Amazon Extends Warehouse Product Restrictions, Causing More Seller Angst

Some have started fulfilling their own orders

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Amazon sellers are facing more uncertainty. Amazon
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In an email to sellers, Amazon said the limitations it imposed on the products it will accept at its warehouses will extend beyond its original estimate of April 5, but it is broadening the list of goods “on an item-by-item basis.”

The email from its Fulfillment by Amazon (FBA) unit, which was reviewed by Adweek, said Amazon will “regularly update” the list to allow sellers to check which products are eligible to ship as its capacity to receive products grows. (FBA is the program that allows sellers to ship their products to Amazon in advance, so the ecommerce giant can ship those items directly to customers.)

“We consider many factors when determining eligibility, including high-demand products customers need now; current inventory levels and inventory in transit; fulfillment center capacity; and our ability to adhere to the latest health guidelines,” Amazon added in the email, which sellers received late last week.

In a message to sellers on March 17, Amazon said it was prioritizing household staples, medical supplies and other high-demand products in its U.S. and E.U. marketplaces until at least April 5.

“Due to the massive amount of space required to warehouse their products, Amazon relies on fast-turning inventory, meaning that they usually replenish inventories on a weekly cadence,” said an agency executive, who asked not to be named because he is not authorized to speak on the record. “Turning off the supply for several weeks meant that Amazon would run out of stock for many nonessential products—and the suppliers of those products missed out on sales.”

This change, however, is a sign Amazon has some capacity again, but only for the top-selling products sellers need to replenish.

This executive said the biggest challenge for sellers has been lack of communication from Amazon.

“It is definitely a wake-up call for some businesses that were heavily dependent on Amazon."

“There was little or no warning of the restrictions, and there was similarly scant information available on what exactly was restricted or not,” he added.

Jonathan Weber, a seller focused on products like outdoor equipment and office supplies, agreed, noting the update from Amazon means some products the platform deems nonessential could be restricted “for a significant amount of time into the future.”

Similarly, John Frigo, who sells home goods and gadgets, pointed to lack of clarity about exactly how Amazon defines “essential.”

“Initially, the announcement was no inbound shipments of nonessentials,” he said. “Then Amazon started having 30-day delivery dates for nonessentials, which even extended to things like vitamin C, which surprised me. I would think that would fall into the category of medical or essential.”

Third-party sellers, which Amazon CEO Jeff Bezos noted were responsible for 58% of sales in 2018, have taken slightly different approaches to the changes.

Frigo, for example, said he tends to keep a lot of stock with Amazon, so he’ll be OK until mid- to late April—and even until June for some of this products.

Deneiro Bartolini, an Amazon seller with products in categories like kitchenware, baby and mobile accessories, said he usually accounts for a month of extra inventory.

“I typically send stuff to fulfillment centers about every three months. However, most sellers do it more frequently,” Frigo said. “I don’t mind paying a little more in storage fees for the convenience of not having to order frequently.”

Amazon charges sellers fees for the products they store. In an email on March 30, Amazon told sellers it is waiving two weeks of storage fees in March for products stored in the U.S., U.K., Germany, France, Italy, Spain, Poland, the Czech Republic and Canada.

As a result, Amazon sellers with products with shorter lead times may get hit the hardest, Bartolini said. That includes products assembled with premade parts or easily assembled on the spot, like screen protectors or small toys.

“Generally speaking, the shorter the lead time, the more often sellers place orders because they can easily adjust the supply based on the demand,” he said. “That’s a good strategy because it lowers the chance of having excess inventory and paying long-term storage fees. In this case, though, some of those sellers are already running out of stock.”

Weber, for example, said his policy is to send no more than a month of product at a time and reship inventory as necessary to avoid Amazon’s monthly storage fees.

“This announcement caught us unawares, so we have already gone out of FBA stock of some of our popular products,” Weber said. “Additionally, sales of some items have gone up significantly due to the pandemic—especially things useful for families confined to their homes—which means even our precalculated month of inventory sometimes isn’t enough.”

In the meantime, Weber said he is shipping many items himself from his own warehouse. Frigo also said he has retained some inventory to fulfill orders.

“Some items our FBM [Fulfilled by Merchant] offer, which is higher priced than the FBA offer, is more attractive to [shoppers] since Amazon is delaying delivery of these items and previously two-day delivered items are now projecting April 17,” Weber said.

It’s a popular strategy. Elizabeth Marsten, senior director of strategic marketplace services at digital marketing agency Tinuiti, said one of her clients estimated they’d run out of inventory in two weeks without replenishment, so their plan is to keep selling what they have, prioritize certain ecommerce channels and reallocate inventory where possible. And, in some cases, the client has been able to fulfill their own Amazon orders by switching to FBM.

However, Weber said he doesn’t know how much longer he can continue with self-fulfillment because of limited staff and social distancing at the warehouse, as well as limited stock of items due to manufacturing and shipping delays.

And while sellers are generally understanding of the circumstances, Marsten—and small business owners—said it is still causing a lot of stress because “their businesses and their employees are at stake.”

Some have taken extreme measures like paying salaries from their personal savings.

“It is definitely a wake-up call for some businesses that were heavily dependent on Amazon and haven’t diversified or enabled themselves to be set up to self-fulfill,” she said. “It’ll be really interesting after some of the dust settles what happens in terms of dependence on Amazon going forward. I’m expecting a run on diversification efforts, like Walmart.”

@lisalacy Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.