Amazon pushes sellers to meet two-day delivery guarantees so more people can get Prime-eligible products

Key Points
  • Amazon on Tuesday announced several changes to its Seller Fulfilled Prime program, which allows sellers to designate Prime-eligible inventory without paying for Amazon's fulfillment services. 
  • Starting in February 2021, sellers will be required to support Saturday pick-up and delivery, as well as make Prime-eligible products available for delivery nationwide.
  • In doing so, Amazon wants to make sure that products with the Prime label are actually meeting one- and two-day delivery promises.  
An Amazon warehouse
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Amazon is pushing some third-party sellers who ship their own packages to meet the company's Prime delivery standards.

Amazon informed sellers on Tuesday that, starting in February 2021, it will require members of its Seller Fulfilled Prime program to provide nationwide delivery coverage and support Saturday delivery and pick-ups.

The SFP program, launched in 2016, enables third-party merchants to make inventory eligible for two-day shipping without paying for Amazon's fulfillment services, Fulfillment By Amazon.

The changes will help Amazon ensure that products with the Prime badge are on par with the company's customary two-day and, increasingly, one-day delivery times. Prime subscribers pay an annual fee of $119 to get perks like free, fast shipping, streaming services such as Prime Video and Prime Music, and benefits like discounts at Whole Foods.

"We know that as a seller enrolled in SFP, you work hard to provide customers with a delightful shopping experience," the company said in a note to sellers obtained by CNBC. "Despite these good intentions, before COVID-19, fewer than 16% of SFP orders in the US met the Prime Two-Day delivery promise customers expect, in large part because many sellers do not operate on weekends."

An Amazon spokesperson confirmed the changes were announced to sellers on Tuesday and told CNBC in a statement: "As we move toward One Day Delivery, we are making changes to Seller Fulfilled Prime to provide customers with fast, consistent delivery, regardless of the fulfillment method. We are informing selling partners now so they have time to adjust their businesses and have set up a dedicated support team to guide them through these adjustments and help them succeed."

The SFP program is only open to qualified sellers who must join a waitlist in order be considered for enrollment. Amazon declined to share the total number of sellers who are enrolled in the SFP program. 

Currently, SFP members can offer Prime-eligible products only to customers in specific regions, such as by zip code. Some sellers may limit two-day delivery to specific areas when they're confident they can meet expectations in those areas. The new rule will allow Amazon to offer Prime products to more people.

It will also require sellers to have greater visibility into their chosen carrier's delivery performance. With SFP, sellers store their own products and pack their own orders, while delivery is managed by carriers like the USPS, FedEx or UPS.

Amazon is launching a new dashboard on Tuesday that allows sellers to track their performance for one- and two-day delivery. Starting in February 2021, SFP members will be required to "meet target delivery speed metrics," Amazon said in the note to sellers. 

It comes as Amazon has doubled down on efforts to transition Prime from two-day to one-day delivery. Amazon made free, one-day shipping available for more than 10 million products last June and since then has earmarked billions of dollars to expand one-day and same-day delivery. 

The company saw some delivery times slip at the height of the pandemic in March and April, which resulted in a drop in customer satisfaction in May, according to Marketplace Pulse. Since then, it has seen delivery times largely return to normal, along with a rebound in positive customer feedback.

Amazon spent $4B on Covid-related costs in Q2
Amazon spent $4B on Covid-related costs in Q2