Amazon FBA Changes (March 2012)
The last post was part 1 of “Record Keeping”. I’ll continue with part 2 next time, I wanted to spend some time this post talking about recent changes to Amazon’s “Fulfillment By Amazon” (FBA) program. There have been two changes recently, one very good and one not so good. Let’s talk about the good one first.
FBA initiated a “Label Service”. Some inventory needs to be labeled before it can be sold through FBA. Usually this is because there’s more than one product in the Amazon system with the same UPC, so they need the seller to label the products with the correct ASIN so that FBA knows which it is. Until now, the seller had to label the products himself. If you’ve ever done this, you know that it can be quite time consuming. However, for a fee (currently $0.20 per item) you can send your items requiring labeling to the FBA fulfillment center, and they’ll label it for you. That’s a real time saver, and something you should look into.
The second recent change to FBA is where your inventory is sent. When I started using FBA years ago, all inventory for a single ASIN (Amazon equivalent of a UPC) was always sent to a single fulfillment center, and most (but not all) ASINs were sent to the same fulfillment center. Then, Amazon changed it so that, except in special cases, all of a seller’s inventory would go to a single fulfillment center. This was a big help, because splitting up shipments from a manufacturer so they can go to multiple fulfillment centers based on ASIN took a lot of time. Unfortunately, FBA’s latest change goes in the opposite direction.
Now, multiple items for a single ASIN can be required to be sent to multiple fulfillment centers. This is very bad, especially for small retailers. Not only does it take a lot of time to split up a shipment from a manufacturer to send it to several fulfillment centers, it makes the shipping cost to the Amazon fulfillment centers extremely expensive.
There are two ways to avoid this problem. The first is that if you send merchandise in case packs, Amazon (currently at least) won’t make you split up case packs. The second is to sign up with Amazon to have all items for a single ASIN go to a single fulfillment center, for an additional per-item fee.
These two methods will help if you’re sending relatively large quantities, but they won’t help if you’re sending very small quantities, like when you’re testing out new products and don’t want to spend a lot of money on products that may not sell well.
I believe FBA doesn’t want to handle merchandise unless it’s high volume. This is understandable from an operations perspective, but I have to believe it’s going to negatively affect small sellers. One of the best values of using FBA is that it frees you up as a seller from having to handle individual orders. But smaller sellers typically carry a lot of products that aren’t high volume, because the margins on high volume products are small or negative for a small seller. But you don’t want to carry a lot of inventory for a slow-moving ASIN, because that’s not an efficient use of money. And if you try to carry a small amount of inventory via FBA to make efficient use of your money, the shipping costs to the Amazon Fulfillment center could be prohibitive because they’re being split up among multiple fulfillment centers. This means smaller sellers will have to handle more of their orders personally, instead of using FBA, and that will be even more time consuming.
FBA sent out a seller survey recently that asks, among other things, about processes sellers use when shipping products to Amazon fulfillment centers. It did cover the negative effects this recent change in FBA requirements will have on sellers. Hopefully from the feedback they receive they’ll reconsider this recent change.