Offer Prime or Go Home

As more Amazon shoppers convert to Prime members, successful sellers have to do what those shoppers expect. Thus more sellers use Fulfillment by Amazon every year - today 69% of the top sellers on Amazon.com in the US use FBA.

Fulfillment by Amazon, or FBA for short, is an Amazon program which allows sellers to offload most of their warehouse operations to Amazon for a fee. Customers buying from FBA sellers get the same two-day Prime shipping and thus sellers get preferential treatment in buy-box rotation.

Fulfillment by Amazon (FBA) Usage Among Top Sellers

In a year FBA usage in the US marketplace has grown from 58% to 69%, in Spain from 49% to 60%, in Italy from 47% to 56%, in Canada from 38% to 57%, in Japan from 41% to 50%, in France from 41% to 53%, in Germany from 33% to 41%, in the UK from 33% to 41%, and in India from 23% to 38%. FBA launched in Australia in February this year and is already up to 25%. FBA usage is measured as a percentage of the Top 10,000 sellers in each marketplace who have all or most of the catalog stored in FBA. These top sellers represent a major part of the GMV on each marketplace.

So far this year FBA usage didn’t grow as considerably as before. In most markets it has achieved saturation, and thus instead Amazon is working on expanding the Prime-enabled catalog through programs like FBA Onsite. Sellers participating in the FBA Onsite program get help from Amazon to improve their warehouse and fulfillment process, ability to use Amazon’s own warehouse management software, integration with previously FBA-only programs like “Subscribe and Save” and “Small and Light”, Prime offers for Hazmat inventory, and access to low rates Amazon gets from shipping companies.

Since FBA launched in 2016 Prime combined with FBA has made the marketplace almost invisible to most shoppers. This has proven to be key. While marketplaces are two-sided by nature, the current form of the Amazon marketplace is different. Most shoppers don’t want to deal with sellers directly, especially when it comes to returns. FBA made this a reality.

Last year Prime surpassed 100 million worldwide memberships, each of which expect the two-day shipping. Thus it’s not surprising that FBA usage continues to rise, and new services like Seller Fulfilled Prime or FBA Onsite are in the works - most Amazon shoppers want to see the Prime logo before they buy. Which at the end of the day means sellers have only one choice - offer Prime shipping. That choice, of course, is not required. A seller can chose not to use FBA. But the data shows that increasingly few sellers are successful without offering Prime. The Amazon shoppers have voted that the marketplace they want is that of Prime.

This is probably one of the biggest unseen differences between Amazon and other marketplaces, be it eBay or Etsy. Amazon is training customers to expect certain things. Prime memberships is the best example of that. The one hundred million Prime members are now used to a certain level of convenience and reliability, making competing retailers and sellers not offering Prime look like bad alternatives. This is powerful because Amazon is actively changing consumer habits.

Shoppers have a choice not to shop on Amazon. Sellers have a choice not to sell on Amazon. But do they really? And then if they do, what other choices follow? This is the effect of Prime.

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Juozas "Joe" Kaziukėnas

Founder of Marketplace Pulse, Joe wears multiple hats in the management of Marketplace Pulse, including writing most of the articles. Based in New York City. Advisor to other startups and entrepreneurs. Occasional speaker at conferences.

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