Why Shipping Performance is a Key Factor for Amazon Account Health

Amazon places great value on customer experience and policy compliance and wants its sellers to be in the same boat. 
To ensure that sellers follow the policy guidelines and prioritize customers, Amazon sets account health metrics to track the health status of every seller account. These health metrics consist of various factors, including shipping performance.

​This blog reviews what Amazon Account Health is and why shipping performance is necessary for maintaining a healthy Amazon account. It also provides a deeper look at the key shipping performance metrics and proven strategies to improve Amazon shipping performance.

What Is Amazon Account Health?

Amazon Account Health represents the overall status of your seller account, evaluated through various performance metrics and adherence to Amazon's policies.

Maintaining strong account health is essential as it influences your ability to sell on Amazon, affects your visibility in search results, and impacts your chances of winning the Buy Box (Featured Offer). If not managed properly, poor account health can lead to account suspension or deactivation.

The key metrics of Amazon Account Health consist of three main areas: Customer Service, Policy Compliance, and Shipping Performance. These metrics are visible on your Account Health Dashboard.
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Account Health Rating (AHR)

The Account Health Rating (AHR) provides a numerical score that reflects the overall health of your seller account. This score can vary based on multiple performance factors, offering a general overview of your account's condition.
You can view your AHR score on the Account Health page at the top of the policy compliance box. The score is categorized into three distinct zones: Healthy, At Risk, and Deactivated, each with a different score range and color code.
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• Green: An AHR score of 200 or above falls in the "Healthy" range, displayed in green on your screen.
• Yellow: Scores between 100 and 199 are considered "At Risk."
• Red: If your score drops below 100, it will display in red, indicating eligibility for deactivation. Immediate attention to listing violations is essential if this occurs.

Three Key Areas Affecting Amazon Account Health

As mentioned above, Amazon account health consists of three key areas:

1. Order Defect Rate (ODR): It is the rate of orders that have some kind of defect, including receiving negative feedback, an A-to-Z guarantee claim, or a service credit card chargeback. 
2. Policy Compliance: It concerns complying with Amazon’s policies and guidelines. Violation of these policies damages account health.  
3. Shipping Performance: It measures the quality of shipping and tracking service provided by the seller and whether the products were shipped on time.

Here, we will focus on the third metric, Shipping Performance, and how it affects the overall health of your seller account.

Amazon Shipping Performance ​

Shipping performance is a crucial aspect of your overall success as an Amazon seller. Not only does it influence your search ranking and eligibility for Prime programs, but it also impacts your sales and brand reputation.

Tip: Difference Between ‘Shipment’ and ‘Delivery’ 
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It's important to understand the difference between shipment and delivery as these terms are often confused with one another. 

Shipment indicates that the seller has handed the package to a shipping carrier and marked it as shipped on Amazon. The customer can now track the package.
Delivery means that the package is actually delivered to the customer’s address. The delivery date depends on the shipping method and the delivery provider’s service level.

Understanding Amazon Shipping Performance Metrics ​

Sellers can manage their performance and compliance issues through the Account Health page in Seller Central. This portal provides a dedicated section titled "Shipping Performance," where you can easily monitor your shipping performance metrics. These metrics are:

1. Late Shipment Rate (LSR)

Aim to keep your Late Shipment Rate below 4%, which means at least 96% of your orders should be shipped on time within the past 30 days. This metric is particularly critical if you sell to business customers, as they can view your On-Time Shipping rate. Here are some strategies to reduce late shipments:

• Ship orders as quickly as possible after they are placed.
• Mark orders as shipped immediately once dispatched.
• If you fail to confirm dispatch within 7 days of the Ship-By date, Amazon will auto-cancel the order, negatively impacting your LSR.

2. Pre-Fulfillment Cancel Rate (PFCR)
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This metric tracks the percentage of self-fulfilled orders you cancel before dispatching. To maintain account health, your PFCR should be below 2.5%, and under 0.5% to qualify for Premium Shipping. Consider the following tips to minimize pre-fulfillment cancellations:

• Only cancel orders for legitimate reasons, such as stock-outs or buyer requests.
• Optimize your listings to reduce non-standard cancellation requests, which can affect your PFCR.
• If you encounter unresponsive buyers or undeliverable addresses, you cannot block them, but you can report them to Amazon. However, your PFCR will still be impacted if you cancel their orders.
• If Amazon auto-cancels an order due to a detected fraudulent buyer or payment
• verification issues, your PFCR will not be affected.
• Tracking numbers must be uploaded before the delivery date.
• Each shipment should have at least one carrier scan (or two for shipments from China) and a delivery scan.
• Use Amazon-integrated carriers for items shipped from China.
• Any shipment delivered more than 17 days after the Promised Delivery date is considered to have invalid tracking, regardless of delivery scans.]
  
