Bad news for Fulfillment by Amazon (FBA) sellers, as the global brand has made some significant changes ahead of Black Friday.
FBA is relied upon by countless businesses across the world to get products sold on Amazon to their customers. Unfortunately, Amazon has announced new limits on FBA services ahead of the Black Friday shopping season.
Here’s what’s changing, how it will impact FBA users, and what the alternative options are for Amazon FBA in Ireland.
How is Amazon FBA changing?
Gone are the days when Amazon was just an eCommerce company. The global brand is a household name for everything from smart speakers to subscription-based streaming. Closer to its roots, Amazon also provides fulfillment services to other eCommerce businesses – known as Fulfillment by Amazon (FBA).
In simple terms, FBA allows businesses to outsource order fulfillment to Amazon. As such, one of the main selling points is that it gives regular eCommerce businesses the speed and flexibility of one of the world’s biggest companies – allowing them to scale up and down as required in a way which wouldn’t be possible on their own.
Unfortunately, Amazon FBA isn’t always as easy as it sounds….
FBA storage limits and the Inventory Performance Index
Amazon imposes storage limits for FBA based on an Inventory Performance Index (IPI). This measures how well your inventory is managed based on factors like:
- Sell-through rate – The proportion of units shipped from those stored in Amazon fulfillment centres.
- In-stock rate – The amount of time your products have been in stock, weighted by their popularity.
- Stranded inventory – How much of your inventory is not available for purchase due to listing problems.
- Excess inventory – How many units are in excess based on the next 90 days of demand.
In theory, a company that isn’t utilising its storage space well enough, based on its IPI, can have its storage limits reduced. With the current warehousing shortage, Amazon reportedly uses the IPI to restrict how much merchants can send to fulfillment centres.
That’s exactly what it’s doing in the run up to Black Friday, according to reports. Restock limits have been cut in anticipation of the peak selling season, which could leave a lot of FBA users short on inventory at a time when they need it most. In fact, many sellers are suggesting that it’s nothing to do with their IPI, having seen their limits cut despite having a good IPI.
FBA rates are rising
Reduced storage isn’t the only issue for eCommerce businesses using Amazon fulfillment in Ireland. In response to higher demand for warehouse space, Amazon has also increased its FBA storage fees by around 10% in the US – a move which may be mimicked in other regions.
In 2022, the rise only applied to non-peak rates, covering storage from January to September. While peak October-December rates remained the same, eCommerce businesses will have less time to plan ahead for peak shopping seasons like Black Friday.
To avoid unnecessary extra costs, they’ll need to send stock in smaller shipments more frequently. Unfortunately, that counteracts many of the benefits of outsourcing fulfillment by increasing admin, hassle, and time consumption. It also increases the risk of products going out of stock and businesses missing out on sales (which could hit your IPI in turn)
That’s not even mentioning the likelihood of rate increases being extended to peak seasons in the future too.
Don’t forget Amazon’s strict inventory receiving requirements
The recent FBA changes are by no means the first time Amazon has frustrated retailers. FBA is already renowned for its strict requirements when receiving inventory. Our Amazon FBA prep services in Ireland were developed to assist retailers with a number of different Amazon FBA issues, including:
- Product labelling – Products require one of three types of barcodes, depending on various eligibility requirements.
- Packaging and prep – Amazon has different criteria for products that are boxed, poly-bagged, case-packed, and sold as a set, along with specific rules for expiry dates, marketing materials, and safety.
- Delivery labelling – There is a long list of label requirements dictating the size, position and number of labels for your shipments, amongst other things.
- Delivery and routing – Then there are the myriad rules for shipping and routing, such as box content information, weight and dimension restrictions, and permitted packing materials.
Is there an alternative to Amazon FBA in Ireland?
As we head into autumn, most eCommerce sellers are already taking steps to prepare for Black Friday. But with higher prices and storage limits adding to merchants’ frustrations with Amazon, it’s only natural that many retailers are looking for alternatives to FBA. Of course, not every Amazon seller is prepared to switch to the alternate option – Amazon fulfillment by merchant (FBM). Amazon FBM is where the seller fulfills the orders they sell on Amazon directly, rather than the orders being fulfilled from Amazon’s warehouses.
The average eCommerce shop doesn’t have the storage space or human resources to adapt to the ever-changing sales demands that come during peak shopping seasons. As an example, Bambora found that sales increased by over 700% on Black Friday compared to a regular Friday amongst their clients. It’s hard bordering on impossible for small to medium enterprises (SMEs) to respond to these high peaks in demand by themselves.
Fortunately, there is another way – online retailers can do Amazon FBM with a third-party logistics (3PL) partner like Autofulfil, who does Amazon FBM in Ireland. With the right fulfillment partner, you can get the best of both worlds – the benefits of outsourcing Amazon order fulfillment without the drawbacks. Here’s how the two approaches compare.
Rates are lower with 3PLs
While FBA leaves you susceptible to Amazon’s rising rates, using a 3PL partner means you have a more affordable fulfillment solution. At Autofulfil, for example, we don’t raise our rates during Black Friday or charge customers more based on higher demand. Our fulfillment rates are also generally lower than Amazon’s FBA fees.
Storage capacity is higher with 3PLs
FBA seems like a great way to put Amazon’s resources on your side. However, given that you’re using Amazon’s storage space and staff, they’re always going to favour their own stock rather than that of their FBA customers when demand is high.
In contrast, fulfillment centres like Autofulfil are dedicated to the eCommerce businesses we work with. So, you don’t have to worry about reduced storage limits during Black Friday, giving you complete flexibility in peak shopping seasons.
Inventory requirements are more flexible with 3PLs
Finally, there’s Amazon’s notorious inventory receiving requirements. As a global brand, they have a one-size-fits-all approach to goods in receiving that makes things easier for them but challenging for their sellers. On the other hand, 3PLs like Autofulfil aim to make it as easy as possible for retailers to partner with us. That includes a friendly, personalised service where your needs are put front and center.
Don’t let Amazon limit your profits this Black Friday
Autofulfil provides a range of Ireland fulfillment solutions, including Amazon FBM in Ireland, that can give you the freedom and flexibility to grow your online sales without the challenges of FBA. Request a call to discuss your Irish Amazon fulfillment plans while there’s still time to make the switch to FBM.
