DISCUSSION
Amazon jacks up price on storage for holiday fulfillment
Written by RetailWire Staff
The 2016 holiday season is still a long way off, but Amazon is already looking for a way to prevent a costly mistake it made last winter. Amazon recently informed third-party sellers that, if they want to keep stock in the Amazon warehouse in November and December, they will have to pay extra.
Fulfillment By Amazon, the e-tailer’s service for handling order fulfillment for third-party sellers, relies on sellers keeping a portion of their stock in the Amazon warehouse. But according to Recode, the stock owned by sellers last holiday season pushed the limits of Amazon's warehouses. The costs attached to the overfilled warehouses cut into Amazon’s margins, negatively affecting quarterly results. By increasing fees for storage in November and December, Amazon hopes to encourage sellers to only keep stock in its warehouses that is certain to move during the holidays. Amazon will be lowering the fees in October before increasing them in the following months.
While the fees were increased slightly last year during the holiday months, the increases this year are far greater. According to Internet Retailer, Amazon will charge $2.25 per cubic foot for standard-sized products and $1.15 for oversized products, compared to last holiday season’s 72 cents for standard-sized and 57 cents for oversized.
Aaron Leon, CEO of ink cartridge retailer and manufacturer LD Products said in the Internet Retailer article that, while the move would probably make Amazon a less profitable marketplace for sellers, most don’t have better options.
In January, Amazon released statistics for its third-party seller marketplace. According to a Wall Street Journal article, the e-tailer boasted delivering one billion items from independent sellers stored in Amazon warehouses.
Amazon has taken further steps year-round to prevent its warehouses filling up with items that may or may not move. The e-tailer recently opened up its express Amazon Prime shipping to some trusted vendors, according to Recode. Previously, only vendors who stored their merchandise with Amazon could be considered for express Prime shipping.
- Amazon just raised its warehouse fees because it ran out of room last holiday season – Recode
- Sellers who use Fulfillment by Amazon consider their options after a fee hike notice – Internet Retailer
- Amazon Touts Marketplace Stats but It’s Hard to Tell How Good They Are – The Wall Street Journal (sub. required)