  ​3.  Valid Tracking Rate (VTR)                                                                                                                                             The Valid Tracking Rate measures the percentage of tracking numbers you upload in a 30-day period that Amazon recognizes as valid. The minimum acceptable rate is 95%, and you receive one VTR for each product category you sell. To stay compliant, review the latest requirements on the official VTR help page. Key rules include:
• Tracking numbers must be uploaded before the delivery date.
• Each shipment should have at least one carrier scan (or two for shipments from China) and a delivery scan.
• Use Amazon-integrated carriers for items shipped from China.
• Any shipment delivered more than 17 days after the Promised Delivery date is considered to have invalid tracking, regardless of delivery scans.

On-Time Delivery Rate (OTDR) For Amazon FBM Sellers

The On-Time Delivery Rate (OTDR) assesses the percentage of Fulfilled by Merchant (FBM) products delivered to customers by or before the seller's specified "Delivery Date." This date is set by Amazon sellers and does not include any promised extensions.

As of September 25, 2024, Amazon has revised its OTDR policy. The updated guidelines require FBM sellers to maintain a minimum OTDR of 90% without extending the promised delivery dates to ensure optimal performance of their Amazon accounts. However, Amazon recommends maintaining an OTDR of 95% or higher for an even better buyer experience.
 
This policy does not apply to products using Fulfillment by Amazon (FBA) services, as sellers are not responsible for the on-time delivery commitments of FBA orders.

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​Poor Shipping Performance: 10 Negative Effects on Your Amazon Account

Failing to meet Amazon’s shipping standards can lead to ten crucial negative outcomes:
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1. Suspension: Amazon may suspend listings, restrict selling rights, or withhold funds for sellers who don’t meet shipping standards.
2. Customer Dissatisfaction: Late deliveries are one of the biggest factors of customer dissatisfaction. If the customers are not happy, you’ll get negative reviews and low seller ratings, diminishing your brand trust. 
3. Low Visibility: Poor shipping performance can lower a seller's ranking in Amazon's search results, making it harder for buyers to find these products.
4. Penalties and Fines: Amazon may impose penalties or fines on sellers who consistently fail to meet shipping commitments. These penalties can be financial and impact the seller’s profitability.
5. Limited Shipping Options: Sellers who don't maintain a Perfect Fulfillment Completion Rate (PFCR) below 0.5% risk losing access to Premium Shipping, preventing them from offering one-day or two-day shipping.
6. Fewer Buy Box Wins: Shipping performance impacts how often a seller wins the Buy Box, which is essential for visibility and sales. Bad shipping performance will result in losing this huge opportunity. 
7. Competition and Loss of Sales: Sellers in highly competitive markets may lose potential sales to competitors who can offer faster shipping. Customers often prioritize fast and reliable delivery, so delays can result in lost sales opportunities.
8. Low Account Health Rating: Unsatisfactory shipping performance can result in a low AHR which, in turn, leads to the risk of account suspension and deactivation. 
9. Cancellations and Returns: A significant delay in order fulfillment can force the customer to cancel the order or return it upon delivery, leading to a higher ODR.
10. Inventory Management Issues: Poor shipping performance can result in inventory management hassles. Having items in transit and adjusting stock levels to account for returns and cancellations can be very inconvenient.

Strategies to Enhance Amazon Shipping Performance

These eight key strategies will help you improve your Amazon shipping performance and mitigate the effects of negative poor performance.

1. Prepare for Potential Shipping Delays
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Shipping delays can challenge e-commerce operations, but proactive planning can help minimize the impact and maintain customer satisfaction. Here are two strategies:

• Multiple Suppliers: Partnering with multiple suppliers increases sourcing flexibility. If one supplier encounters delays, others can step in to fulfill orders and keep deliveries on schedule.
• Diverse Fulfillment Options: Consider a blend of fulfillment methods, including Amazon’s Fulfillment by Amazon (FBA), third-party logistics (3PL) providers, and self-fulfillment. This variety allows you to adapt as delivery needs change.
  
  2. Manage Inventory Smartly    

Maintain a buffer of essential or high-demand items that can be shipped promptly if delays arise. Identify your most popular products and ensure these are included in your safety stock.

