Amazon Said to Limit Warehouse Access to New Merchantsby
Restricting the service signals concerns about capacity issues
Storage constraints prompted a building spree this year
Amazon.com Inc. is restricting merchant access to its warehouses during the busy holiday shopping season, people familiar with the matter said, signaling that the online retailer is worried about capacity issues that have created problems in the past.
The Seattle e-commerce giant is freezing new merchants out of its fast-delivery service Fulfillment By Amazon until Dec. 19, preventing them from sending inventory to its fulfillment centers in advance of the holidays, said the people, who asked not to be identified because they weren’t authorized to speak about the issue.
The news triggered investor concerns about warehouse limitations ahead of the holidays, said Colin Sebastian, an analyst at Robert W. Baird & Co. Amazon shares declined 1.2 percent at 1:47 pm New York time, in stride with the Nasdaq Composite Index. The stock had gained 25 percent this year through Monday’s close.
“They’re preparing for a very busy holiday, and given the constraints they’ve had in the past, I think they are being more careful about what they are taking,” Sebastian said. “The concern around this news is that they won’t have the capacity they need over the holiday.”
Sending inventory to Amazon warehouses is a critical step for products to be eligible for the two-day delivery service coveted by Amazon’s most loyal shoppers -- those paying $99 a year for Prime memberships. Shoppers can filter search results to show only products that are eligible for two-day shipping, giving those items an advantage over those that take longer to be delivered.
Amazon usually has cut-off times for merchants in select categories -- such as toys -- to get inventory to warehouses in advance of the holidays. This year, however, for the first time the restrictions on new sellers apply to all categories of items and came without advance warning, the people said. Amazon declined to comment.
The move is the latest step Amazon has taken to make more efficient use of warehouse space during the peak shopping season. Earlier this year, the company changed its fees to penalize merchants who store slow-moving or off-season merchandise in its warehouses during the height of the shopping year and reward merchants who send in fast-moving products such as a hot-selling Christmas toy. Amazon makes more money from the revenue share with merchandise than it does for storing products, providing an incentive to ensure its warehouse space isn’t cluttered with products that don’t sell during the holidays.
About half of the items sold on Amazon come from independent merchants who pay the company in exchange for access to its more than 300 million online customers. Merchants can list items on the website and handle packaging and shipping themselves, similar to selling on EBay Inc.’s marketplace. Or they can pay more to send inventory to Amazon warehouses, where it is stored, then packed and shipped by Amazon workers when orders roll in. Merchants using Fulfillment by Amazon say the additional fees are worth it in exchange for greater sales volume. Sales through that service increased 60 percent in the fourth quarter of 2015, according to the company.
The holiday shopping season is Amazon’s busiest. Winter storms coupled with a crush of last-minute orders in 2013 forced the company to issue gift cards to customers whose Christmas gifts didn’t arrive in time.
Warehouses swollen with inventory from third-party merchants also pushed up the company’s operating costs last year, prompting a building spree this year in preparation of even more orders. Amazon had said it would open 21 new warehouses in the first nine months of this year, compared with 10 in the same period of 2015.