Amazon makes it harder for sellers to avoid shipping service

(Bloomberg) – Amazon.com Inc. plans to make it harder for merchants to ship the products themselves, which means they’ll be more likely to pay the company to do the job .

The new shipping performance requirements, announced in an email to merchants on Tuesday, will force third-party sellers to make Saturday deliveries and meet new one- and two-day delivery promises from February. If merchants fail to meet the targets, they risk losing a coveted Prime Fast-Shipping badge that influences what products shoppers buy.

Amazon said the changes were necessary because sellers’ deliveries are often late, while merchants say they fear being forced to pay for Amazon’s logistics without being able to shop.

The move has potential antitrust implications, as merchants could be forced to raise product prices if Amazon’s logistics cost more than paying United Parcel Service Inc., FedEx Corp. or the US Postal Service.

Amazon launched Seller Fulfilled Prime five years ago to help increase the number of products shipped quickly by letting certain merchants handle the delivery themselves. The goal was to reduce bottlenecks in Amazon warehouses, as products would flow directly from sellers to Prime subscribers, who pay a monthly or annual fee for delivery discounts and other perks – and typically spend more than others. Amazon buyers.

Today, Amazon says the program’s performance is appalling and is raising standards in an effort to reduce delivery times for many products from two days to one. Prior to the Covid-19 outbreak, less than 16% of Amazon orders shipped via Seller Fulfilled Prime in the United States met a two-day delivery promise, largely because attendees were unable to make weekend deliveries. end, Amazon said.

“Amazon is making significant investments in our fulfillment and transportation capabilities to make Prime faster, moving from a two-day delivery schedule to a one-day delivery schedule,” the email said. “As we continue to improve the Amazon Prime experience for customers, we want to make sure Seller Fulfilled Prime meets customer expectations for Prime.”

By increasing the performance indicators that Amazon itself judges, the company will make more merchants pay Amazon for logistics rather than competing services, said Shaoul Sussman, a lawyer at the Institute for Local Self-Reliance, a frequent Amazon reviewer.

“Amazon keeps these sellers at a very high level that Amazon itself doesn’t even track,” he said. “It seems the decision is to kill this program. The way to kill it is with very high operating costs and forcing those who want to make their own delivery to Fulfillment By Amazon. “

In a letter to federal lawmakers last year, an online trader accused Amazon of forcing him and other sellers to use the company’s expensive logistics services, forcing them to increase prices. price for consumers. The letter also accused Amazon of “tying up” its marketplace and logistics services, a potential violation of antitrust laws in which a company uses its dominant position in one market to give itself an advantage in another market where it is less established.

The sellers said that delivering products on their own is potentially less expensive than Amazon’s services. But most used Fulfillment By Amazon anyway to avoid being punished for performance issues and because that meant their products had more visibility on the site. In the letter, the merchant said Amazon had increased its fees by 20% over the previous four years until they were 35% higher than competing services. Amazon disputed the claims.

“As we move towards one-day delivery, we are making changes to Seller Fulfilled Prime to provide customers with fast and consistent delivery regardless of the processing method,” an Amazon spokesperson said. “We are now informing business partners so that they have time to adjust their business and have set up a dedicated support team to guide them through those adjustments and help them be successful.”

Amazon has been developing its own delivery operation for years to reduce its reliance on UPS, FedEx and USPS for the critical “last mile” to a customer’s home. Providing logistics services to merchants is a fast growing revenue stream for Amazon. Third-party seller services, which include logistics, generated second-quarter sales of $ 18.2 billion, up 52% ​​from the previous year and well above the $ 10.8 billion of its profitable Amazon Web Services cloud computing division.

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