Amazon’s Holiday Lockdown Of FBA Was Great For Established Retailers
Towards the end of 2016, Amazon announced that the company’s Fulfillment by Amazon service would not be available to new retailers during the holiday season. If a retailer hadn’t sent their first shipment by October 10th, they had to wait until December 19th to start shipping. The restrictions meant that new and seasonal retailers missed out on the bulk of holiday season shopping.
Fulfillment By Amazon is a hugely popular service for smaller eCommerce retailers. It allows retailers to outsource one the most time-consuming and tricky-to-manage aspects of eCommerce to a company with extensive infrastructure and an established reputation for getting fulfillment right. And, of course, it allows Amazon to generate revenue from goods sold by other merchants.
But even Amazon can’t cope with the huge increase in demand for its warehousing services during the holiday season. That’s partly because demand from established retailers sky-rockets in November and December. But it’s also because many new retailers that only sell during the holiday season create ephemeral eCommerce businesses that leverage Fulfillment By Amazon.
In previous years, the combination has meant that Amazon had limited ability to store goods from established retailers and seasonal retailers alike, directly impacting their ability to order, store, and deliver goods to customers.
But, last year, established merchants had a clear run. Because the new rules were announced fairly late in the year, many ephemeral retailers were caught out and were unable or unwilling to start making shipments much earlier in the year. Although, unavoidably, FBA was pushed to its limits during the holiday season, established merchants enjoyed a better experience than in previous years.
The limitations on seasonal retailers weren’t entirely new last year; Amazon has had the same rules for products in the toys category for a number of years, but this was the first year those rules had been applied more widely. Amazon has signaled that it’s likely to implement the same arrangement in the future.
Seasonal eCommerce merchants are a huge part of the eCommerce economy. For many retailers, it simply doesn’t make sense to run and manage a store all year round — especially when there’s almost no chance of that store generating a profit for most of the year. In fact, the myth of Black Friday’s origin focuses on this: Black Friday is the day stores that are usually in the red balance the books.
Setting up a complex fulfillment operation for seasonal eCommerce isn’t economically viable, which is why FBA is so popular with seasonal merchants. It’s likely that if Amazon continues this policy, seasonal merchants will look elsewhere for fulfillment or be forced to alter their business model.