In the midst of Amazon’s recent and ongoing policy changes, there’s been quite a bit of buzz among veteran 3rd party sellers, longing for the good ole’ days.
You could imagine their conversations sounding something like this:
“Hey Jack, remember back when we didn’t have ASIN Quantity Limits!?”
“That’s a good one, Jill. How about when nobody knew what a LTSF was, because it didn’t exist?”
“Or back when they were just assessed once a year!”
“Ahhh, the good ole’ days!”
In case you haven’t heard, Long Term Storage Fees (LTSF) is yet another policy that has been ‘updated’ to reflect the evolving marketplace conditions as well as the ASIN Quantity Limits policy. That’s just to name a few and there are still more to come…
Remember when 3rd party sellers were free to ship their products to Amazon’s fulfillment centers for FBA (Fulfilled By Amazon)? Back then, it didn’t matter how long products languished on warehouse shelves before they were sold. This good fortune, however, did not last.
- A new policy (LTSF) was implemented which had an assessment with associated fees charged once per year.
- Eventually this policy was changed to what it is now, an assessment with fees charged once per six-month period.
- The policy was updated yet again with a lock out period that disallows sellers from shipping units quickly back into Amazon if they were recently removed to avoid the fees.
Amazon has actually been testing a relatively new program, called Merchant Fulfilled Prime (a.k.a. Seller Fulfilled Prime). You can check out our previous discussion about that here:
This new program mimics Amazon’s own FBA services:
- It offers the quick two-day delivery Amazon Prime members love.
- The product is shipped directly from the sellers warehouse instead of an Amazon fulfillment center.
- The program has very strict guidelines in regards to shipment delivery date and package tracking for the buyer.
For more insight into Seller Fulfilled Prime, please see this excellent article by Allison Enright: Amazon lets sellers handle some Prime fulfillment, and it’s paying off.
What’s driving Amazon’s decision to make policy changes like this?
It’s common knowledge that 3rd Party Sellers selling FBA enjoy a higher Buy Box percentage over those selling FBM (Fulfilled By Merchant). Add to the existing choices, Seller Fulfilled Prime, and FBM slides down the priority list even further. Another way to look at this is that sellers can now get one step closer to FBA priority status while still storing and shipping their own inventory.
Amazon recently added a brand new fulfillment center in California (see Amazon plans fifth warehouse in the Inland Empire). Amazon also recently leased a bunch of planes to increase its logistics capabilities (see Amazon leases 20 planes, starts air freight service).
Add all of this together and a pretty clear picture starts to form: Amazon has become a victim of its own success.
Simply put, there is a major storage problem at Amazon fulfillment centers. Amazon has marketed the FBA program too well. Sellers quickly learned Amazon is the cheapest 3PL (3rd Party Logistics) out there and soon shifted to stockpiling their inventory in Amazon warehouses to cut back their own storage costs.
Amazon seems to be saying:
- If you use our warehouses as intended (i.e. as fulfillment centers rather than warehouses) then, by all means, please send us the stuff you plan to sell.
- If you plan to store your stuff indefinitely at our fulfillment centers, please don’t, and here are some incentives to help deter you.
These incentives (or deterrents) are what we’ve touched on in this and in previous articles (for example ASIN Quantity Limits). Amazon has even tried to sweeten their incentives by notifying sellers of FREE removal of FBA inventory back in April.
Here is the relevant part of that update:
You may have slow-moving or low-selling inventory. Starting today, March 31, 2016, FBA is waiving fees for any removal order for return or disposal of your inventory that is currently in U.S. fulfillment centers. This promotion ends April 30, 2016, after which time normal removal-order fees will apply.
If you remove units as part of this promotion for which you paid a Long-Term Storage Fee in February 2016, we will reimburse 66% of the fee that you paid per cubic foot for those units.
Amazon has too much slow moving inventory sitting in their fulfillment centers and it’s taking up too much of their precious space. This approach of “separating the wheat from the chaff” points to making Amazon and those who sell on Amazon more profitable.
You have to credit Amazon for its inventiveness.