Time for the weekly recap of Amazon news! It's always good to keep up with events related to the fast-moving world of the Amazon ecosystem. I select the most important news updates to share with subscribers each week, which you can sign up to receive right here.
New fulfillment program for Sellers: “FBA Onsite”
Amazon’s FBA program, where Amazon stores and fulfills customer orders and enables Prime-eligibility of those products for consumers, has been popular with brands and sellers for a long time. However, in some cases, sellers would rather fulfill their own inventory.
Consider large or heavy items, where a merchant would need to cover the cost of sending the inventory to Amazon, and then pay fulfillment fees when a customer orders it. Or products which are considered Hazardous Materials, which Amazon does not allow in their standard FBA warehouses.
Amazon has a new program for those merchants who already have robust fulfillment capabilities, and it’s called FBA Onsite.
Similar programs that Amazon’s rolled out include Seller Fulfilled Prime, which was cost prohibitive for many merchants because they had to guarantee products to be delivered within the same 2-day window as Prime. The performance metrics for this program were also aggressive and required merchants to have very advanced fulfillment capabilities.
Seller Flex is a similar program where Amazon contracts Uber-like delivery personnel to pick up orders from merchants for direct delivery to customers. This program was trialed in October but had obvious geographical limitations.
How it works:
- Sellers have an instance of Amazon’s Warehouse Management Systems (WMS) installed on the merchant’s servers.
- Amazon coordinates package pickup and delivery through the software, choosing the method of delivery (FedEx, UPS, USPS, or Amazon’s own network).
- Merchants keep goods in their own warehouses.
- Merchants can still participate in FBA programs like Subscribe & Save and Small & Light.
- FBA Onsite offers A Nationwide, 2-day Prime offer for a flat fulfillment rate. These shipping rates could be as much as 70 percent less than merchants would pay themselves through 3rd party carriers.
We will cover more details about this program and the benefits to brands and merchants on our blog as more details emerge. Be sure to subscribe to our newsletter for updates.
New fulfillment program for Sellers: “Supply Chain Connect”
New fulfillment program for Sellers: “Supply Chain Connect”
Supply Chain Connect is a new service for brands using FBA, which allows sellers to grant limited access to a ‘Supplier Portal’ for their manufacturers, freight forwarders, wholesalers, or similar parties to ship inventory directly to Amazon.
This program aims to solve inaccuracies and excessive back-and-forth between brands and their suppliers, by giving them direct access to shipment information and the ability to acknowledge and act on the shipment information directly in the Amazon system.
- Brands invite supplier to a ‘Supplier portal’ on Amazon.
- The brand creates and confirms a shipment.
- A ‘Prepare shipment’ tab includes a carrier option where you can share shipment information with a selected supplier.
- Suppliers then sign into the portal to take action on requested shipments (pick list, labels, tips for shipping, box content information, etc).
Merchants can select an ‘Amazon Partnered Carrier’ which means lower costs for the merchant, and greater insight (and shipping volume) for Amazon.
Watch the video summary about the new program here.
Amazon has quietly launched a “$10 & Under with
Free Shipping” page
I want to point out the downstream effects that this will have on US brands & sellers, which doesn't seem to have been covered in the press.
Looking at the assortment, the requirement is a price point below $10, with free shipping. Free shipping doesn’t necessarily mean Prime eligibility, where typically Amazon stores and fulfills the inventory, and sometimes owns the inventory itself.
This microsite will be a place where direct manufacturers from China can get their products displayed prominently and use the very cheap USPS ePacket delivery service. The ePacket program, which was developed and funded by the USPS, eBay, and China Post, allows Chinese sellers to ship directly to US customers with tracking information for less than less than we can ship the same thing from South Carolina to NYC using USPS First Class delivery (no tracking).
US sellers and brands have complained about the advantage that Chinese sellers have over US brands in this regard, and any push that Amazon makes into Dollar Store territory will escalate this sentiment. But from Amazon's perspective, it will have the desired effect: more assortment and lower prices.
Investors surprised by Amazon’s profitable operations
Amazon released its Q4 results last week. For the first time, quarterly profit topped $1 billion. After decades of investing in its own logistics network, Amazon is getting orders to consumers faster and cheaper than ever. This is despite having a bigger network than ever, with 30% more warehouse square footage than 2016.
My prediction is that Amazon will eventually start selling logistics services to merchants and other businesses, similar to the way they built the AWS cloud computing division to fill their own needs and then started reselling the service to other businesses and enterprises. AWS is Amazon’s most profitable division today.
Amazon partners with Berkshire Hathaway and
JPMorgan Chase on employee healthcare
Amazon, Berkshire Hathaway, and JPMorgan Chase announced a partnership to cut health-care costs and improve services for their U.S. employees.
Though the first initiative will be focused on technology, this brings the rumors of Amazon’s push into the healthcare category back to the fore. Amazon could be a deft partner in technology, to be sure. But they also could get significant economies of scale through such a partnership and use it as a mechanism to get into the actual distribution of pharmaceuticals and medical devices - a huge industry with a complex payment and rebate structure between distributors, insurers, and manufacturers.