In an attempt to deal with potential network capacity issues this holiday season, Amazon has taken the unusual step of limiting the use of Fulfillment by Amazon warehouses and services to existing sellers between now and Dec. 19, the company confirmed. This means new sellers would have difficulty using FBA to fulfill last-minute Christmas orders.
The move caused concern about capacity in Amazon’s 90-plus U.S. distribution and fulfillment centers ahead of the peak season. Amazon typically gives merchants cutoffs for different product categories such as toys in order to ensure holiday delivery, but has never put such a blanket restriction in place.
“We are restricting shipments from new-to-FBA sellers to ensure we have the capacity necessary to quickly receive and store inventory and ship products to customers,” the company said in a note to sellers. “If new FBA sellers have not completed their first shipment to Amazon before October 10, 2016, we encourage them to start shipping to Amazon after December 19, 2016. If the situation changes before December 19 we will notify them by email. We encourage sellers to continue selling on Amazon and fulfilling orders directly to customers.”
Colin Sebastian, an analyst with Robert W. Baird, said Amazon has been somewhat picky in terms of pre-approving sellers in certain categories and closely monitoring reviews to gauge their reputation, but this move was unprecedented.
“After the last holiday season, Amazon had a lot of inventory from third party sellers that was moving slowly, and that takes room away from other merchants,” Sebastian said. “They’ve tried in the past to advise merchants on what items they can sell, since Amazon can predict that to some degree, but capacity is a real issue.”
Earlier this year, Sebastian noted, Amazon forced sellers to take back unsold merchandise, sometimes even paying for return shipping. “It was a first step in trying to clean out these fulfillment centers of slow-moving merchandise,” he said.
In Baird’s most recent quarterly survey of Amazon’s inventory, the breadth of selection declined, all of coming from third-party sellers and not from Amazon’s own goods.
“That seems consistent with Amazon trying to fine-tune what’s for sale and cleaning up the inventory, getting rid of what’s not moving quickly,” Sebastian said. “If lots of consumers want to buy a Sony PlayStation VR, and Amazon has too many Nintendo Wiis, they’ll clear out the Wiis and make room for more PlayStations. Multiply that across millions of products and that’s the challenge they face.”
While Amazon has been addressing capacity issues related to its rapid growth by continuing to throw up new facilities at a rapid pace, this temporary shutout of new sellers on FBA is designed to address it from the inventory side.
“Looking at the last couple holiday seasons, Amazon realized one thing that can help is better management or optimization of inventory on hand for holiday purchases,” Sebastian said. “They’re looking at available capacity in terms of both third-party and first-party inventory, and clearly being more aggressive in managing what additional products are going to be sent to those DCs before the end of the year.”