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Amazon Calls on Merchants to Supply Cheap Goods

Amazon launched a new fulfillment option for third-party merchants called FBA Small and Light in a bid to expand its offerings of small, low-cost goods with free shipping. However, unlike regular FBA (Fulfilled By Amazon), these products will not be eligible for Prime shipping.

Instead, the FBA Small and Light items are available to both Prime and non-Prime customers with “FREE Standard Shipping.” That’s 4-8 business days instead of the typical 2-day shipping offered for FBA Prime-eligible orders.

Rob Eldridge, VP of Product Management for FBA at Amazon, said the team has been working on the FBA Small and Light project for 9 months, and said it materially expands Amazon’s selection. “Historically it’s been very difficult to fulfill these types of products in a cost-effective manner.”

For items with a low average selling price, the shipping charges often exceed the price of the item, he said. “We didn’t like that about the customer experience.”

FBA Small and Light is run out of a new warehouse that opened in Kentucky in the fourth quarter that is devoted exclusively to the program. Neil Ackerman has led the product management team for FBA Small and Light and told EcommerceBytes they set out to offer a program that would be less expensive for third-party merchants than the cost of fulfilling those items themselves.

We saw an S&L offer for three bundles of pipe cleaners for $4.49; a package of 14 ear plugs for $6.09; some silver thermal compound for $6.99; and an iPhone armband case with key holder for $11.99 (there is some flexibility about the $10 maximum price requirement).

The rate card shows the program is an alternative for merchants who use USPS because Amazon is able to take advantage of its agreements with multiple shipping partners that provide economies of scale. Ackerman said offering a low price to sellers usually results in a lower price to customers.

The chart above shows the difference in rates for S&L items. For a one-ounce item, it would cost $1.90 plus the marketplace fee (that’s what other marketplaces call “commission”). Marketplace fees vary – it might be 8% in some categories or 15% in others – but sellers must remember there is a minimum marketplace fee of $1, and that’s true for the S&L program as well. Naturally there’s a cost to shipping the items to the warehouse, though with such small, lightweight items, that’s not likely to be a deal breaker for sellers interested in testing the program for themselves.

To understand the challenge the program is trying to address, take a look at Amazon “Add-On” products. Amazon Prime members get free 2-day shipping on almost all items, but Add-On items are excluded – members must have a minimum order before being able to purchase an Add-on product. Likewise, Add-on items do not count toward the $35 minimum to receive free shipping for non-Prime members.

Amazon explains, “The Add-on program allows Amazon to offer thousands of items at a low price point that would be cost-prohibitive to ship on their own.”

The new FBA Small and Light program is available for items that will generally:

  • weigh less than or equal to 8 ounces;
  • have dimensions less than or equal to 9x6x2 inches;
  • are priced under $10.

Sellers can’t offer the same product in both FBA Small and Light and standard FBA, but they can offer the same product in both FBA Small and Light and Merchant Fulfilled. Amazon said there’s not much crossover between S&L and Standard FBA because “previously, it wasn’t economical for sellers to use FBA for these products.”

Sellers who learned about the program over the past few weeks had several concerns. One was that Amazon may choose to commingle S&L inventory. Another was that it may be more difficult to be reimbursed for lost or damaged units.

Ackerman noted that the program isn’t about “cheap” products – for example, lipstick and memory cards are part of the program. He also mentioned stickers, trading cards, and stencil kits for makeup.

Amazon is looking for fast-moving products for this program – while that has yet to be a problem in the 13 weeks since the program has been live, Ackerman said Amazon would reach out to merchants if they found their inventory wasn’t turning.

Sellers must apply to have their ASINs (products) approved. There’s no special requirement about the way to send in ASINs in the application, and “inbound is easy,” Ackerman said, referring to the process of shipping items to the Kentucky warehouse.

FBA Small and Light offers will feature a “Free Shipping” badge. Below that it will include the following verbiage: “Note: Not eligible for Amazon Prime. Available with free Prime shipping from other sellers on Amazon,” hyperlinking to those other seller offers.

Eldridge said that while there’s a tradeoff in terms of delivery time, “overall it’s a great win for customers and sellers.” Amazon FBA Small and Light offers greater selection on thousands of products from hundreds of sellers, he said.

The program has been by invitation-only mode but has now opened up to all merchants, who can find a link on Seller Central where they can learn more and apply.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.