out of stock in California. Well, now that orders got to get redirected back to Texas. So there’s all these different variables that, you know, it’s easy to overlook. And so, you know, again, when you start these exercises, that really mapping it out, thinking through the different scenarios that could happen, is going to help you then identify what’s the right software package or services for you. And this this kind of leads into is we’re talking earlier about your 3PL partnership. I would say this is this is when you’re interviewing them, this is a key question to really drive home with them is what are their capabilities as a technology development team, because, you know, finding, we’ve had two different burners, one was really strong with with the integrations and one was was one struggle. And it made a big difference in our ability to get SFP up and running quickly. And having that 3PL partners that had a strong development team, I was able to work with our team to get the integration time or window was much shorter with them than it was with our first partner.
James Thomson 24:01
Once you got this all set up, and you had the products in the right locations, was there any personal benefit to your non Amazon business?
Matt Snyder 24:11
Certainly is to you know, if we think about the e-commerce space today, you know what Amazon has driven to the customer is it’s all about speed, it’s all about the you know, this benefit of getting products the next day, or in some cases the same day. And so even when a customer is not shopping on Amazon, they still have that expectation. They want that Prime service, whether they’re buying on Walmart or if they’re buying on target or even if they’re buying from your own webstore. And so, you know in going through this process, what it has done is it’s improved our performance or efficiencies across all of our sales channels. Now, Amazon is one sales channel but we sell direct to our consumer through our own web store. We have other b2b sellers that we work with and several other channels. So this is improved. Our performance across all these other channels. So when a customer does or decides to go look at our web store, you know, they can expect the same level of service and delivery speed on our webstore. And if we can offer that, if that’s really the deciding factor of how fast can I get my product? Well, if they have the option of getting that in our webstore, it just increases our conversion rate on our own webstore and increases the opportunity that a customer’s gonna buy from us directly. And ultimately, that’s what we want us as a brand is we want that direct relationship with the customer. And so it has certainly helped us improve our conversions across all our other channels as we’ve been able to offer the seen prime level services to these other channels.
James Thomson 25:42
I’m curious what your finance team does when it comes to figuring out the average cost to ship individual SKUs when every location every order is going to have a different shipping cost involved? Because I saw the same SKU 100 times and have 100 different shipping costs, and hence 100 different margins on those 100 orders?
Matt Snyder 26:01
Yep. So we look at this as a cost average. So you know, at that, we can look at this, you know, at the end of a quarter tip, we can look at our total shipping costs, versus all of our product sales and get an app more accurate view of what our p&l looks like. But as we’re modeling this out, the way I kind of approach this is garden at a cost average of what is the ground shipping, what is a second day ship, and then what is the overnight shipment. And you know, had those costs then collected for all of our products in our catalog. And then it looked back and just did a 12 month look back of what was the order volume for each of these products. And then you can kind of make some some, you know, different models are assumptions of Okay, well, how much based off these metrics? How many overnight orders, how many secondary orders and how many grounds? And then you can kind of begin to model that out. And when I looked at this, I looked at it as what would be the cost if I didn’t offer prom at all, if I just sold this as a goprime no FBA no csfp, what’s my cost? And what’s my what’s my margin dollar, sir? By layer in SFP, what’s what’s what that looks like and then even did FBA? And that’s, you know, as sellers are thinking about these different options, you know, encourage you to do that, because it will really show you then where, you know, what is the true value of crime and will based on the category, it can be anywhere from 25% to, you know, to 35 to 40% lift in sales. But what’s your true cost to increase those sales? And how profitable is that? So that’s how we’ve looked at that. And then, you know, generally about, you know, once a quarter, we’ll kind of do a deep dive of what’s our true overall costs of shipping? versus our cost of goods sold and, and NP, the p&l that way?
James Thomson 27:56
Have you been able to use that data to help reallocate where you place inventory on specific SKUs?
