Earlier this month, Amazon announced Fulfillment By Amazon, the company’s warehousing and delivery product, would be unavailable to all new users over the holiday period. FBA won’t accept shipments from new FBA sellers after October 10 and before December 19. Restricted access to FBA during the holiday season is great news for established online retailers, and not so good for opportunist retailers who flood distribution channels with low-value goods during the holiday season.
FBA is hugely popular with retailers, partly because it solves many of the fulfilment problems that can damage early-stage retail businesses, and partly because it’s the only way to make products eligible for Amazon Prime status, which includes free 2-day delivery throughout the US.
Products without the Amazon Prime badge are at a substantial disadvantage because many of the most valuable Amazon users — those who pay a premium to join Amazon Prime — filter out products that aren’t eligible for free two-day delivery.
The move is likely to be a response to the poor experience established retailers had over the 2015 holiday season. However huge Amazon’s warehouse capacity, even it couldn’t cope with the demand. Historically, Amazon has applied similar restrictions to goods in the toys category, but this year every category is included.
Following the 2015 holiday season, Amazon embarked on an ambitious program of warehouse construction — adding over 20 new warehouses already this year. Even with the extra capacity, Amazon has chosen to limit access to FBA, which bodes well for future holiday seasons. It’s likely that the new rules will become a permanent fixture at this time of year, further increasing the value of established FBA retailers.
Established retailers have reacted positively to the new rules. By restricting FBA to established retailers during the year’s most busy shopping period, Amazon have in one move massively improved the competitive landscape in favor of established retailers. It will be easier for established FBA users to rank well within Amazon’s online store, increasing product visibility and reducing completion from fly-by-night retailers taking advantage of the holiday season to offload generic stock.
Owners of FBA businesses with an established history with Fulfillment by Amazon can use their ability to get stock into the program over the coming holiday season as a sales point. Entrepreneurs who intend to take advantage of the holiday season can no longer simply create a retail business and start shipping in the month before Black Friday and Cyber Monday — they’ll have to start a lot earlier in the year or buy a retail business with an established track record.
Of course, what’s good for FBA retailers is good for those in the market for FBA businesses. Entrepreneurs looking to purchase FBA-based retail businesses can expect reduced competition during the holiday season, increasing the potential ROI for retail businesses that use FBA.
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