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Amazon Says FBA Sellers Put Demands on Warehouse Capacity

Amazon executives said the company is working with FBA sellers on the issue of warehouse space. It’s hard to believe that sellers were once wary of using Fulfillment by Amazon, but now many sellers are eager to send their inventory to the company’s fulfillment centers, believing it gives them greater exposure to Prime shoppers. So much so that Amazon is finding new ways to deal with the demand.

When a Wall Street analyst asked about fulfillment costs at peak season during the company’s earnings call on Thursday, Amazon Chief Financial Officer Brian Olsavsky said it was due to demand from FBA sellers for space in Amazon warehouses.

“We were very full. It was a high class problem to have,” Olsavsky said, but he said it resulted in higher fulfillment costs in the fourth quarter.

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“We learn from every Q4, this one was no exception.” (Q4 consist of the last three months of the year, when holiday shopping is at its peak.)

“We are already making plans for a smoother Q4 next year,” the CFO said. “We’ll continue to add fulfillment capacity, we’ll work with FBA sellers on inventory stocking and timing, and we think that there’s things we can do better, as we do every year. We come out of the fourth quarter with immense learnings.”

Already this year Amazon has announced plans to build five new fulfillment centers around the country, in California, Kansas, Texas, and New Jersey.

As far as working with FBA sellers, Amazon has certain levers to control demand – one is pricing, and in fact, it’s running a promotion in which it is waiving fees for removal orders for sellers who wish to clear out some of their inventory.

Another lever is limiting what sellers can send to FBA warehouses. Last month, it went beyond the normal seller limits and, as we reported, Amazon began rejecting certain products (ASINs) within shipments from sellers.

Some were told the rejections were due to overfull warehouses, others were told the products didn’t have enough sales volume.

An innovative move to relieve some demand from FBA sellers who want the benefit of reaching Prime shoppers – Amazon is now allowing some sellers to offer Prime on seller-fulfilled merchandise, a program it has been expanding since it launched last year.

Despite the warehouse capacity problems, Amazon executives said during Thursday’s conference call that selection growth was a big area of focus for the company, and he said one important way it drives selection is through FBA. “We continue to be very pleased iwsth the progress we’re making in FBA.”

“FBA is helping drive some of the selection growth we’re seeing here. Selection growth and Prime are two very key drivers of our growth.”

See Amazon’s first-quarter earnings press release:

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Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. Send news tips to ina@ecommercebytes.com.


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