Is FBA still an option or a necessity?

MORE: Twitch’s Pog Picks | Should you buy Amazon stocks now | Manage order cancellations

February 18, 2023

    AMAZON NEWSAmazon continues its stronghold on sellers with FBA

    Creative: Geral Jan Omelio, FBA Sellers

    Amazon has always connected selling on their marketplace to their FBA fulfillment service. But now, the chokehold is getting tighter. Sellers are continuously faced with inventory storage restrictions and fee increases, as originally reported in this Marketplace Pulse article.

    Limited storage space is a big problem for sellers, especially during the holiday season when sales are expected to double or even triple for some. Of course, it doesn't help that many avoid using 3PL warehouses since Amazon ranks FBA sellers higher.

    The FBA structure has always worked for sellers. However, it does come with its drawbacks:

    • Storage space can't scale with the sellers' growth;

    • Amazon decides on how much storage space sellers can get;

    • Sporadic random changes to storage limits; and

    • Poor communication between Amazon and the sellers.

    And as if it's not enough, Amazon recently announced a new FBA fee structure for 2023, increasing by over 30% since 2020. 

    It's a domino effect from this point. Amazon increases its fees, and sellers increase theirs to maintain a good profit margin; FBA storage space is limited, so they can't send inventory as needed. However, they can't sell their products cheaper on a different ecommerce platform since Amazon penalizes sellers who offer their products lower on other channels. So ultimately, prices will increase across all marketplaces.

    🙅‍♂️ FBA an option or a necessity?

    At this point, FBA is turning out to be a requirement rather than an option. Over 90% of top sellers on Amazon use it. It's almost impossible to succeed in selling on this platform otherwise.

    HOT TOPICTwitch revives "Pog Picks" this holiday shopping season

    Creative: Geral Jan Omelio, Holiday Shopping Season

    In time for the holiday season, Amazon-owned streaming platform Twitch is reviving its live shopping show Pog Picks, according to Marketing Dive. The event will happen separately in the U.S., Canada, U.K., and Germany.

    📺 Pog Picks is produced by Twitch's Brand Partnership Studio and hosted by Twitch streamers. It promotes products from editorial picks to brand sponsorships and invites viewers to join in gaming challenges and polls to win featured items. 

    Things you should know:

    • Although some consumers have stepped away from streaming shopping this year, Twitch pushes on with its holiday-themed Pog Picks. They cited Coresight Research's statistics that predict the increase of the live stream shopping market to $20 billion this year.

    • Twitch already had the "Pog Picks: MultEHverse" event for Canadian viewers last November 8. The three-hour show advertised new technology deals and attracted almost 70,000 unique viewers on streamer bobajenny's channel.

    • For the US market, "Pog Picks: Holiday Hive" will happen on December 10, beginning at 9 p.m. ET. Several viewers are expected to join the upcoming event since over 1.5M people watched the premiere last year.

    Twitch announced this event even after YouTube and Facebook shifted their focus to shorter formats than long-form videos, which was heavily influenced by TikTok's success.

    BITES OF THE WEEK:

    CASH CORNERIs now the perfect time to buy Amazon stocks?

    Creative: Geral Jan Omelio, Amazon Stocks

    It's a bad time for Amazon but a good time for long-term visionary investors. Amazon's stock has been down by over 47% from its most recent highs this 2022, as reported in Seeking Alpha's article. 

    Aside from company-specific factors, this dip is the market's state and investors' short-term objectives. With Amazon's stock condition today, many investors avoid buying into it due to what may occur over the next 1-2 years.

    📉 What's in it for Amazon investors?

    • As Amazon makes major investments in its web services (AWS) in anticipation of its future expansion, it's clear that AWS can provide a stable cash flow.

    • Amazon Ads is now a $30 billion company. It grew at a 30% annual rate in the most recent quarter, despite the general ad sector being in a difficult situation. 

    • Amazon has created a huge and loyal customer base, with almost 160 million prime customers and a nearly 50% market share in the US, so there's great potential to keep this number.

    With a 25% operational cash flow growth rate, investors have several reasons to maintain an upbeat outlook over the long run despite the recent underperformance of Amazon stock.

    SELLER REFRESHERMaintain a healthy account by managing order cancellations

    Creative: Geral Jan Omelio, Managing Order Cancellations

    Amazon sellers are expected to maintain a 2.5% weekly cancellation rate or else risk getting their seller account deactivated. So if you're getting 50 orders, you should only have 1 (1.25 to be exact) canceled order - a pretty tight number to work with!

    So, how does one achieve a healthy seller account? 

    Amazon Seller University shares tips on maintaining a healthy account even through order cancellations.

    • Prevent out-of-stock inventory by monitoring stock levels or having dedicated Amazon inventory.

    • Send a "critical message" to your buyer if their address is undeliverable.

    • Check if the prices listed on your listings are accurate.

    • Turn on "vacation mode" when you can't fulfill orders.

    • Never accept unofficial cancellation requests from a customer.

    Remember to take proactive steps to maintain a healthy Amazon Account and stay up to date with Amazon news and policies.