In March, Amazon announced a service fee that caused sellers to complain incessantly, "Originally, FBA required payment for order processing fees, sorting and packaging fees, weighing and processing fees, and storage fees, but now it has added a storage configuration service fee."
The so-called "inbound configuration" refers to "warehouse division". Split warehouse is a distributed inventory configuration that disperses the products sent by sellers to Amazon FBA warehouses into multiple warehouses. Collecting a separate warehouse service fee is one of Amazon's measures to reduce its own warehouse operating costs.
On the other hand, e-commerce platforms that are also targeting the US market have also tightened their nerves. As Amazon improves product delivery speed through warehouse division, a battle for faster delivery is quietly underway.
01 Amazon launches a "delivery acceleration battle"
According to the "2024 Amazon Logistics Inbound Configuration Service Fee" announced by Amazon, starting from March 1, 2024, Amazon Logistics will charge different levels of fees for different inbound configuration options selected by sellers. Distributed warehousing, which involves transporting goods to multiple warehouses at a lower cost than single point warehousing, and even for free.
Why does Amazon force most sellers to split their warehouses through fees?
This is because China is relatively close to the West Coast of the United States, and the initial transportation cost is relatively low. This has led to frequent stockouts in Amazon's popular warehouses in the West Coast, while warehouses in other places often experience vacancy, which is obviously not conducive to the rational utilization of warehouses. In addition, as most sellers store their products in popular warehouses, Amazon's own delivery and fulfillment costs will be relatively high when consumers who are far from the warehouse purchase the products.
If Amazon can allocate the same batch of products from sellers and products from the same SKU to multiple FBA warehouses, it can not only reduce the risk of stockouts, improve warehouse utilization, but also save FBA final delivery costs. Therefore, Amazon chooses to conduct a comprehensive analysis based on the facilities, temperature, humidity, and other factors of each FBA warehouse, combined with the seller's product type, and then allocate each type of product to the most suitable FBA warehouse.
Amazon forces sellers to divide their products into warehouses, which will inevitably lead to logistics optimization. Using Amazon FBA products will enable them to be delivered to consumers more quickly. In terms of delivery time, Amazon will widen the gap with other e-commerce platforms operating in the United States, such as TEMU, eBay, and AliExpress, forcing the latter to be involved in the "delivery speed war".
The innovation and upgrading of logistics supply chain has always been the goal pursued by many e-commerce platforms.
In 2023, Amazon achieved daily or next day delivery of over 7 billion products worldwide, with over 4 billion products in the United States and over 2 billion products in Europe. In order to achieve such results, Amazon has launched multiple measures in 2023, including shortening delivery distances, improving inventory layout, and launching daily delivery services.
In the United States, Amazon is implementing regional operations by dividing its operations center and distribution network into smaller and easier to serve areas, in order to more efficiently utilize inventory within each region. Shipping from regional operation centers to distribution stations reduces the length of time packages stay at distribution stations and reduces reliance on air freight.
In 2023, Amazon will add 9 dedicated "same day delivery" sites, covering 18 cities in the United States. At present, the total number of dedicated "day to day" stations in the United States exceeds 55. These hybrid sites integrate operation, classification, and distribution, greatly improving delivery speed.
Amazon has explicitly stated that in 2024, it will improve delivery speed through "nearby delivery". This is also seen as Amazon's declaration to further compete with Wal Mart.
In fact, platforms such as TEMU are also striving to improve the speed of logistics fulfillment, and the full custody model is conducive to improving logistics efficiency and services. In terms of overseas warehouses, TEMU plans to build one warehouse each in the eastern and western parts of the United States. In terms of initial logistics, TEMU cooperates with internationally renowned shipping companies such as Meisen, Eslite, Dafei, Maersk, and COSCO Shipping to launch sea freight express transportation. The semi custody mode is mainly aimed at sellers who have goods in overseas warehouses, further shortening the delivery process of platform products.
In China, where e-commerce is more developed, platforms such as Tmall and JD.com have rolled up delivery speeds to hourly and minute delivery. During the 2023 Double 11 shopping festival, "Why is Double 11 express delivery so fast" became a hot topic on Chinese social media, and many netizens exclaimed that "they received the goods before they could regret it". The performance speed of US e-commerce may one day be affected by this.
