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FBA Restrictions Highlight the Need for FBA Alternatives for Third-Party Sellers

Jake Rheude

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This post was updated March 24, 2020 at 5:00 pm EST.

The American supply chain just had one of its most disruptive announcements to date. Amazon, responding to the coronavirus epidemic, instituted major changes that will impact huge sections of its marketplace. The company will now limit what products it will ship and store, halting new orders for anything that it doesn’t see as essential. Marketplace sellers will need to find FBA alternatives for their eCommerce fulfillment.

It hit without warning. We don’t know the full impact today, or what it will be tomorrow. It isn’t clear that Amazon does either. The policy change will last at least the next three weeks, but there are no indications that the company’s restrictions will be limited to that timeframe.

Amazon Restricted Access

For your business, that means Amazon may only sell what goods it has in place right now, preventing you from sending it more and ending your business’s sales when its FBA stock runs dry. Without the agility of a 3PL on your side, customers may find your products sold out—and turn to a competitor that is still active in the marketplace. 

Since its initial announcement, Amazon has informed sellers that removal operations will also be halted, temporarily. This adds insult to injury. Some sellers now have no way to access the stock stored in FBA warehouses. We have more details on this new announcement below.

Amazon’s inventory restriction announcement

In a post on the Amazon Seller’s Forum made on March 17th, 2020 at 12:52 am, Amazon told its over 2.6 million active third-party sellers that the company would be temporarily disabling shipment creation for non-essential products. This is part of the company’s response to shifting product demand around the COVID-19 pandemic.

Here’s Amazon’s full statement:

The move is impacting third-party sellers who store goods in Amazon warehouses through the Fulfillment by Amazon (FBA) program. In addition, wholesale vendors who sell goods directly to Amazon are affected. If you’re using Amazon as your order fulfillment provider, and aren’t selling essential products, Amazon will only sell and ship the goods you have in its warehouse. After those are gone, you can’t replenish your stock. You can’t replenish stock until April 5, 2020, assuming this timeline does not change.

This change is broad and immediate and has caused significant panic among Amazon sellers. It follows recent restrictions to who can sell certain in-demand items, such as Purell. Amazon has banned companies from price-gouging. It is also limiting established vendors from adding new household items. The company has stuck with this policy, even though these goods are needed to meet customer demand. That means your goods won’t be available to fill the spike in online orders.

Particularly important from Amazon was this part of its announcement: “Please note that Selling Partner Support does not have further guidance.”

Red Stag has been talking about the risk of relying solely on Amazon/FBA for years. This most recent restriction in the midst of a health crisis is just another example of the implications on your business when Amazon is your only selling platform and fulfillment provider. It highlights the need for sellers to find FBA alternatives to make sure their order fulfillment continues uninterrupted.

Who does Amazon say is non-essential?

Amazon says it will continue to accept products from third-party sellers and wholesale vendors in six specific categories:

  1. Baby products
  2. Health & household
  3. Beauty & personal care (including personal care appliances)
  4. Grocery
  5. Industrial & scientific
  6. Pet supplies

If you’re not in those six categories, Amazon has already disabled shipment creation for you, and it’s doing so for its retail vendors in the near future. While the company says this will take effect starting March 18 and run through April 5, there’s no guarantee the company won’t extend the delay for longer.

For anyone reading this right now, it’s too late to create shipments and get your inventory to Amazon. That’s already making life difficult for many small businesses and partners who wait for early Q1 results and tax preparation to start refilling inventory. Without FBA alternatives, your business can hit a roadblock.

Sellers Unable to Move Products to FBA Alternatives

To take things from bad to worse, the surge in online orders is affecting the ability of sellers to get their FBA inventory back. Amazon announced on March 24, 2020, that it had paused the execution of removal orders in some warehouses. So, even if you want to use an FBA alternative to ship your orders, your stock might be stuck in an Amazon warehouse.

To compensate, Amazon will waive the April 15 long-term storage fees. That hardly makes up for the fact that your inventory is effectively held hostage. Amazon won’t ship non-essential products. It also doesn’t have the resources to return those products to you so you can find another way to ship them.

This issue isn’t limited to US warehouses. Amazon’s notice affects several other countries that have been hard-hit by the coronavirus. Here’s a copy of the Amazon announcement:

Amazon's announcement is one more reason that sellers should find FBA alternatives

Amazon has built a mighty distribution network. Amazon FBA allows many Marketplace Sellers to take advantage of this powerful fulfillment operation. But the current crisis highlights the fragility of the FBA framework. When problems come up, sellers can get crushed by the impersonal machinery of Amazon FBA. That’s yet another reason to consider one of the many FBA alternatives available for eCommerce fulfillment.

Prime slowed down ahead of the restriction

It’s also worth noting that Amazon’s two-day shipping guarantee has slowed. The time-line for delivery is now as much as seven days, according to reports from Yahoo and Baird Equity Research. Gizmodo has since reported that non-essential products could take a month to ship to consumers. This shift may be Amazon’s attempt to start getting high–priority items delivered faster. However, it could also do long-term damage to other product categories. Brands could see their products take longer and longer to reach people and then ultimately become unavailable.

If you compete against Amazon Essentials, Basics, or its other brands — almost all of which appear to be in the categories Amazon is prioritizing — that could mean significant lost ground as customers switch to Amazon-branded items that can maintain availability.

By prioritizing these six categories, Amazon is trying to ensure that household, medical, and cleaning supplies get to people. It’s an admirable step to help address some of the COVID-19 concerns. Unfortunately, it might impact your business significantly.

It also highlights how little control you may have over your business if you rely on Amazon’s FBA.

How should sellers respond right now?

