Amazon is playing hardball with its third-party Marketplace sellers, limiting warehouse space with little warning, Bloomberg reports.
Sources said that Amazon is denying new Marketplace sellers access to its free two-day Fulfillment by Amazon shipping service until Dec. 19, which prevents them from sending their inventory to its fulfillment centers ahead of the holidays.
“[Amazon is] preparing for a very busy holiday, and given the constraints they’ve had in the past, I think they are being more careful about what they are taking,” Robert W. Baird & Co. analyst Colin Sebastian told Bloomberg. “The concern around this news is that they won’t have the capacity they need over the holiday.” Amazon declined to comment.
The Draconian step applies only to new sellers, but is nevertheless a sign that Amazon is struggling to accommodate the swell of merchandise sent to its warehouses and fulfillment centers ahead of the holiday season. The move comes after other changes the e-commerce giant made to its fulfillment systems for the holidays: Amazon recently changed its fees in order to penalize sellers who have slow-selling or off-season goods during the busy holiday time while rewarding those with faster-moving goods, Bloomberg notes.
Cutoff dates for storing goods at its fulfillment centers is nothing new for Amazon, but for new sellers this year, it was the first time that the e-commerce giant moved to deny all categories of merchandise (and not just best-selling holiday goods like toys). Vendors can still sell on the site, but they must fulfill and send their goods themselves and won’t enjoy the benefit of the Fulfillment by Amazon program, which allows Prime members to take advantage of free two-day shipping perks.
While Amazon has made assertive moves to expand its fulfillment centers and warehouses to provide speedy delivery to its Prime members, its shipping and fulfillment costs are growing faster than its revenue. But rather than scaling back, so far the company has focused on making those operations more efficient: In addition to air cargo leases, Amazon’s efforts include an Uber-like crowdsourced ground delivery network it calls Amazon Flex, thousands of semitrailers and, of course, drones. That has prompted several analysts to believe that Amazon aims ultimately to become a shipper in and of itself.
Experts have told Retail Dive that Amazon’s shipping services could indeed expand to serve third parties, following the path of its cloud services. While the retailer built the Amazon Web Services unit to serve its own needs at first, outside parties from Netflix and the U.S. Central Intelligence Service now employ its services as well.
“They’ve built this enormous platform that enables them to service customers with this logistics network — inventories they own, inventories they hold and inventories they direct,” Mark Cohen, professor of retail studies at Columbia University, told Retail Dive last month. “[A]t the end of the day, there’s a lot more to Amazon than just this tremendous array of merchandise.”
Financial research firm Cowen & Co. questions the viability of a full-fledged Amazon shipping service. In a note this spring, Cowen analyst Helane Becker argued that Amazon lacks the density and reach of shipping incumbents UPS and FedEx, and contended that rival retailers would be unlikely to support a delivery service owned and operated by any competitor, especially Amazon. If Amazon is restricting capacity this year, unable to accommodate its own sellers, a full-fledged shipping service clearly would be still far in its future.