The Supply Chain Matters blog highlights a report indicating that hosted sellers on Amazon now worry that they will not meet holiday peak demand because of prior inventory limits on warehouse space.
Business Broadcast Network CNBC reported this week that a growing number of Amazon sellers are increasingly concerned that they will not be able to take advantage of holiday demand for their products.
In August, the online retail platform provider initiated stricter inventory quantity limits for third-party sellers which participate in the Fulfillment by Amazon (FBA) retail program. This directive was reportedly meant to help conserve overall Amazon warehouse space during this dual-fold quarterly period that includes both COVID-19 and holiday related fulfillment. The directive was meant to further avoid the disruption and customer delivery delays for high priority goods which the online retailer experienced during the early weeks of this pandemic.
The reported result is that for hot selling products during this current period, sellers have to attempt to replenish their inventory within the inventory limits determined by Amazon and then experience significant delays in transit and actual replenishment with one seller indicating, according to CNBC: “it has taken anywhere from 10 days to two weeks for it (inventory) to enter FBA warehouses. Before, it would take only two to four days.”
The CNBC report profiles a number of small merchants who generally indicated that while they expected to complete this surge period with significant increases in sales, revenues could have been even better without the inventory restriction policy. Some merchants questioned whether the online platform provider had factored holiday seasonality in calculating inventory limits. An Amazon spokesperson indicated to the network that they indeed factor seasonality, along with a seller’s historic sales and forecasted demand when establishing the inventory limit.
The report does note that some sellers have opted to either fulfill product demand by themselves on their own web sites or utilize third-party logistics providers to satisfy holiday demand needs. The risk of that strategy is both added fulfillment costs and risking an additional penalty from Amazon.
An Experts View
Last month, this Editor interviewed Jason Boyce, a nationally recognized Amazon expert and online commerce veteran. Boyce is the co-author of the book, The Amazon Jungle, and co-founder of Avenue7Media which for 17 years has grown as a top-200 seller on Amazon, substantially improving sales performance for six, seven and eight figure brands selling on the platform.
Boyce predicted that the online retailer would likely run out of square footage and FBA sellers would consequently run out of stock this holiday period in record numbers. The FBA inventory limits involved 1.7 million sellers. He noted that “Shopageddon” is placing a massive strain on the online supply chain, and parcel carriers like FedEx and UPS cannot add enough capacity to handle current peak volumes. That condition was brought forward in one of our recent Supply Chain Matters blogs.
Yet, for many FBA sellers, Amazon represents a compelling platform with few alternatives, and despite the challenges, sellers covet the online market reach of the platform.
There are few alternatives.
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