Sellers relying on FBA should work to count their inventory and project how long it will cover Amazon-based orders. After you have an idea of your stock, ask where Amazon handles your orders. Does it just fulfill goods sold on the Amazon marketplace or is Amazon also shipping the orders placed on your website?

Create a list of where Amazon reaches your customers for you versus where you reach them directly. Based on that understanding, determine how long you have to respond before orders can’t be fulfilled. That might be a month, a few weeks, or even just 7 to 10 days. The time window depends on how lean you run your business.

That’s how long you have to mitigate this risk and adjust your supply chain.

flat rate shipping

It’s time to start looking for ways to reach your customers that don’t involve Amazon as anything more than a sales channel. Look for good FBA alternatives – fulfillment companies who can help you reach customers in that two-day window . Try to give them the delivery they’re used to for Prime (and take advantage of Seller Fulfilled Prime if you’re already eligible). That will maintain your status as a trusted brand. Moving away from FBA doesn’t mean you have to lose Prime status. A long as you’re working with the right partner, you can do seller-fulfilled Prime.

Start talking with third-party fulfillment companies about FBA alternatives

Ask them about your business and how they can help. Ensure you have fulfillment guarantees for delivery and order accuracy. Ask how they prioritize your business and if the company might deem your business “non-essential” down the road. Find a partner who will put your business first always and knows how to help you reach Amazon’s audience but protects your inventory, orders, and customers.

Sellers need to find their rock who, no matter how big the waves get, will remain steadfast.

Marketing takes a hit, too

You’ll also want to look at your current marketing budgets. Yes, that’s probably the last thing on your mind. Unfortunately, Amazon has reportedly stopped placing ad bids on Google for “non-essential” product categories. It’s likely that this includes products Amazon could run out of — so anything outside of those six categories.

For your business, this means Amazon potentially won’t focus on driving traffic to category pages and specific products relevant to you. You’ll need to step up and start managing more of the campaigns and spending. It’s yet another disruption to your planning and budgeting that’s part of this blindside.

Is Amazon’s control becoming a threat?

What many third-party sellers, wholesalers, and small businesses are learning is that Amazon controls much more of their business than they realized. Amazon isn’t a direct threat — in most cases — but it doesn’t operate in the way a partner should. You’re subject to the whims of Amazon for its fulfillment and marketplace. That’s even beyond the constant threat of being blocked, having listings closed, or shutting down your seller account. Plus, the threat of bad product ratings caused by FBA inventory swaps. Because of all these factors, FBA alternatives are a good option for your business even without a crisis like the one we’re experiencing today.

At the same time, Amazon may also:

  • Stop accepting inventory from your business or partners.
  • Pull listings as it sees fit.
  • Cannibalize your sales by offering its own competing Amazon Basics and other brands.
  • Adjust marketplace search results to show fewer products that aren’t its own, which are often marked as “Editor’s Choice” or “Best Seller.”
  • Increase FBA storage fees during Q4, eating into your year-end sales and revenue. (And new charges that went live in February 2020)

Amazon is always expanding into new markets with its branded products, far beyond the cables and cords it first began to offer, competing directly with its partners and customers.

How to mitigate your risk

Businesses like yours are facing a crunch that you can avoid. The key is to stop relying on a single partner to handle service, sales traffic, and fulfillment. Spreading out your operations means fewer bottlenecks for you and less risk if a partner takes actions that prioritize it over you.

Because Amazon is the largest marketplace in the United States, it’ll likely be easier for you to take back control of fulfillment first. That way, you still get the benefit of Amazon’s consumer reach, but are less vulnerable to supply chain threats. Simple, direct risk mitigation is always a healthy first step. Finding reliable FBA alternatives can keep your order fulfillment moving without interruption.

Red Stag Fulfillment already offers many Amazon sellers a way to reach their customers within two days, serving as a reliable alternative for fulfillment needs. Running an ecommerce business isn’t easy, even without the impact of the coronavirus, and this announcement is putting new pressure on you. We’re here to help alleviate that when we can, whether that’s through our guides and resources or a quick conversation to help you identify needs and what would make us or another partner a reliable alternative.

How do I tell who is a reliable FBA alternative?

In difficult times like this, you need a partner you can trust, and one who is looking out for your business while they manage theirs. Part of that support and protection is ensuring they understand what makes you unique, the challenges you face, and what can help you succeed. At the end of the day, the best order fulfillment company for your business is likely a different solution for another business niche.

We’ve put together a complimentary Fulfillment Company Questionnaire for anyone who might need fulfillment support. Use it to see if the person you’re considering is a reliable alternative.

flat rate shipping

We recommend that all companies fill out that section. Whether you’re thinking about working with us or someone else, we think you’ll find it valuable. It’s there to help your team understand what you need to ask and learn, and it can point out some issues with current partnerships. Today, it’s something that might warn you against FBA based on how Amazon communicated these decisions and their continual rollout of products that compete directly with partners in their marketplace.

We know this is a tough time for many.

You’re already trying to protect your staff and keep your family safe from the coronavirus. Now, you face a potential threat to your livelihood and ability to care for your team’s financial needs. It’s mounting stress that no one needs. So, we at Red Stag Fulfillment want to let you know that we’re here for you. You can contact us to learn about the third-party fulfillment services we provide, try to better understand the Amazon changes, or just get some help. Our mission as a leading fulfillment partner is to help, whether that’s onboarding you into our warehouses ASAP or pointing you to the best reliable Amazon alternative based on your needs.

An important note

Nothing in this article is meant to imply a legal relationship between Red Stag Fulfillment, LLC and and any company mentioned. Red Stag Fulfillment, LLC does not own any other company’s trademarks referenced or included in this article. Information gathered for this article came from a mix of publicly available news and websites, websites of the companies mentioned, and direct communication with named companies.

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