Amazon has long held a strong position in the fulfillment and logistics market; the e-tail giant ships goods for millions of sellers that offer goods up on its platform.
But in recent years, it has worked to expand that footprint, leveraging its Multi-Channel Fulfillment (MCF) and Buy With Prime programs. MCF allows brands and retailers to fulfill orders placed on their own sites—or other marketplace sites—via Amazon without indicating that to the customer. Buy With Prime, on the other hand, allows brands and retailers to offer consumers the choice to checkout through their Amazon Prime accounts; when they do, the goods, like MCF, are fulfilled by Amazon.
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The strategy sees Amazon creeping closer to competition with traditional third-party logistics players who ship goods on behalf of myriad direct-to-consumer brands or manage the fulfillment for large brands’ e-commerce operations.
Buy With Prime transactions also reap the full benefits of Amazon’s customer service and logistics network. So, for instance, if a consumer purchases a product through Buy With Prime and decides to return that item, they can do so directly through Amazon’s channels, rather than interfacing with the brand or retailer directly. To Wain Yu, director of GTM, sales and marketing for Amazon MCF and Buy With Prime, that’s one of the core benefits of the program to Amazon—existing customers have an even greater use for their Prime membership.
“Amazon has capabilities in [the] supply chain that we’ve had to build for ourselves over the years, and just like we’ve done for other capabilities, like AWS [Amazon Web Services], we think the idea of making that available to other merchants and other third-party businesses to use is just a good business to have. It’s a win-win-win for everyone,” he said.
Today, roughly 300,000 sellers use MCF, and the highest-performing categories are consumer electronics, beauty and apparel and footwear. Steve Madden is one of the companies leveraging Buy With Prime. The footwear purveyor has a section of its site labeled, “Prime,” where consumers can purchase Prime-eligible products and receive them in mere days.
Josh Krepon, president of direct-to-consumer at Steve Madden, said partnering with Amazon decreases the average shipping time by multiple days. If Steve Madden ships an item from one of its warehouses, it can take about five to seven days for a consumer to receive the package; with Buy With Prime, that decreases to one or two days.
“The advantage of the Amazon network is pretty clear, in terms of not only the Prime branding itself, but also the shipping speed,” he said.
Amazon has said publicly that, through its MCF program, it will allow clients to ship products sold on other marketplaces, like Walmart, Shein and Temu. Walmart has long remained a competitor to Amazon, and prior to the collapse of the de minimis provision, Temu and Shein’s market share had started to creep up. But Yu said the e-tail giant isn’t concerned about fulfilling orders from other platforms.
“Amazon’s just really customer obsessed. We really just focus on, ‘What is the thing that really drives a lot of value to merchants as a customer, as well as shoppers as a customer?’ We’re kind of obsessed about that, and a little bit less obsessed on, ‘What might this do to Amazon over time?’ The underlying belief there is, if you’re delivering value to customers, some of that value will come back to you in some way over time,” Yu told Sourcing Journal.
That may, in part, be due to the fact that Amazon’s MCF and Buy With Prime programs require a financial investment from individuals and entities storing merchandise in the company’s warehouses.
Yu said MCF functions similarly to Amazon’s Fulfilled by Amazon (FBA) program; sellers pay a storage fee and a fulfillment fee. The storage fee is based on the size of the product, the number of cubic feet the seller’s assortment requires and the time those products spend in an Amazon warehouse. The fulfillment fee hinges on the number of units Amazon ships, as well as how large and how heavy those parcels are. Buy With Prime, on the other hand, includes the service fee, the fulfillment fee and a Prime service fee, which Yu said is “basically a fee that [sellers] pay for having the trust of Prime be on their site.” That cost is a percentage of the order value.
That fee structure, paired with figuring out the early wins of the Buy With Prime program, have seen Steve Madden working to figure out which of its products make sense to list via Buy With Prime.
“The challenge has been trying to find the right assortment,” Krepon said. “The greatest learnings for us have been trying to figure out what items we want to set aside that do have that Prime badge featured. It’s been around bestsellers, [and] it’s been around fashion items that we bought into in a meaningful way that we want to highlight.”
Making decisions about which SKUs it should leverage Buy With Prime for has been more time-consuming than expected for Krepon on and his team. While Steve Madden has four of its own warehouses in the U.S., and about 110 stores, adding another fulfillment option still required additional labor on the brand’s side.
“We’ll go through and allocate units to Amazon, and that will be, in effect, another warehouse for us. We operate with four warehouses of our own, where we ship products to customers, in addition to our 110-odd stores. Effectively, we turn on another warehouse with Amazon,” Krepon said.
And once Steve Madden sends the inventory off to Amazon, the company knows only that the e-tail giant is in possession of it—not where it’s stored.
“We don’t actually know where they’re putting it. That’s the secret sauce of Amazon, of trying to figure out how and where to put our products, so that it can get to customers faster,” Krepon explained.
To Krepon’s point, Yu said Amazon does not give up the data that it uses to determine which of its warehouses it will store MCF and Buy With Prime customers’ inventory at.
Steve Madden shipped about 75 of its fall styles to Amazon for its Buy with Prime footprint. Krepon said the quantity the footwear company allocates to the e-tail giant depends entirely on the SKU and the depth of the buy.
“There might be styles where we’ll send them thousands, and there might be some where we just send them hundreds,” he said.
While he noted that the number of styles Steve Madden is using Buy With Prime for today accounts for “a pretty small subset” of what the brand offers consumers on its site, the company is hoping to triple the number of items it offers via Buy With Prime in the coming months.
But, in doing so, Krepon plans to carefully plan which SKUs should be headed Amazon’s way, in part because of the cost of doing business with the e-tail behemoth.
“One of the trade-offs that people should be aware of is, it’s expensive to get product back from Amazon, so I think having a plan for that entire lifecycle of a product is another important piece that I don’t think everyone thinks about,” Krepon said.
Yu said many MCF and Buy With Prime clients have several options for inventory they’re no longer selling on their own sites.
“Some of them basically just liquidate it and use MCF to fulfill that liquidation, wherever they decide to liquidate it,” he said. “Another option is…we do have a bulk removals process where we’re able to take the inventory out of stock and ship it back to wherever they wanted us to ship it to. Sometimes, they actually just decide to sell it on Amazon.”
Despite the logistics involved in investing in Buy With Prime further, Krepon said his interest comes, in some part, from the lift the company has seen to its conversion rates, but also from the continued desire to delight customers.
“From a conversion perspective, we have found that, apples to apples, the conversion is better via the Prime badge,” he said.
For Yu, that’s about trust.
“The presence of Prime on [a client’s] site really is meant to increase trust in the delivery and returns experience that their shoppers are getting,” he said.