02 Shop sellers are impacted, and meticulous operation is a must-have
After Amazon announced that it would charge a storage configuration service fee, sellers complained incessantly.
Starting from March, sellers are generally required to pay an additional "warehouse transfer fee" for shipments to FBA warehouses, ranging from 12 cents to 6 dollars. "Originally, FBA required payment for order processing fees, sorting and packaging fees, weighing and processing fees, and storage fees. Now, with the addition of warehousing configuration service fees, the cost has suddenly increased. If the price does not increase, Amazon will be sorry," said a seller.
In summary, if the seller chooses not to divide the warehouse, the cost will be significantly higher than dividing it into 2-3 warehouses, and if they do not want to pay this additional fee, they will have to distribute the goods to 4 or more warehouses. Due to the popularity of FBA warehouses in the Western United States, the storage configuration fee will be higher than in the Central and Eastern United States.
Li Cong, Vice President of Zongteng Group, pointed out that this requires sellers to increase their inventory of individual products, have faster turnover, and operate more finely.
The first ones to be impacted are the distribution sellers. The original number of SKUs for the distribution sellers was relatively large, so the shipment volume for each item was relatively low. This means that after Amazon charged the inventory configuration service fee, their costs were increasing, so they had to reduce SKUs.
Of course, there are also some sellers who choose to leave Amazon and ship independently due to cost constraints. Although it has saved some costs, it does not have an advantage in the operation of the Amazon platform. In the overall transportation efficiency improvement in the US market, more refined supply chain management and brand operation are needed.
This will also to some extent incentivize the expansion and management of third-party overseas warehouses. At present, various platforms are more inclined to cooperate with large warehouses, and warehouse management systems are crucial for the development of overseas warehouses.
For big sellers with stronger financial strength, the overall impact is not significant. Deploying inventory in multiple warehouses not only provides Amazon with traffic support and improves delivery efficiency, but also reduces delivery costs in the final stages. In addition, big sellers have more accurate sales expectations for the overall goods, in order to ensure the accuracy of warehousing.
The adjustment of Amazon's inventory service fee policy has affected the operation of sellers and also had an impact on logistics services.
If cross-border logistics is divided into four stages: A, B, C, and D, the first stage A is the domestic transportation part in China, the second stage B is the initial transportation from the Chinese port to the destination port, the third stage C is the customs clearance from the destination port to the overseas warehouse, and the third stage D is the final delivery process.
The logistics and distribution links that are greatly affected are segment B and C, because Amazon's warehouse division mechanism forces sellers to distribute their goods to multiple warehouses, which reduces the weight of the goods transported to each warehouse. On this basis, some logistics companies start accepting customers' small-scale goods from the port of origin, and then distribute them according to the small weight after arriving at the destination port. For example, there are logistics service providers that have already launched, starting from 10 kilograms for truck delivery and 12 kilograms for express delivery. There is no requirement for full container direct delivery.
Logistics service provider Lee explained, "If all the goods are shipped to the US West and then divided into three warehouses, it is relatively easy to handle, after all, the shipping cost in the US West is low and there are many goods. However, if it is delivered to the US East, the pressure will be greater because there are many new warehouses and long distances in the US East, and the corresponding costs will be higher."
There are also market voices speculating that Amazon's move is to promote Amazon logistics services such as Global Logistics (AGL) and Warehouse Distribution Network (AWD). Because the seller uses AGL to transport the goods to the AWD warehouse, single warehouse storage can be achieved without the need for storage configuration service fees. Currently, it defaults to sending to the warehouse located in the US West. Afterwards, the seller can choose between AWD automatic replenishment or manual replenishment to FBA.
Lee agrees with this speculation: "Standard item sellers are likely to choose AGL official logistics, but the cost of cost control is shelf life and accuracy. In addition, the use of AWD warehouses will increase, which is also an official product, while medium and oversized item sellers will tend to choose overseas warehouse shipping methods and match warehouse split shipment plans."
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