Amazon is instituting a series of initiatives aimed at improved inventory management on its marketplace, including speeding up fulfillment and delivery, according to its website. Beginning July 1, Amazon began limiting storage for sellers with an "inventory performance index" below 350, a score updated weekly. Sellers with an index score of 350 or greater will have unlimited storage, though monthly storage fees and long-term storage fees still apply.
Sellers can't send new shipments to Amazon until their inventory level drops below their storage limits, the company said. If existing inventory exceeds storage limits for a given month, Amazon will charge a storage overage fee of $10.00 per cubic foot, on the over-stored portion, in addition to monthly inventory storage fees and any long-term storage fees.
And those have also risen. As of April 1, monthly inventory storage fees rose by 5 cents per cubic foot for standard-size and oversize items. On Aug. 15, Amazon will introduce a 50-cent per unit per month charge for items in fulfillment centers for 365 days or longer and will charge a total or minimum long-term storage fee, whichever is greater. And beginning Sept. 15, long-term storage fees will be assessed monthly instead of semi-annually, the company also said.
In the past, Amazon marketplace sellers had been able to pay for unlimited storage, leaving the e-commerce giant to contend with unsold merchandise.
That not only crowds its warehouses — a problem that Amazon has previously sought to correct at the holidays — but also deprives the e-commerce giant of its take on merchandise sold through the marketplace, which is now half of what it sells.
Those sellers have been a boon when it comes to sales and fulfillment. The marketplace model allows Amazon to reap the benefits of sales without much cost for fulfillment and shipping, expenses that Amazon is seeking to offload even more.
And it must. In the first quarter, fulfillment expenses rose to $7.8 billion from $4.7 billion in the year-ago quarter. The e-commerce giant is tapping its Prime membership for more income as well, raising the price by $20 this year to $119. "The value of Prime to customers has never been greater," CFO Brian Olsavsky said on a conference call in April. "The costs are also high."
So far it doesn't seem like most Prime members are blinking. Nearly half (48%) say they'll keep their memberships, while 32% say they'll be canceling theirs, according to a survey of more than 1,000 U.S. consumers from Offers.com conducted for deals site BlackFriday.com. Some 20% are disgruntled but also said they'll use a free Prime trial to participate in Prime Day. In all, 48% in that survey said they're Prime members, 45% are not and 7% will get a trial membership just for Prime Day, slated for July 16.
But while Prime members may not quit over the higher fee, their expectations for customer service may rise, and there Amazon's marketplace poses a problem. As its marketplace has taken over a greater portion of sales, Amazon's reputation for top-notch customer service has suffered, as some sellers fail to provide customers with solutions to problems, adequate packaging or shipping speeds and, perhaps worst of all, authentic goods or goods-as-advertised. As a result, the company is now also moving to consolidate its marketplace and retail teams.