A few weeks ago, the Wall Street Journal and other news outlets reported that Amazon employees had been using proprietary data collected from some of the company’s third-party sellers to price, develop and launch Amazon products.
The story came on the heels of Amazon’s recent decision to modify its Prime delivery promises for non-essential products due to concerns about COVID-19 supply chain shortages and its announcement that it would not be accepting any new shipments of those products at its warehouses for a while. Sellers of “non-essential” products who relied on Fulfillment By Amazon (FBA) to get orders out the door found themselves out of luck.
If you are largely dependent on Amazon for sales and fulfillment, perhaps its time to explore a “Plan B” – alternatives to FBA.
Recent Amazon actions serve as a reminder that, while the retailer offers unbeatable access to buyers and the most advanced fulfillment infrastructure in the world through Fulfillment By Amazon (FBA), it comes with a laundry list of caveats and strings attached – one that’s getting longer and more potentially complicated every year.
For instance, consider what happened in 2018 when Amazon altered its fee structure so that companies got charged monthly, rather than semi-annually, for having slower-moving inventory – and when it rolled out its Inventory Performance Index (IPI), which resulted in higher rates to store slow-moving SKUs.
Or think about the new policy Amazon introduced last June, when it began requiring certain sellers to feature price-per-unit information on all of their listings.
There are also inherent downsides to FBA operating procedures:
- Inability to Customize. FBA is built for efficiency. You sign up, check a few boxes, agree on a price, and start. There are no planning meetings to review any unique requirements you may have.
- High Costs. FBA storage rates and other charges can be quite high. The company operates a highly mechanized network of leased warehouses that wasn’t cheap to build and isn’t cheap to operate. FBA storage rates also penalize brands with slower-moving inventory.
- Poor Brand Experience. When FBA ships your product, it is shipped in an Amazon box. The customer experience is around Amazon, not your brand.
- Lack of Responsiveness to Smaller Customers. Exceptions inevitably occur. When you call FBA about that truckload that needs to be received immediately to handle a rush order, it may take a while to reach a person that can actually do something to help.
Make no mistake, Amazon is a powerhouse sales channel and fulfillment partner, but there are some tradeoffs you’ll need to make operationally to capitalize on these benefits. It may be wise to start looking for alternatives to FBA for at least some of your orders so that you won’t be left flat-footed the next time a Black Swan-like event, major price increase or other challenge rolls around.
There are numerous ways you can do this, including:
- Diversifying your sales channels. Look into selling some of your products on other large online marketplaces
- Separating your sales and fulfillment channels. Continue selling via Amazon, but take responsibility for your own fulfillment via Fulfillment By Merchant (FBM) or Seller-Fulfilled Prime (SFP). You can do this yourself, or lean on a third-party fulfillment company.
- Investing more marketing time and effort into promoting your own web store so that you can drive more sales through your own, more profitable operations.
Start by selling a small portion of your inventory on a new sales channel first, just to see how it works. Or, consider using a 3PL’s fulfillment centers rather than opening new ones of your own if you decide to look for alternatives to FBA.
The important thing is just to get the process started, because in today’s volatile world, variety isn’t just the spice of life. It’s the key to sustained sales and success.
For more ideas – or to discuss any of your fulfillment needs, we encourage you to contact Amware. We’ve helped hundreds of online sellers fulfill orders for all their sales channels, including Amazon.