Matt Snyder 28:05
So we have and where we, I think what’s been more helpful is with both our webstore orders, you know, we use Power BI and then within Amazon, we you know, if you’re not using Amazon business, or give a plug here for that we use Amazon business and and they get some great insights into Amazon Amazon business gives you some data feedback on where your your your sales are coming from, depending on again on your marketing plan, if you’re using DSP, you can get some those insights as well as your where orders coming from. So you know, we use those different data points to help us think about inventory placement, that probably gives us more insights, then, you know, technically what we could do as well is when you are on Seller Fulfilled Prime. One thing that’s different from FBA is you actually you’re getting that customer information, you’re getting the ship to address, you’re getting the state and zip codes. So you could pull that information down. And you know, and use that data then to map out better inventory positions and inventory planning. So there’s definitely, you know, again, one of the benefits of this program is you’re getting some more customer information. And again, you have to be careful of how you use it. But there’s an opportunity then to use that to help you better plan for your inventory positions.
James Thomson 29:29
So as a consultant, how do you advise companies to think about SFP that they’ve now got properly set up versus continuing to use FBA for at least some part of their catalog?
Matt Snyder 29:42
So, again, you kind of talked about this earlier, what has been, I’ve found the values and these weren’t necessarily the values that we made our decision on back in 2017 when we first joined the SFP program, you know, originally it was For us it was thinking about, we have these, these are products that are expensive to ship. And so every time we got a we had to put this on a truck to go somewhere else. That’s marketing dollars we’re giving up. It doesn’t matter, it can maybe be that that cost per unit is smaller on a standard sized product or a small product. But those smaller products probably have a lot more volume than our products so that they cost us to start to add up over time. So I encourage you sellers to think about, what does that cost per unit that I’m just giving away when I put this product on a truck to Amazon? And then I would say think about you know, how long is that product taking you to get into a sellable condition. If that inventory is taking more than 30 days. That’s a lot of cash flow that you have held up. And I think that’s a big challenge for a lot of sellers. And especially as they get started or you know is there they’ve found success, and they’re trying to find ways to continue scalar business. Cash Flow is the number one reason I hear from sellers of what throttles their sales is cash flow. This is a great way to open cash flow because you’re not having an inventory out there for 30 to 45 days that’s unsellable as soon as it hits your dock like you can sell it. And that’s cash let you get back in your system and help replenish no help expanding more product categories or new products or so that I would say that’s a probably key one that’s often overlooked. When sellers are considering SFP versus FBA. And then thirdly, I would just say, you know it gives you a lot of more insights that you’re you’re getting closer to that customer and you’re you’re kind of talked about you can you can see more where my customers operate, Where do they live at? How frequently are they purchasing from me? That’s been one of the things that we’ve been able to pull from this as we build some reporting to understand how frequently a customer repeats purchases from us? And then, you know, that didn’t drive us our marketing. Okay, we know that we have this percentage of repeat customers, what can we be doing to target those customers to then try and get them to our webstore make them aware of the opportunity to buy from us. So it’s also creating new offerings for us in the marketing side, versus what we’d have from an FBA partnership.
