Is Amazon’s Buy with Prime program the answer that brands have been seeking?

Recently, Amazon announced this new Prime member benefit. It will enable online stores to leverage Amazon’s checkout, Prime delivery service and returns. For now, it’s an invitation-only program that is expected to roll out to more merchants over time.

Like any Amazon program offered to online sellers, Buy with Prime should be examined and analyzed with a jaundiced eye. The potential benefits for brands and online stores are obvious and attractive. But the likely costs – both financial and otherwise – could be prohibitive for all but the smallest online stores.

Keep reading to find out the benefits for buyers and merchants, as well as the red flags online sellers must look out for if they adopt Buy with Prime for their brands’ web sites.

Amazon’s pitch for Buy with Prime

Amazon has a sales pitch that starts with its buyers:

• Prime members can shop at online stores (other than Amazon)
• They get fast, free Prime delivery
• Checkout is seamless and familiar
• Eligible orders have simple, free returns
• Shipping and delivery notifications are familiar and prompt

“We always aim to exceed Prime members’ expectations by offering more selection, exclusive deals, quality content, and convenient features,” said Jamil Ghani, vice president of Amazon Prime. “With the introduction of Buy with Prime, we’re expanding where members can enjoy trusted and convenient Prime shopping benefits beyond Amazon, adding even more value to their membership.”

For sellers, the potential benefits are clear:

• There are more than 166 million Prime members in the United States
• These shoppers may be more likely to buy a product on the seller’s web site if Prime shipping and returns are included
• Sellers would outsource pick-pack-and-ship to Fulfilled by Amazon (FBA), creating efficiencies for online stores without high-quality and fast fulfillment operations

“For over 20 years, we’ve been empowering small and medium-sized businesses with opportunities to grow,” said Peter Larsen, Amazon’s vice president of Buy with Prime. “Allowing merchants to offer Prime shopping benefits on their own direct-to-consumer online stores is an exciting next step in our mission to help merchants of all sizes grow their business—whether on Amazon or beyond.”

How does Buy with Prime work?

For merchants already using FBA, Buy with Prime can be added to their online store within minutes because their inventory is already stored in Amazon fulfillment centers. To get started, merchants:

• Sign up for Buy with Prime
• Link an Amazon Seller Central account
• Use Multi-Channel Fulfillment to offer one pool of inventory for multiple channels
• Link an Amazon Pay account to offer a seamless checkout experience for Prime members
• Install a JavaScript widget in their online store to add Buy with Prime to one or more products

Unlike transactions on Amazon.com, merchants will receive shopper order information, including email addresses for customer orders, which they can use to provide customer service and build direct relationships with shoppers.

In other word, both Amazon and the seller will own buyer information. This is a departure from the experience of third-party sellers on Amazon, who most definitely do not own buyer information and are forbidden to use customer details by Amazon’s Terms of Service.

Is there a downside to Buy with Prime?

Like any Amazon program, Buy with Prime has some serious red flags that might not immediately be apparent to merchants without experience selling on the platform.

First and foremost are the costs. Amazon has not publicly revealed the fees for the program, but did acknowledge that the full slate of expenses will include unit-based calculations:

• Service fee
• Payment processing fee
• Fulfillment fees
• Storage fees

Just as they do for third-party sellers, the fees will be based on product dimensions and weight, average selling price, and number of units per order. There are not subscription fees or long-term contracts. Merchants can expand their inventory and selection at any time, and they can cancel at will.

How will these fees compare to an in-house fulfillment operation or third-party logistics (3PL) company? That depends.

• For smaller merchants, Amazon’s fees likely will be quite attractive. Smaller sellers have difficulty negotiating favorable shipping rates for two-day delivery. In addition, Amazon’s FBA services eliminate the need for warehousing of the inventory in question, as well as the personnel and materials needed to ship orders.
• For larger merchants, fees often are less than Amazon FBA using an in-house shipping operation or 3PL. Worst-case, the fees are comparable when fulfilling orders at scale.

But here’s the real difference between FBA and self-fulfillment or a 3PL: accountability.

A lack of accountability could make Buy with Prime frustrating

Amazon third-party sellers know the score. Selling with FBA can offer fantastic benefits and competitive advantages. But the frustration can be never-ending.

In a nutshell, the Amazon FBA program is completely unaccountable to sellers:

• Order shipped and delivered late? Too bad.
• Inventory lost or damaged? You have to file a case and fight to be reimbursed.
• Weight and dimensions are wrong, causing inflated fees? It will probably take an executive escalation to solve.
• FBA lost your inventory, reimbursed you, and then decided to sell the found units on Amazon Warehouse Deals? Or sold the items to a liquidator? Suck it up. You aren’t allowed to control your distribution anymore.

In other word, merchants that embrace Buy with Prime need to know the truth. This will not be a “set it and forget it” endeavor. And unlike in-house shipping departments or 3PLs, merchants will not have direct recourse when mistakes inevitably occur.

Merchants that ultimately are successful with this program must install a program manager or hire an outside service provider to oversee it:

• Do not trust that Amazon received your shipment in full. Inbound shipments must be monitored, with claims filed for inventory not received.
• Do not trust that Amazon accounts for your inventory and returns correctly. Claims must be filed consistently from month to month, to ensure that merchants are properly compensated for missing items.
• Do not trust that fulfillment fees are calculated accurately. Fulfillment fees and details must be reviewed to ensure the numbers are correct.

Be ready. Like all Amazon programs, it will be a ride of highs and lows.