We have multiple Amazon updates for sellers (both Seller Central and Vendor Central) we wanted to make sure you’re aware of this week.
Although an official date for Amazon Prime Day has not yet been announced, communication from Amazon Vendor Central explains that POs for approved Prime Day deals will begin in August. Our estimation is that Prime Day will be held during the first or second week of October.
For Seller Central clients, plan to start increasing your inventory position on FBA four to six weeks prior to October 1st.
For Vendor Central clients, Amazon stated that you should expect to receive POs for approved deals in two phases starting at the beginning of August.
FFP/SIOC Chargeback Grace Period Extension
Amazon has announced that it will extend its grace period on the SIOC minimum dimensions chargeback. The SIOC exemption rule will now be effective 1/1/2021. For visibility to which ASINs are likely to be eventually affected, you will notice them under “waived” status in Vendor Central chargeback notices. The main point is that the baseline SIOC requirements have not changed, meaning that an ASIN with packaging larger than 18″ x 14″ x 8″ or greater than 20 lbs will require SIOC FFP certification.
Please be aware that in preparation for holiday and due to the COVID pandemic, Amazon intends to apply storage limits to sellers using FBA . The limits are expected to extend to all product categories. Starting today, Amazon is removing its inventory removal fee to accommodate the new standards. This is expected to alleviate some supply chain constraints, but we don’t have information on how long the new inventory regulations will apply.
Seller Central Visibility
Along with other Amazon updates for sellers, the company has announced that U.S. based 3P sellers must now disclose contact information publicly. The decision should help brand manufacturers identify and shut down the sale of counterfeit or unregulated goods as well as identify unauthorized sellers.
Our latest insights YouTube video covers the important questions brand manufacturers need to ask, as well as benefits to consider before adopting a hybrid (1P/3P) selling model on Amazon. Andrea Leigh, Ideoclick’s VP of Strategy and Insights, discusses the four elements to consider when adding a 3P/FBA channel. The Amazon expert also covers the three main benefits brands can achieve when adopting a hybrid approach to selling on Amazon.
News and industry discussions are swirling around the rumor that Amazon is shaking things up with smaller suppliers and planning to cut all 1P manufacturers under $10M in annual sales. If you read the Bloomberg article or have heard of this elsewhere and you’re concerned, please don’t worry because we have you covered!
Here’s the gist of why you shouldn’t worry: First, there have been no confirmed timelines associated with this change – so it’s possible you’ll never be affected. Second, there are tremendous advantages to a being third-party seller on Amazon, and we can readily help you get set-up. If you already have a hybrid 1P/3P arrangement, we can help you optimize your seller central account and product assortment as a precaution to best mitigate risk.
First, it’s helpful to understand what’s likely driving Amazon’s motivations behind the rumored transition:
Having lots of smaller suppliers introduces risk to Amazon
For Amazon, holding and managing inventory for smaller suppliers with less predictable product movement represents a financial risk. Also, it’s difficult to properly vet, police and remove (when necessary) the smaller suppliers who may be selling counterfeit or otherwise unauthorized product. Similarly, smaller manufacturers who may not have met certain safety or testing standards can clearly become problematic for Amazon. We realize our clients don’t fall into these counterfeit or safety-risk categories, but Amazon may not.
First-party vendors are more high-maintenance for Amazon
As with any business, a company must consider how employees’ time spent generates revenue and constantly evaluate the value of each employee. Considering the time involved in onboarding and managing first-party platform vendors and items (even with scaling and automation efforts), Amazon finds that the arrangement comes at a high cost to serve compared to the realized revenue.
Amazon’s investment into one-day shipping means they must find ways to shift to more profitability elsewhere. Third-party vendors create “easier” profit for Amazon, and better selection for customers
Without the maintenance mentioned above, Amazon still earns commission on every sale through the 3P platform – so it’s guaranteed earnings at a lower cost to serve.
Having a large stable of 3P sellers allows Amazon to offer their customers a larger selection, without the heavy burden of directly managing them.
With Amazon’s “hands off the wheel” price matching algorithm for 1P vendor items, the items and even entire brands may become exposed to a CRaP out situation, which presents a loss for Amazon as well as vendors. Vendors moving to 3P gain the control to price their products more sustainably – creating a win/win for vendors and Amazon.
Here are some advantages of the third-party seller central account:
A seller central account gives you the ability to set your own retail prices (avoid CRaP status), manage your own inventory and marketing. And because you manage your own data, you have access to superior reporting.
There’s a tremendous community of experienced Amazon third-party seller forums that share best practices and help others troubleshoot. You will be amazed at the plethora of resources available.
What you should do
If you don’t already have a seller central account, let us help you set one up. For reference, we have published an FBA playbook that you can request here if you don’t have it already. (Or, if you’re an existing client, reach out to your account manager.)
We can help you create and manage a pricing strategy. Be aware that in your seller account, you will have to manage sales tax remittance in all states.
If you receive communication from Amazon regarding hybrid selling, or selling as a third-party seller on Amazon, we recommend that you don’t respond immediately. Please consult first with your Ideoclick Account Manager. We will help you craft a strategy and response that serves your best interests.
You will find the seller community a very welcoming place and the third-party arrangement an incredible opportunity to continue growing your business, and we look forward to helping you through this transition!