Amazon reached out to sellers who had a solid track record for getting products to consumers’ doorsteps quickly from their own warehouse. The resulting program, called Seller Fulfilled Prime, lets marketplace merchants flag their product listings as eligible for Prime two-day delivery, a distinction that until then was available only for sellers’ products shipped from an Amazon warehouse as part of the fast-growing Fulfillment By Amazon service.
Fast-forward to the close of 2015 and Amazon says sellers have added the Prime flag to 500,000 marketplace SKUs. That’s important for sellers because the Prime flag is seen by members of Amazon Prime, the paid subscription service that grants customers two-day shipping on these products at no charge, along with other benefits.
This is important for marketplace merchants because the Prime flag is more and more seen as a hygiene factor for Prime customers. Meaning: Prime subscribers only choose amongst products on Amazon with the Prime flag because these arrive as fast as possible.
It is a fascinating platform dynamic that almost automatically increases the efficiency of the marketplace and makes the marketplace as a whole more attractive in the process. It makes the Prime offering richer for subscribers. And, because these subscribers buy more than other groups of customers online, it increases sales significantly for sellers.
Latham says Amazon had told the e-retailer it would be adding an option to let sellers select which SKUs appear as Prime-eligible based on the consumers’ location. For example, Quick Candles could show the Prime flag on listings only to Prime consumers whose default shipping address is where Quick Candles can deliver to them in two days using ground shipping from Piedmont, S.C. Amazon rolled out that option Oct. 15, and Quick Candles was the first merchant to test the regionalizing option, Latham says. Once that option was live, Quick Candles went all in with some 2,000 SKUs in the areas it could reach with ground shipping in two days—about 60% of the U.S. population, he says.
Quick Candles sells now 20% more of those products made Prime-eligible compared to a year before without the Prime flag.
(Here is some more information on Seller-Fulfilled Prime and Fulfillment by Amazon.)
The interesting part here is that Amazon can pull merchants into such a program and increase its marketplace in all dimensions only because Amazon first built up Prime, its subscriber base and the brand (Prime flag) dynamic.
This way, Amazon got onto its service the first side (attractive customers) that the second side (sellers) is looking for.
A full-on marketplace provider would have a far harder time to get to this state because the chicken-egg problem is hard to solve in this instance. (Not impossible, but hard.)
For companies like Jet this might mean more hurdles. For a company like Zalando, an online retailer morphing into a platform, this might mean to look even closer at how Amazon is pulling of this platform play.