Amazon has announced that it will introduce another new service to help with third-party sellers, including FBA sellers. From 2023, they will launch their own Amazon warehousing solutions (AWD).
This service will give sellers the option to store a huge amount of inventory. It will be a welcome addition to many, as lots of brands are struggling with supply chain problems.
Amazon’s Gopal Pillai wrote a blog post that announced the service. He outlined some of the benefits sellers will experience.
“With this simple pay-as-you-go service, sellers are free from the time-consuming, cumbersome process of moving inventory from upstream facilities to Amazon fulfillment centers.”
Amazon’s third-party warehousing solution
If you sell on Amazon, you will know that FBA limits on inventory and storage volume can be frustrating. It isn’t easy to manage the shipments of your items, especially if you are having to do so regularly.
Amazon warehousing via AWD will allow users to store as much as they want. There are no limits on the volume or quantity, but there are fees incurred for the storage as you would expect.
For sellers who are already using other third-party logistics solutions, it could even save money. For FBA sellers, it will save a lot of hassle, too. You can set up AWD to work with your Seller Central account and ship items to Amazon FBA when inventory gets low.
Sellers who sign up to use AWD can use Amazon warehousing by consolidating their global inventory. Sellers can take advantage of this on Amazon Seller Central. It will simplify operations for a lot of businesses selling on Amazon.
It seems that long term, the goal of the AWD program is to help with more than just Amazon selling. Eventually, the program will let sellers send inventory to any location around the world, and this includes other wholesale customers, or even directly to stores.
The fact that you will be able to ship to other locations and use Amazon like you would any other 3PL is ideal. It means you don’t have the complex task of separating your Amazon inventory from inventory that you wish to ship elsewhere.
The service is also ideal for handling huge volumes of products, which can be sent via pallets around the world. The service uses Amazon Transportation, Amazon Global Logistics, and Amazon Freight for fulfillment. Even if you don’t sell on Amazon, in theory you could use Amazon warehousing for your business.
Why is Amazon doing this now?
Amazon’s growth is not news to anyone, but over the last few years it has absolutely rocketed. The company expanded Amazon’s warehouse presence significantly in the last three to four years.
Now, there are around 1,200 warehouse facilities in the US alone. Word spread that Amazon had potentially overbuilt its warehouse space. This Forbes article speculated that subleasing could be the answer.
The company appears to have found a brilliant solution. The extra space means that Amazon can make money out of this larger network. On top of this, it means more competitive pricing than some of the alternative companies.
Competition from companies like Shopify and Maersk is bound to be a concern for Amazon. Shopify has put lots of resources into expanding the warehousing offering for their sellers. At this time, the prices offered by Amazon are higher than many of the other 3PL companies. It’s possible that you may find cheaper third-party logistics partners.
In Amazon’s own announcement of the Amazon AWD program, they spoke of the pain points experienced by sellers. These were identified as storage prices, awkward and complex fees, and not having enough storage.
Used correctly, it is possible that AWD can be a solution for all of the identified problems.
A simple, transparent pricing model
Pricing can get complicated when it comes to warehousing. Amazon warehousing may well be the simplest on the market now.
Storage fees have been dropped as of August 1, 2022, and now stand at $0.42 per cubic foot for most of the year. In the Holiday season of October, November, and December, this jumps to $0.80 per cubic foot.
The processing fees are also incredibly simple at a flat $2 per case, and the transportation fees stand at $1 per cubic foot.
The pay-as-you-go model is also great for sellers, and allows you to easily manage your costs and know when storage might be eating into your profit margins, but it is not necessarily the cheapest option out there. Many sellers may still choose to stay with existing warehousing partners as a result.
Benefits of AWD Amazon warehousing for sellers
Those who are already selling on Amazon might be the ones to get the most out of this. Only time will tell when the “Distribute” part of the program rolls out in 2023.
Benefits of the AWD program for sellers include:
1. Combatting hard limits on FBA
Amazon has historically implemented some quantity limits on different sellers. This used to be done per ASIN, but is now based on size. If you hit on a great keyword and start selling, it is possible that these inventory limits could make you leave sales on the table. AWD can automatically replenish your stock.
2. Reducing the risk of end-to-end holdups
The more companies you introduce into the supply chain, the higher the chances of a holdup. Over 38% of companies in the US experienced these kinds of delays in 2021. Amazon warehousing and fulfillment sets out to minimize issues, and Amazon Supply Chain’s transportation services – Amazon Freight and Amazon Global Logistics, even work together to optimize these lead times for sellers.
3. Reduce the need for your own warehouse
Of course, this is true for every 3PL company. It means that sellers don’t have to keep stock in your own warehouse. If you are already selling with Amazon, using AWD means that you can keep everything in one system. It is easier to manage, as is holding and managing stock.
4. Avoid stockouts
If you suddenly get a rush on your products with one retailer, or it is on a promotion on Amazon that boosts sales for a few days, you want to avoid being out of stock. A stockout can damage your Amazon reputation or account health. It’s possible your product will fall down the pecking order and get overtaken by a competitor. An account audit can show whether stock levels are an issue for your account.
If you suddenly get a rush, the increase in upstream storage space means that you will be able to quickly ship more items to Amazon and avoid having to disappoint customers.
Something that will appeal to a lot of sellers is the fact that you can automate certain aspects of the supply chain by using Amazon’s warehousing. When your stock falls below a certain level, AWD can automatically ship more to the FBA warehouse.
This is another potential pain point. If you are running a successful Amazon business, you may have inventory in different warehouses throughout the US. You may even have to provide your inventory all over the world.
With AWD, you will be able to consolidate it into one simple global pool that is able to fulfill orders. This cuts a lot of the administrative work, ensuring your inventory has spread to all the corners of the country.
For existing sellers on Amazon, it is easy to start out with AWD.
In your account, under the “Inventory” menu, you will find an option to “Store and Distribute” with Amazon. This is the tab where Amazon Warehousing and Distribution (AWD) can be managed. Currently, there is a one-click signup process.
The service has already launched for Amazon sellers. If you are looking to store items within Amazon’s network to ship elsewhere, however, there is a wait. At the moment, Amazon has simply explained that the “Distribute” part of the service will launch in 2023.
Are there any downsides to AWD?
Amazon warehousing opening up to others is really only bad news to 3PL providers. It is possible that a stranglehold on the industry could allow Amazon to do things like dropping the inventory limits for FBA sellers. Trying to make FBA warehouses less crowded could be one of the goals. However, nobody knows for sure, and this is just conjecture.
With all of the additional Amazon warehouse space, AWD seems like it could be a win-win situation for existing Amazon sellers and for the retail giants. This could prove to be the case if Amazon can find a way to drop the prices somewhat. Keep tabs on this as the AWD program continues to develop.