James Thomson 32:14
Let’s talk about what happens in May 2021, these new policies come in place, a number of existing SFP sellers will likely drop out because they haven’t been able to figure out how to get the metrics to work under these new tightened requirements. Let’s say Amazon reopens SFP at some point, what do you think is going to happen with existing SFP sellers that stay versus potentially new FBA or new 3p sellers flocking towards this program? What are you anticipating,
Matt Snyder 32:44
you know, I would anticipate Amazon’s gonna be very exclusive and who they decide to allow into this program. You know, the reason we’re having these new metrics is that sellers got into the program, you know, with the promise that they could be, they could meet these standards. And what Amazon’s self found was that sellers were getting further and further beyond that the prime and delivery promises and prime is not just a service to these Amazon customers, but it’s become a big part of their brand. So they take a lot of, there’s a lot of protection around the service. So they’re gonna be selective of who they let in. So my advice to somebody who’s interested in this program is, is don’t wait for their program to open up, you know, later this year. Because Amazon’s gonna, they’re gonna want to see how you are? How can you assure us that you’re gonna be able to meet these expectations? And so if you can begin thinking about this now of Okay, well what do we need to do from a warehouse? locations? What do we what do we need to put in place to ensure that we have national coverage and we can meet those those expectations with my partnership, or my relationship with the with FedEx or UPS that can go to Amazon and I can show them, I can assure that we’re gonna have you know, every day we’re gonna have a FedEx truck at our facility to pick up right? what’s my support staff from customer service, because it’s one thing it’s often overlooked is when you use FBA, Amazon’s taking care of a lot of your customer service your contact? Well, that’s not necessarily true with a SFP. Is there still that Prime customer support, but oftentimes, more often, not actually, we have a customer support person who’s in contact with those customers. And, and this can be a benefit for you because, you know, in a case where a customer needs to send back a return, we can actually provide a return label to these customers and that product comes straight back to us versus going to Amazon. And then you know, you can avoid those challenges of either liquidations or paying for it to come back into your facility or ending up on warehouse deals and it’s killing your price.
James Thomson 34:56
Are you able to prevent returns from happening by the Being able to have that conversation with the customer and realize they need an extra screw or a little doodad, or something that was preventing them from putting everything together.
Matt Snyder 35:07
Exactly. Or even in some cases, you know, maybe it’s a minor blemish on the product. And we can, we can offer a savings or oftentimes we’ll say, hey, if we send you a, you know, a free accessory, that takes care of the problem for us, and we can oftentimes avoid that, that return. And that’s, again, with our product size, anytime we can avoid putting it back through the carrier systems, it saves us a lot of money. So there’s certainly a again, then other cost savings, there’s when we can have that more communication with the customer and avoid a lot of the returns or when there is return a lease limit the cost of having a product come back to you or, or disposed of. So
James Thomson 35:49
COVID may be under control by the time we get to q4 this year. But I expect that Amazon’s fulfillment centers will still be bursting at the seams. So what role do you see SFP playing this Q4, relative to what it played in 2020. I think there’ll be a different different role a different way it’s considered
Matt Snyder 36:11
to if I think about this from from our perspective of you know, what does being an SFP seller allow us to focus on versus a seller whose who’s FBA, heading into q4. Let’s look at this last year on Amazon due to COVID. It wasn’t just that you had limited inventory restrictions or longer receiving time, but they moved Prime Day to October. So you had this major event, these two major events backup to each other. That begin there’s there’s a lot of opportunity lost there, because you had to try and coordinate imagery for both those events, and even go into this year. So we looked at this year, you know, you’re still trying to make sure that you have enough inventory for the product for the promotions and events that you’re planning in q3. Because oftentimes, these you know, as a seller, you’re committing to your marketing plan well before the event, and somebody supplants their, their cost a lot of money. And so you want to ensure that you’re able to maximize that event and not have too little inventory so that you lose out on lost sales, but also not have too much inventory that you don’t sell through it all. And now you’re paying for either storage cost or removing that inventory. So the SFP sorry, yeah, that’s, that’s one less thing I have to worry about. I’m not worried about do I put in too little too little or too much. I can focus on my marketing strategies, I can make sure that I can have enough inventory in our channels. And again, we’re selling this on other channels. So if I were committed on Amazon, well, that inventory is gonna get sold somewhere else. And there are some challenges or things that you have to consider or plan for differently. Rather than thinking about when do I need to get my FBA order in and trying to understand the timelines? With that it’s more about thinking about what to do my 3PL partners have the right amount of staffing plans. Am I having a conversation with my carrier to make sure that we’re going to have those daily pickups you know, the volume picks up for them as well, too? So you have different conversations, different things to play in for. But on Amazon, there’s there certainly are those advantages of Okay, if I’m if I’m messing heavy in a Black Friday, Cyber Monday deal, you know, I don’t have to worry now about not having enough inventory in Amazon, I can I can really maximize my investment and, and feel safe that my I’m not going to be hamstrung by not having enough inventory then in Amazon.
