One-Day Shipping Spurs Amazon to Offer Warehouse Discounts

Sellers get a break for storing at higher volumes

Sellers get a break for storing at higher volumes. Getty Images
Headshot of Lisa Lacy

Amazon wants its third-party sellers to store more merchandise in its warehouses to ensure it has enough inventory of popular products to execute one-day shipping, so it is offering discounts on monthly storage fees up to 75%.

That’s according to an email to independent sellers from Fulfillment by Amazon, the service in which Amazon stores, packs and ships products on sellers’ behalf, which was sent to Adweek. A rep for Amazon confirmed the discount.

The email notes that more inventory on hand means Amazon can place goods closer to customers.

The promotion begins June 1 and runs through January 31, 2020.

According to the email, from June 1 to September 30, monthly storage fees will drop from $0.69 to $0.17 per cubic foot. From October to December, fees will be reduced from $2.40 to $1.20 per cubic foot.

This, however, only applies to eligible products when sellers meet specific warehouse inventory levels. Eligible products include standard-size products with 60 or more units sold in a month or products Amazon highlights in sellers’ Restock Reports.

In addition, sellers must maintain four to eight weeks’ worth of eligible products for at least 21 days a month, or, for products flagged by Amazon, whatever range is specified in the Restock Report for at least 21 days a month.

The email said discounts can begin with June’s storage fees, which are charged in July.

They also account for 58% of sales in 2018, for a total of $160 billion, and have a compound annual growth rate of 52% since 1999.

“As we evolve our Prime shipping offer to a one-day delivery promise, we’re continuing to invest in ways, like lowering fees, to help selling partners increase sales by providing even more one-day selection for customers,” an Amazon rep said in an email.

A seller who requested anonymity to avoid retribution from Amazon said this reverses a decision a few years ago in which Amazon started charging sellers more to store more in its fulfillment centers. He expects the discount will incentivize fellow merchants to store higher quantities of popular products, making the number of items Amazon has available for one-day shipping higher than Walmart’s eligible selection.

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