Amazon expands product eligibility requirements for its FFP/SIOC program.
As of February 4th, 2020 Amazon has updated its minimum package dimensions pertaining to its sustainable packaging programs. This communication highlighted increased expectations for Amazon Vendors to develop and implement ready-to-ship packaging. Amazon has pledged to meet the Paris Agreement 10 years early through their Climate Pledge, meaning a net-zero carbon goal by 2040 across all Amazon businesses. A major component of this commitment is to reduce packaging waste.
While this is not the first instance of Amazon updating packaging policies, this marks a significant increase in the number of products impacted by Amazon’s sustainability goals. The programs impacted by this decision are Ship in Own Container (SIOC) and Frustration Free Packaging (FFP).
What is Frustration Free Packaging (FFP) and Ship in Own Container (SIOC)?
Amazon launched FFP back in 2015 as a program to reduce the size & materials while retaining product protection throughout the ecommerce supply chain. In addition, Amazon developed this program to ensure that customers had simple, easy-to-open, and recyclable packaging for their orders from Amazon. Amazon identified that traditional retail packaging for in-store purposes created superfluous waste and did not fundamentally improve the customer experience.
Through this program and its initiatives, Amazon has reduced shipment packaging weights by 38% and elmininated 1.5 million tons of packaging. The program was launched to support its Vendor Central platform, and up until 2018 it was an optional initiative. Amazon pivoted to require this program for certain products, and to encourage brands to adopt the program they introduced financial incentives.
What are the differences between these programs?
Tier 1: Frustration Free Packaging (FFP)
Curbside recyclable packaging materials
Easy to open packaging for customers, leading to a better CX
Minimalist packaging to reduce waste - the product ships without additional Amazon overboxing
Reduction in product damage rates during shipment
Products must be tested and certified by 3rd party facilities
No prep required by Amazon, and thus no prep charges for Vendors
Tier 2: Ships-In-Own-Containter (SIOC)
Subset of the FFP program with no design requirements
Minimalist packaging to reduce waste - the product ships without additional Amazon overboxing
Reduction in product damage rates during shipment
Products must be tested and certified by 3rd party facilities
No prep required by Amazon, and thus no prep charges for Vendors
FFP is more restrictive than SIOC as it requires brands to design, test and certify their packaging to fulfill the program requirements. SIOC requires brands to test & certify their packaing to ensure that it can be shipped without an overbox or needing prep.
What should brands know about the existing program rules?
Noted above FFP was not a requirement until 2018 and it largely focused on larger/bulkier product. But on Sept. 3rd 2018, Amazon laid out long-term plans to move small items to boxes with flexible mailers, and to work with Vendors to have items Ship-In-Own-Container (SIOC).
The deadline for products to meet its Tier 2 SIOC requirements was August 1st, 2019. This applied to non-sort items with dimensions over 18”x14”x8” or weighed more than 20lbs. If items were not tested and certified as SIOC or FFP, then each unit sold would be subject to a $1.99/unit chargeback fee. This fee is designed to push brands quickly into planning & adopting improvements to their packaging for products meeting specified dimensions & weights.
It’s important to note that Amazon is talking about non-sort packages. The change was not applicable to items going to sortable facilities.
What do brands need to know about the changes to the minimum package dimension requirements?
The minimum dimensions for FFP or SIOC certification are now set at 6” x 4” x 0.375.” This is a reduction from the 9”x6”x0.375” expectations.
Items are excluded from SIOC chargebacks if:
Any one, or more, of its dimensions are less than 6” on its longest side
Less than 4” on its median side
Less than 0.375” on its shortest side
What about the price tag? Each item above the minimum packaging expectations will be subject to the $1.99/unit chargeback. The change will go into effect on August 1st, 2020. Units sold from Feb. 1st through July 31st 2020 will have fees “waived.” Beyond this point, Amazon will begin to apply the chargebacks in full force.
What should brands consider doing?
If sustainability and packaging efficiency are core tenants of your business - then the FFP/SIOC programs would be a great opportunity to align your brands mission with an Amazon program to delight your customers and make a sustainable impact.
For many businesses, the decision may be a simple financial calculation. The unit velocity of your products and the size of your catalog will have a significant impact on the viability of getting your products tested and certified. If you have high unit sales, a $1.99/unit chargeback would be inadvisable as the certification cost is dramatically less. If you have limited sell through, or have a large catalog - it may not be financially tenable to certify every product and remain profitable. In either scenario brands must invest in packaging that is durable, space efficient, and ready to ship. Amazon has established the Amazon Packaging Support and Supplier Network (APASS) to help brands on designing, testing, or certifying packaging to meet SIOC requirements
A benefit to some sellers will be that variated products (those that share the same shape, material composition, packaging design, and packaging specs) would not require certification for every variation - you would submit a single item as a representative for the group. Additionally, if products are sold through multiple Vendor codes or multiple marketplaces, adjustments to the certification form are available to prevent excess testing.
When considering the costs & opportunities of updating packaging for your products on Amazon, it is important to remember that these changes are here to stay. Amazon is not going to reverse course on its sustainability promises, and the reduction in packaging and labor costs for Amazon at its warehouses is significant. But this program is not one-sided; outside of improving customer experiences, brands may generate meaningful cost savings through reductions in prep charges, reductions in damaged inventory, and reduce labor cost during production & packging processes.
If your business is concerned about the impact SIOC charges will have to your Vendor Central business, ARMR can help craft an Amazon strategy to preserve your profitability. Whether it is assortment planning, migrating to Seller Central, or pursuing SIOC adoption, we’re here to help.