Amazon.com Inc. hooked more sellers on its fulfillment services last year, in part because of Amazon Prime’s popularity and shipping advantages, such as lower rates and faster delivery times, for some sellers.
Amazon, No. 1 in the Internet Retailer 2016 Top 1000 Guide, announced today that more than 2 billion items from marketplace sellers were shipped through its Fulfillment by Amazon service in 2016. That’s double the volume in 2015, when the e-retailer delivered more than 1 billion items through FBA, the service in which merchants selling on Amazon’s marketplace pay Amazon to store and ship their goods. Active sellers using FBA grew more than 70% year over year, the company says. During the holiday season of November and December, items shipped through FBA grew 50% compared with the same period of 2015.
When marketplace merchants use Fulfillment by Amazon, their products become eligible for Prime shipping. That’s important for sellers because the Prime flag on products is seen by members of Amazon Prime, the $99 annual membership that gives consumers access to fast shipping options, streaming video and music, and other benefits. Roughly 45% of U.S. consumers, as of October, live in a household with an Amazon Prime customer, according to estimates from Cowen & Co. investment bankers.
Getting products in front of Prime customers is one key reason some sellers use Fulfillment by Amazon services. That’s the biggest advantage of FBA for e-retailer Jam Paper & Envelope, says senior digital marketing analyst Kelly Ennis. Jam Paper began using FBA for some of its products in May 2015 and now roughly 25% of the 12,000 SKUs Jam Paper sells on the marketplace are fulfilled by Amazon. In December, Jam Paper’s Amazon order volume grew 54% year over year, and three times as many orders were shipped through FBA compared with products Jam Paper fulfilled itself.
“A huge advantage of using FBA during the holidays is that we basically get an extra week of orders because of the two-day shipping,” Ennis says. During the days leading up to Christmas, the non-FBA products Jam Paper sells on Amazon get labeled with a message that indicates the item will arrive after Dec. 25, even if the company’s shipping and handling time might indicate faster delivery times. As a result, Ennis says Jam Paper saw orders on products it fulfills itself drop on Dec. 14, while orders through FBA continued to grow until Dec. 22. Overall, Jam Paper’s order volume on Amazon grew 179% for the year, in part because it offered more Prime-eligible products.
Amazon also grew its Seller Fulfilled Prime program last year, which lets marketplace merchants flag their product listings as eligible for Prime two-day delivery but still ship the products themselves. Seller Fulfilled Prime, which began in May 2015, added more than 6 million items that are Prime-eligible in the U.S., U.K., France, Germany and Japan, Amazon says.
Seller Fulfilled Prime is especially beneficial for retailers that have warehouses and fulfillment operations in place. Shoe e-retailer Street Moda, for instance, joined Seller Fulfilled Prime in 2016 and fulfills orders from its own warehouse, which also handles orders from StreetModa.com and other marketplaces such as those operated by Wal-Mart Stores Inc. (No. 4 in the Top 500) and eBay Inc.
“Being in Kentucky, we can reach 60% of the nation with ground shipping in two days,” says Matt Kubancik, founder and CEO of Street Moda. Additionally, he says by using Seller Fulfilled Prime instead of letting FBA ship his products, shipping expenses on those orders decreased 6-7% last year. Kubancik says he saved money by not having to pay the shipping fees to send products to Amazon’s warehouses and fees associated with being a part of the FBA program. Plus, the larger volume he now ships from his own warehouse allows him to negotiate better rates with carriers like UPS Inc. and FedEx Corp.
In addition to its fulfillment services, Amazon today provided the following updates on its marketplace sellers and other areas of its business:
- Sellers received orders for more than 28 million items on the Monday after Thanksgiving, known as Cyber Monday
- Amazon Business crossed more than $1 billion in sales in 2016, with marketplace sellers receiving half of the orders and Amazon accounting for the rest. Amazon Business has more than 400,000 business customers in the U.S.
- Handmade by Amazon, the e-retailer’s online marketplace for handcrafted items, offers more than 500,000 items sold by marketplace sellers. The shop launched in October 2015 with 80,000 products.
- Amazon Mexico, which launched in June 2015, has more than 20,000 sellers and offers 50 million products.
- Amazon Canada’s marketplace sellers had $1 billion in sales in 2016.
- American Girl (No. 118), Lands’ End (No. 44) and Segway were among brands that began selling products on Amazon’s marketplace last year.