October 10, 2016.
If reading that date causes your heart rate to spike, then you’re probably a new seller who hoped to cash in this holiday season on Amazon using their FBA service. And you were probably disappointed to find out you would have to wait until after Christmas to get started.
Let me explain.
Amazon made an announcement on October 10th that they would not accept any inventory from first-time FBA sellers until after the holiday season. And by “made an announcement,” I mean Amazon just started blocking shipments from anyone who had never used their FBA service before. Merchants who tried to initiate a shipment received the following notice:
“We are restricting shipments from new-to-FBA sellers to ensure we have the capacity necessary to receive and store inventory and to ship products to customers quickly. If you have not completed your first shipment to Amazon before October 10, 2016, we encourage you to start shipping to Amazon after December 19, 2016. We encourage you to continue selling on Amazon and fulfilling orders directly to customers. We apologize for any inconvenience. If the situation changes before December 19, 2016, we will notify you by e-mail. We apologize for any inconvenience.”
True to form, Amazon didn’t make a big announcement in advance of this date. They just made a business decision and ran with it. In fact, the only real mention of this on the Amazon Services page is down at the very bottom in fine print (Note: This has since disappeared from this page):
So why did Amazon impose a moratorium on new FBA sellers? Because:
- The fulfillment warehouses in the U.S. already operate at almost maximum capacity.
- The Christmas shopping season opens the floodgates for people trying to make a quick buck. Which means…
- There’s a huge surge in inventory, which may or may not sell. So…
- Amazon wants to make sure they have the resources to service ALL of their customers. And that means both buyers AND merchants.
Basically, they want to make sure they can process all the holiday orders and keep all their Prime customers happy.
A lot of new FBA merchants want to sell popular products, but Amazon already has tons of inventory from the current merchants. In fact, Amazon has already imposed limits on ASINs that “have high inventory levels but low customer demand.”
The rest of the new FBA merchants want to overload the warehouses with generic, private label Chinese products that may or may not sell at all. And again, this just takes up shelf space.
So what does this mean if you were planning to launch your first product using the FBA service this Christmas season?
It means it’s time for a little bit of hustle. And that’s a good thing, because it can also mean higher profit margins!
For the past year, Amazon has been slowly rolling out a “Seller Fulfilled Prime” program. This means your product listings can display the “Amazon Prime” label, which is a huge benefit. Why? Because over HALF of all Amazon customers are Prime members. And those Prime members spend more money on Amazon than non-Prime members!
The key benefit of being a Prime member is “free” shipping (not counting the $99 annual fee, of course). If you shop on Amazon like me, you probably filter all your product searches by checking the Prime box on the left sidebar. And trust me, your customers will do the same. Having that label on your listing makes your product more desirable.
The “hustle” mentioned earlier is because you have to fulfill the orders yourself. You can’t just dump all your inventory in a fulfillment center and let Amazon do all the dirty work. You have to figure out where to store it. You have to pack and ship everything. And you have to ensure that all of your shipments reach the customer within 2 days, which is the Prime standard.
There is a premium for 2-day shipping, but don’t let that scare you. By enrolling in Seller Fulfilled Prime, you can take advantage of Amazon’s steeply-discounted shipping rates. And you don’t have to pay all of the FBA fulfillment fees, either. As long as you have a healthy margin between your sales price and your total (or landed) cost of goods, you can make Seller Fulfilled Prime work for you.
If you decide to give SFP a try, here’s how the program can benefit you:
- You can start selling your product without incurring any FBA fulfillment fees. This is a good way to test the market without committing funds to Amazon.
- You will always have access to your inventory. This can come in handy if you decide you don’t like your product photos and you want to try some new ones. It’s also good because you can create different bundle options and test which ones sell better (packs of 3, packs of 10, etc.).
- You can test your product without racking up long-term storage fees. One of the FBA fees is a monthly charge based on how much shelf space your product takes up. And if your inventory is slow to sell, Amazon will start hitting your account with these storage fees. As evidence of how important shelf space is for the fulfillment centers, FBA is currently running a promotion where sellers can remove their excess inventory for free (Note: Link requires login at Seller Central).
- You’ll be nimble. Despite all your research, you never know how well your product will sell on Amazon. The marketplace could be flooded with merchants selling the same thing as you at the drop of a hat. Or maybe shoppers just aren’t interested. Whatever the case, you’ll be able to change strategies to see what works.
Seller Fulfilled Prime is a good strategy for launching a product, regardless of whether or not there’s a temporary hold on new FBA sellers. You can spend the first phase of your launch testing and optimizing your listing copy and product photos. You can run promotions to start generating sales momentum. And once you reach the tipping point of knowing your product is selling, then you can ramp up inventory and start using the FBA program.
Like it or not, Amazon will continue to do what’s best for their brand as the largest eCommerce platform in the world. And the shoppers who spend tons of hours and even more money on the site are always going to be the top priority. All we can do as merchants or sellers is to work within the system and take advantage of everything Amazon gives us.
And we may find along the way that all of the policy changes incorporated on a whim are all for the best.