Use just-in-time (JIT) inventory management to reduce excess holding costs while ensuring you have the right products in stock. Monitor sales and trends closely to keep inventory levels aligned with demand.

3. Communicate with Customers

Always keep your customers informed. If a product may be delayed, notify them early, offering options to wait or cancel. Address inquiries about shipping delays promptly to show your commitment to customer satisfaction.
Set realistic delivery timelines to manage customer expectations. Regularly review and adjust delivery promises based on data, carrier performance, and external factors affecting shipping.

4. Use Fulfillment by Amazon (FBA)

Consider using FBA, where Amazon manages storage, packing, and shipping, often providing faster, more reliable delivery. FBA also makes products Prime-eligible, appealing to customers who prefer fast shipping.
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5.  Use Prime Shipping Advantages
If possible, offer Prime-eligible products to benefit from Amazon’s fast, reliable shipping. Prime members tend to prioritize fast shipping, which can help broaden your customer base. Ensure that your listings meet Amazon’s Prime requirements and standards.

6.  Explore Alternative Shipping Methods
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• Seller-Fulfilled Prime (SFP):
  SFP lets you handle Prime orders directly, maintaining control over the shipping process while providing Prime benefits. To access it, you should meet Amazon’s performance criteria and shipping standards.
• Third-Party Logistics (3PL) Services:
  Partner with a 3PL provider to expand shipping capabilities. A 3PL can provide warehousing, order fulfillment, and efficient shipping, offering flexibility to navigate delays.

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7.  Proactively Manage Customer Feedback
Respond professionally to customer concerns about delays, providing updates and solutions where possible. Thoughtful customer service can turn a potentially negative experience into a positive one.

Keep customers informed about potential delays with transparent delivery information. Send tracking updates, delivery status notifications, or emails in case of delays to manage expectations.
8.  Encourage Positive Reviews

Encourage satisfied customers to leave positive reviews to balance any negative feedback from delays. Remember to follow Amazon’s review policies to ensure compliance.

Final Thoughts

Optimum shipping performance is crucial for maintaining robust Amazon account health. It allows sellers to achieve consistent visibility, customer trust, and business growth on Amazon. 

By improving key metrics like Late Shipment Rate, Pre-Fulfillment Cancel Rate, and Valid Tracking Rate, sellers can enhance their delivery reliability, meet customer expectations, and reduce risks of suspension or deactivation.

Effective shipping performance not only improves the Account Health Rating but also contributes to securing the Buy Box, reducing penalties, and driving competitive advantage. Prioritizing these areas enables sellers to build a sustainable and high-performing Amazon account.

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FAQs

1. What is the importance of shipping performance for Amazon Account Health?
Shipping performance is a critical metric Amazon uses to evaluate seller reliability and customer satisfaction. Poor shipping performance affects visibility, eligibility for Prime, Buy Box opportunities, and even account suspension risk. Maintaining strong shipping metrics is essential to avoid penalties, preserve account health, and ensure positive customer experiences.
2. What happens if my Late Shipment Rate (LSR) exceeds Amazon’s target?
If your LSR exceeds Amazon’s 4% threshold, your account health can be negatively impacted. This can lead to penalties like loss of Premium Shipping options, lower search ranking, and reduced Buy Box wins. Consistently high LSR can even lead to account suspension, so it’s important to keep shipments timely and track performance closely.
3. How can I monitor my shipping performance metrics on Amazon?
Sellers can access and track shipping metrics through the Account Health page in Seller Central. Here, you can monitor key indicators like Late Shipment Rate, Pre-Fulfillment Cancel Rate, and Valid Tracking Rate, which are displayed within the "Shipping Performance" section. Regular monitoring helps ensure metrics stay within acceptable ranges.
4. What is the difference between Fulfillment by Merchant (FBM) and Fulfillment by Amazon (FBA)?
Fulfillment by Merchant (FBM) allows sellers to handle their own storage and shipping, provided they meet Amazon’s performance standards. In contrast, Fulfillment by Amazon (FBA) means Amazon handles storage, packing, and shipping. 
5. What strategies can I use to reduce pre-fulfillment cancellations?
To minimize pre-fulfillment cancellations, avoid over-promising on inventory and only cancel for valid reasons, like stock shortages. Keep listings updated to prevent order errors and consider inventory management practices that align stock levels with demand. Communicate with customers proactively if issues arise to mitigate cancellation impacts on account health.

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