With the COVID-19 coronavirus still spreading across the United States, many businesses are feeling the effects. From hotels and restaurants to bricks and mortar retail, there doesn’t seem to be any industry that hasn’t been affected.
The logistics industry is no exception, but thankfully the effects have been positive in many ways, including an increase in online shopping thanks to quarantined customers shopping online from the safety of their homes. But while ecommerce has been beneficial for both consumers and logistics providers, one segment of the supply chain, Amazon sellers, are feeling the pinch.
Amazon Restricts “Non-Essential” Sellers
It all began in March, when Amazon implemented warehouse restrictions for retailers. While they did allow their sellers to continue storing merchandise at their many US warehouses, they began limiting the kinds of merchandise they would allow to be restocked in those warehouses. Products considered to be essential items like hand sanitizer, canned goods, and toilet paper were given priority, while others, such as clothing and tech accessories were turned away. While this move was beneficial to consumers facing barren store shelves, it was a crushing blow to the many Amazon sellers who sell so-called, ‘nonessential’ items.
The problems for Amazon sellers didn’t stop there, though. Due to increased sales, the retail giant faced shipping delays of even in-stock products, leading them to hire more warehouse workers and drivers. But even with the increased workforce, sellers still faced, and are still facing, storage restrictions.
Amazon Enacts Punitive Long-Term Storage Limits
On July 13, 2020, Amazon announced more restrictions on storage ahead of the holiday retail season. Anticipating a greater demand for online shopping due to the still-increasing coronavirus, Amazon made the move to again help consumers get the popular products they want, this time without the delays they experienced in the spring. In a letter to their sellers, Amazon explained that they would be implementing restrictions across all product categories, and would allow for only about 3 months’ worth of product sales. The retailer also pointed out that they have hired more than 175,000 employees, and will be opening 33 new warehouse facilities within the year to keep up with the demand.
But while all this growth seems like good news for consumers and the economy, the restrictions that were put into place to encourage this growth are still bad news for some Amazon sellers. After all, if they can’t store as much product with Amazon, where can they store it?
Warehousing and Fulfillment Alternatives for Amazon Sellers
The good news is there are plenty of options for Amazon sellers looking to warehouse their inventory. Options that do not include those tightly restricted Amazon warehouses.
Some options which Amazon sellers may want to consider when it comes to warehousing their products is to rent their own warehousing space independent of Amazon. This will allow sellers to store their products safely, on their own terms, and without the Amazon inventory restrictions.
FBA Prep Services Provide a Potential Solution to Bridge the Gap
The first option for sellers looking to sell through Amazon but without the inventory restrictions is to use an Amazon FBA Prep warehouse. These ‘Fulfilled by Amazon’ warehouses specialize in the storage, preparation and shipment of merchandise that is sold through Amazon, without the restrictions Amazon’s own warehouses are enforcing against sellers. Though each FBA Prep warehouse will have its own terms and conditions, they can be much more flexible than Amazon’s own warehouse.
However, there are some downsides to using an FBA Prep service. First and foremost – there aren’t many FBA prep companies out there because it isn’t a very profitable business model. Amazon, via FBA, continues to make the lion’s share of the fulfillment and shipping revenue, so most independent fulfillment companies aren’t interested in storing a few pallets of products for a short period of time. It simply isn’t profitable for them. Second, it requires not only managing the relationship with Amazon but also managing a second relationship with an FBA Prep company, which is somewhat cumbersome and takes more time.
An FBM Strategy Offers a Comprehensive Alternative Strategy
Another option for Amazon sellers to consider is the use of a ‘Fulfilled by Merchant’ or an FBM strategy. The FBM strategy is when the Amazon seller still uses Amazon as a selling platform, but allows the business to fulfill its Amazon orders themselves rather than using Fulfillment by Amazon, either in-house or via the use of a third-party fulfillment company.
There are pros and cons to using the FBM strategy, but overall, the pros often outweigh the cons. To host your own FBM operations, you must find either an independent warehouse, or warehouse your product somewhere on your own. If you do choose to warehouse your merchandise on your own, you must handle the details involved in selling, such as shipping and returns, as well as customer service.
Choosing your own independent third-party warehousing service has many benefits. For starters, you can choose where your merchandise is stored and negotiate a rate that includes all the services your business needs, including product storage, shipping, customer service, and more. You can even run the fulfillment of other sales channels, such as Walmart, eBay or your own website, through the third-party warehouse for a comprehensive solution for all orders.
Another one of the benefits of the FBM strategy is that independent warehouses can often negotiate better shipping rates than you can get on your own depending on the volume of product you need to ship.
Fulfillment by merchant warehouses can also work with you if you have a smaller shipping volume and smaller amounts of merchandise to store, and can be noticeably less expensive than fulfilled by Amazon warehouses and Amazon’s actual warehousing.
Finally, the control aspect cannot be denied when it comes to FBM strategies. Without the product restrictions Amazon has put into place, hosting your own fulfillment allows for greater control of your own inventory, ensuring that you always have inventory on hand. This is especially important today in a time when there is much uncertainty in the world due to COVID-19 and the approaching holiday season. And to boot – you will likely be able to speak with a live person instead of email support for questions!
To summarize, an FBM strategy utilizing an outsourced fulfillment center offers:
• One central fulfillment and shipping solution for all sales channels
• Potentially lower overall fulfillment and shipping fees
• Better overall control and flexibility without significant restrictions
• Improved customer service
No matter what you decide when it comes to housing your inventory, there is likely a viable option for your business if you do the right research. Whether you choose to stick with Amazon despite the restrictions, utilize a Fulfill By Amazon warehouse or take matters into your own hands with a Fulfilled By Merchant warehouse, do your homework and decide what’s best for your bottom line.