James Thomson 38:47
It sounds like you’ve worked through these complicated logistics software and financial implications of using SFP. But share with our audience, what did you find was harder than you expected? To get Right? Yeah, it’s fun talking to a consultant who’s figured it out. But I’m sure you’ve got bruises and scars on you because you figured it out. Yeah.
Matt Snyder 39:09
It’s like, I look back, I would say, you know, our major, you know, we’ve had several pain points. And I will tell you that anybody who’s been in this program or will be in this program, there will be a point where you lose your eligibility. It’s just, you know, maintaining these 99 and 98% on time shipments and on time deliveries. I don’t care how good you are, you’re going to mess up, you’re going to some unknown issues gonna happen.
James Thomson 39:34
I’ve heard of a bunch of people just recently with the storms in Texas, if their warehouses were in Texas, you know, you got hammered hard.
Matt Snyder 39:43
Yep. So that was kind of an early on lesson that I learned was how do you make sure you’re prepared for the unknown? The weather is a great one. So our you know, our operations team is constantly in communication with FedEx and with our 3PL to understand like, what’s We never have this type of weather in Texas. But this last week, we did you know, we were shut down. And so knowing that we know we made preparations ahead of time, we turn off all of our prime status throughout the surrounding areas. We went ahead and turned it off for all northeast, we extended our handling time and moved it from one day to up to two to three days. So all these things that we can do in preparation. You know, we didn’t know that early on. And the first time, you know, we had a storm in the northeast, and I was told that we’re going to go out that day. But Amazon doesn’t care, Amazon, you were, you’re responsible for that order, from the time it’s placed on Amazon, to the customer receiving it, if there’s a failure within software within your 3PL partner or within the carrier that’s on you. And it’s up to you then to show Amazon through your plan of action if you know how to make this issue occur? How are you solving it? How are you going to ensure this doesn’t happen again, and they’re not gonna give you cert, they’re gonna give you back prime until you can answer that correctly. And there’s been times where, you know, we could get it back on the next day, and there’s been times where it took us, you know, two weeks. And so the more that you can plan ahead of all these, again, we talked about, there’s a lot of unknown. So think about what were the hospitals out there that could occur and, you know, have a plan of action, have a process document ready for those events, so that your team can react ahead of time or act in the moment to to either mitigate, or, or avoid those issues. The second I would say is, is the technology side of this, you know, again, this has been a very base off of your size. But, you know, as we were going through this, this padding on our last 3PL partners, Amazon’s made some changes recently in the qualifications or requirements to get the right developer key. So we do a lot of automation. And so to get that you have to, you know, apply with Amazon and get the right access. And so it’s called like no PII certification. And it took us about 45 days to get this completed. So that’s something that, you know, we didn’t plan for that originally and our initial timeline, and it had some delays for us. So I would say that again, but that I didn’t initially have a good understanding of how heavy the technology side of this was. And we learned that lesson or the first time when we were selecting a 3PL partner. The second time around, we really found somebody that we felt confident that we needed to do the integrations. They can help us with that. And, again, this burner has multiple locations. So if down the road, we decide that we want to add another one of their locations into our network. It makes it much easier knowing that they have a team that can help support us.
James Thomson 42:57
But Matt, I want to thank you for joining us today on the Buy Box Experts Podcast. For those of you who are interested in learning more about Matt’s consulting practice, please email Matt at [email protected]. Or you can look Matt up on Linkedin at linkedin.com/in/matthew-snyder-amazon. Thanks for joining us today and join us next time on the Buy Box Experts Podcast. And now to finish today’s podcast I’d like to share some final thoughts. For third party sellers to be successful on Amazon, a critical lever will be soliciting feedback from customers. We at Buy Box Experts are really big fans of the team at eComEngine and it’s tools that help Amazon sellers to simplify the process of messaging customers of their Amazon orders. To learn more, go to ecomengine.com. And with that, I want to thank you for listening today and I look forward to joining you next time on the Buy Box Experts Podcast.
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