In January of 2023, Amazon announced the expansion of Buy With Prime (BWP), a program allowing eligible retailers to sell through Amazon Prime on their own websites, with shoppers using their Prime account for payment, and Amazon completing the fulfillment with its two-day Prime guarantee.
Though it might have come in quietly, many believe this could grow into a widely used offering and could even be a step towards Amazon competing directly with FedEx and UPS as a carrier. I wrote more on that in the article “Buy With Prime: Is Amazon Rivaling FedEx and UPS?” in the March/April edition of PARCEL.
As a follow-up to that article, let’s take a deeper look at what Buy With Prime means for shippers, who it does (or doesn’t) make sense for, and ways it can be successfully implemented as part of a multi-carrier strategy.
Pros and Cons of Buy With Prime
Let’s revisit the pros of Buy With Prime; the first being the “Prime” logo itself. Fifty-nine percent of American households have a Prime membership. With no shortage of members, the ease of a one-click checkout and free two-day delivery promise led to a 25% increase in sales conversions during BWP’s beta testing. For some businesses, the sales boosts might cover some of the cons of BWP (more on that later).
Additionally, BWP presents a unique carrier diversification opportunity. Amazon functions differently than FedEx or UPS. It still doesn’t have network-wide pickup capabilities, meaning BWP orders have to be pre-shipped to an Amazon facility. This has an upside, as it allows shippers to pre-determine an amount of volume to give to Amazon, meaning they can meticulously select the right amount of volume to take from another carrier without losing volume-based discounts.
And what are Buy With Prime’s cons? First, it’s expensive. BWP service fees can account for a little over five percent of an order’s value, plus an additional $5.38 for the fulfillment. Couple this with the $0.78 per cubic foot monthly storage fees - and the cost of shipping units to Amazon in the first place - and it becomes evident how the cost of selling w/ BWP can eat into margins.
This is Amazon’s incentive.
Much of its focus with the Fulfillment by Amazon (FBA) program is that Amazon sellers shouldn’t have to worry about fulfillment - and most don’t want to. For an entrepreneur with a product, shipping units to an FBA warehouse and selling on Amazon is the fastest way to go-to-market; much faster than incorporating 3PLs or setting up their own logistics network. In exchange for the convenience, Amazon charges significant fees. From Sifted’s data, FBA fees usually account for 30-50% of an item’s sale value.
Is BWP Right for You?
Whether or not a business should implement Buy With Prime varies a bit case by case, and depends on each organization's specific goals. For many FBA-exclusive sellers, it’s a no-brainer. Setting up a simple website can give them better access to customer information, a more personalized, branded buying experience, and even increase their storage capacity limits at Amazon facilities.
For larger businesses, it might be a bit trickier. FBA sellers pay a premium for Amazon’s fulfillment services so they don’t have to invest in their own, saving time and money in establishing carrier or 3PL partners and/or building their own facilities. If a larger business has already done this work and made these investments, it might not make sense to pay Amazon’s prices. However, this isn’t black and white, as a business might determine that the sales boost from the BWP checkout could outweigh the higher fulfillment costs.
In the end, it comes down to what each business is looking for. If one wants the cheapest fulfillment possible, BWP isn’t their best choice. However, if a business is looking to boost sales, and determines that the boost in conversions BWP could provide would outweigh the higher fulfillment costs, they should explore it. Perhaps a business is less concerned about costs and more concerned about a resilient, multi-carrier mix. Integrating w/ BWP could be an easy way to implement another fast, dependable “carrier” and create swimlanes in case of capacity constraints.
If a business decides to move forward with BWP, there are a few things they can do to ensure success. First, for those that don’t already sell on Amazon, they’ll need to create an Amazon Supply Chain account. This will also allow them to fulfill other non-Prime-eligible products through Amazon Multi-Channel Fulfillment (MCF). Then, they’ll need to integrate Amazon Pay for order processing.
Once all the technical hurdles have been cleared, they’ll need to determine how much volume they should fulfill through BWP orders. Giving BWP an equal split of shipments will likely drop them out of volume-based discount tiers with their other carrier(s). With a keen knowledge of their carrier contracts and shipping data to know where their volumes stand, they can determine precisely how much volume to peel away and pre-assign to BWP without dropping a discount tier. In some cases, dropping a tier might be inevitable, but some of the other benefits (sales increases, resilience, etc.) might outweigh these costs. Again, it depends where each business’s priorities lie.
Unfortunately, Amazon Seller Central doesn’t provide much visibility into storage and fulfillment fees for Amazon’s FBA, MCF, or BWP services at the time of writing this. Data-savvy businesses can still find that information, or use one of a few emerging software tools, to fully measure how much fulfillment through Amazon is costing them. They can then compare how these fees stack up to their traditional carrier or 3PL costs, compare the difference to any boost in sales they’ve seen, and confidently know whether or not they should continue their BWP operations.
Amazon continues to drive change in the industry. Like anything, confident, data-driven decisions can ensure a shipper’s success amid these changes.
Caleb Nelson is Chief Growth Officer at Sifted, a Logistics Intelligence software company.
This article originally appeared in the September/October, 2023 issue of PARCEL.