The Amazon marketplace is consistently growing, with new items being listed every day under an ever-expanding network of categories. The key to keeping up? Prime status eligibility.
Amazon has set a high bar with its Prime category, with free two-day shipping being the main draw for customers. It is a major factor of why Amazon is the first place that online shoppers turn to. Because of this, Amazon has implemented an algorithm that pushes Prime products to the top of search results.
Then, the Prime banner acts as a powerful beacon for customers looking for the free two-day shipping that they have come to expect from Amazon. Prime products experience higher visibility and sales, and listings without Prime status eligibility just can’t compete. That’s why going Prime is essential for any seller looking to remain competitive on Amazon. We have a breakdown of all the ways to get there, so you can decide which route is right for you.
Types Of Fulfillment
Merchant Fulfilled
Most sellers starting on Amazon go for Merchant Fulfilled products. It’s a beginner-friendly option with easily controlled inventory and straightforward fees comprehendible to anyone. The tradeoff for its ease of use, however, is its ineffectiveness. Merchant-fulfilled products have low visibility because they are unable to be qualified as Prime. Amazon has become the premier online marketplace largely due to its promise of fast, free, two-day shipping. Something that customers have come to expect and will seek out exclusively while browsing the sea of products on offer.
Fulfilled By Amazon
To make the crucial transition to Prime status, the most common route is Fulfilled by Amazon (FBA) products, in which a seller ships products to Amazon warehouses. This option does require that the seller pay fulfillment costs to Amazon, but it relieves the burden and margin of error inherent in shipping and fulfillment logistics.
These costs are an investment that initially reduces profitability, but sales volume increases with the higher visibility that Prime products enjoy. Plus, the seller still has control of product listings with FBA products— that means hands-on access to all of the content on the page, including branding and optimization opportunities.
Something to consider when choosing the Fulfilled by Amazon route is the nexus to be contended with: the legal requirement for companies doing business in a certain state to collect and pay tax on sales in that state. Each time an Amazon warehouse fulfills an order, the seller is required to pay sales tax in the respective warehouse’s state. This can be difficult to navigate manually, but automation is possible with solutions like TaxJar— a program that Lab 916 leverages for all clients choosing the FBA route.
PROS:
- Skip the headache of shipping and fulfillment logistics
- Increase your sales volume with higher visibility
- Have total control over your listing pages
CONS:
- Cut into profits by paying fulfillment costs to Amazon
- Deal with the nexus of paying state taxes
Seller Fulfilled Prime
Sellers equipped to take on the entire Amazon process, fulfillment, and all, may choose Seller Fulfilled Prime as their ticket to Prime Status. With this route, the seller takes care of all fulfillment and shipping on their end. There is a probation period, in which sellers must prove their facility to provide two-day shipping before receiving the Prime badge that customers seek out.
During this probation period, Amazon requires that the seller purchase and use Amazon labels, which can add up. Additionally, the requirement to offer free nationwide shipping can cut into initial profits. However, there is some room to control the price: Amazon gives the seller the option to decide which states or regions can offer the two-day shipping.
Seller Fulfilled Prime requires a considerable amount of daily management, as orders made before 11 AM must be shipped out the same day. However, for the hands-on seller, this is a welcome challenge. Plus, those who offer seasonal products or large items, have inconsistent inventory or want to avoid the costs associated with FBA may find Seller Fulfilled Prime to be the right fit.
PROS:
- The entire Amazon process is under your control
- A flexible option for certain types of inventory
- Skip the costs associated with FBA
CONS:
- Probation process requiring Amazon labels can be a costly period to wait out
- More labor and daily management are required to meet the two-day shipping requirement
Types of Vendor Accounts
Vendor Central
Vendor Central is an exclusive Amazon program that sellers must be invited to. Amazon purchases your products directly with this option and dictates both the buying and selling price. Beyond pricing, Amazon also takes control of changes to product page details: copy, thumbnail images, keywords, and so on, to constantly keep your listings by their ever-evolving algorithm. Vendor Central also removes the logistics challenge of dealing with state sales tax— Amazon takes that responsibility on and away from the seller. A Vendor Central presence further opens up access to more effective advertising with Amazon Marketing Services. These services, specifically designed and developed to promote success on Amazon, usually skyrocket sales volume. This higher volume can partially account for the smaller profit margins that Vendor Central sellers tend to see.
PROS:
- Amazon’s team takes over your product pages and polishes them for success
- Remote management and shipping logistics from your business equation
- No need to deal with state sales taxes
- Enjoy full access to Amazon Marketing Services
CONS:
- The exclusive status of Vendor Central means sellers must wait to be invited
- Prices are controlled by Amazon rather than the seller
- Profit margins tend to be smaller
Vendor Central Express
Those eager to experience the benefits of Vendor Central but have not yet been invited can be proactive by applying for Vendor Central Express. This is a similar program, but less exclusive, as anyone can apply. To get started, sellers must negotiate with Amazon about the prices which products will be bought and sold for. There are two options available for sellers enrolled in Vendor Central Express: selling items in bulk to Amazon warehouses or keeping products in their warehouse. Those choosing the latter must inform Amazon of how much inventory is available. Then, when a sale is made, Amazon will pay the pre-negotiated price and send a prepaid shipping label for the seller to use. This can be the ideal route for large items, whose bulk can rack up warehouse storage fees otherwise.
PROS:
- Open for anyone to apply
- Room to negotiate with Amazon about pricing
- Amazon still takes over state sales tax requirements
- Same access to Amazon Marketing Services that Vendor Central offers
CONS:
- Price negotiation can be an unfamiliar and difficult process for some sellers
- Very little seller support compared to Vendor Central
It’s up to you to gauge your comfort level and available resources when choosing the route that makes sense for your business. Use these pros and cons as a starting point, and reach out to us for a free consultation. Lab 916 is here to help at all stages of your transition to gain Prime status, from initial consulting to account management.
