The Importance of Amazon Supply Chain Management 

Inventory issues can tie up your Amazon sales, harm short-term and long-term marketing performance, and erode profitability, all of which makes inventory management a critical piece of a healthy Amazon business.

Kaspien’s supply chain network spans 9 countries across 3 continents and includes access to warehouses, distributors, freight carriers, product prep facilities, and marketplaces. Our logistical infrastructure is supported by data analytics from over billion data points processed daily and machine learning algorithmsOur retail partners benefit from our enterprise resource planning (ERP) software, warehouse management system (WMS), listing tools, and other integrations.

To put it shortly, we know a thing or two about optimizing the Amazon supply chain. In this post, we’ll share a little bit about what goes into managing Amazon logistics successfully.

Managing the Amazon Supply Chain Effectively 

Managing Amazon inventory effectively requires a combination of proactive and reactive strategies, leveraging tools that are directly related and adjacent to supply chain management. There’s a lot to unpack, so let’s dive into some of the most important pieces.

Accurate Inventory Forecasting

Accurate inventory forecasting is essential because it protects brands from running out of stock without severely overstocking. Amazon’s fulfillment centers charge storage fees and fulfillment fees. When manufacturers ship too much inventory into FBA centers, inventory stagnates, driving up storage costs that erode profitability. 

When brands send in too little inventory, they run out of stock. In addition to losing sales, out-of-stocks have other implications as well: 

  • Marketing performance suffers. When a product is out-of-stock, product rank deteriorates. Because product rank influences both organic and paid marketing performance, running out of stock harms sales, even after inventory is replenished. 
  • Market share decreases. Shoppers turn to competitors when a product is out of stock. This compounds the impact to product rank, with competitors improving rank while your rank deteriorates. As a result, competitors are well positioned to seize and retain market share. 

At Kaspien, we combine historical data from $1 billion retail sales, proprietary algorithms, and human expertise to ensure optimal inventory coverage.  

Maintain Inventory Control with Distributors 

Too many brands have learned the hard way that allowing anyone to sell their product can erode their brand integrity in both digital and physical spaces. Any seller carrying a brand’s product can list their inventory under the brand’s listing on Amazon. Once in the listing, the seller has free rein over listing content, including text and images. These can lead to inaccurate and low-quality content that tarnishes your hard-earned brand image.  

To protect against this, brands should (re-)negotiate contracts with their distributors that limit to whom they can sell product. By maintaining an active relationship with trusted authorized sellers, brands retain inventory control and through it, control over their brand’s online representation. Brands currently facing difficulties with unauthorized sellers can leverage our price & seller tracking software or take more aggressive steps through unauthorized seller removal. 

Brands should also enroll in Amazon’s Brand Registry program, which grants them access to additional marketing and brand protection tools, including specifying which sellers have approval to edit listing content. 

Prepare Products Compliantly for Amazon’s Fulfillment Centers 

Over 85% of top Amazon sellers use Fulfillment by Amazon (FBA), and with good reason. Products fulfilled through FBA are able to offer Prime shipping, which can be 2-day, 1-day, or same-day depending on location. Fast shipping speed is one of the most important factors for online shoppers, and FBA provides sellers with the infrastructure to provide it. 

Of course, Amazon’s FBA centers have specific and stringent product preparation requirementsFailing to satisfy these requirements can result in inventory being refused, returned, or repackagedThis is a simple, yet essential step for selling successfully on Amazon. 

If your brand lacks the capability to prep products compliantly, there are many FBA product prep providers able to assist. Kaspien offers such product prep services as well for FBA, WFS, and DTC.  

Keep Inventory Moving 

Amazon marketing is another key ingredient for maintaining healthy inventory. Marketing helps keep inventory moving, which grows sales, minimizes storage fees, and reduces unsellable inventory. Amazon advertising is the go-to tool for driving sales, but Amazon DSPcoupons, and Deals are all exceedingly useful tools for moving large amounts of inventory quickly.  

Remove Unsellable Inventory 

Speaking of unsellable inventory, it’s really not great for your account’s health. Unsellable inventory includes product that has been damaged, expired, or is otherwise unable to be sold. Unsellable inventory is a greater issue for products that are fragile, seasonal, or have a short shelf life.  

To maintain inventory health and reduce storage fees, it’s best practice to proactively remove unsellable inventory. When an inventory removal order is requested, Amazon processes and ships the specified inventory within 14 business days, though this can extend to 30 business days during peak shopping seasons. 

These practices are reactionary. Leveraging previously mentioned tools, like inventory forecasting and Amazon marketing, can greatly help to minimize unsellable inventory in the first place. 

Amazon has penalized sellers for exploiting removal orders to send product to customers and influencers. Penalties include accounts being blocked from requesting removals in the future and even account suspensions. 

Identify Inventory Reconciliation Cases 

Amazon’s fulfillment centers regularly mishandle inventory without reimbursing sellers. While Amazon catches many of these errors and automatically reimburses sellers, they don’t catch all of them. Sellers who don’t want to lose money unfairly to Amazon’s mistakes have to manually identify and file inventory reconciliation cases. 

You may think these errors are few and far between, but they quickly add up. On average, our inventory reconciliation softwareChannel Auditor, reimburses FBA sellers 2% of topline channel sales. Especially for sellers moving a large inventory, 2% of topline sales is no small figure.  

As such, inventory reconciliation for FBA is absolutely essential for sellers looking to maximize their Amazon channel profitability and optimize their inventory management. 

Diversify Fulfillment Solutions 

We’ve talked a great deal about FBA so far, but another critical piece of managing inventory effectively is having supplementary fulfillment solutions.  

In early 2020, thousands of sellers were caught off guard when FBA buckled under the strain of the surge in online sales. Amazon restricted non-essential categories from shipping inventory into FBA, and the great titan Amazon was proven to not be indominable.  

Sellers learned then the importance of having other fulfillment solutions. Those capable of fulfilling orders through Fulfillment by Merchant (FBM) or dropship were able to continue to meet consumer demand, while those who depended entirely on FBA were scrambling to find new solutions. 

Similarly, sellers who use “just-in-time” inventory were also put at risk. While the practice minimizes fees and thereby maximizes profits, it left such sellers exceedingly vulnerable in what proved to be a surprisingly fragile supply chain. Holding larger storage volumes would have helped shield them from the worst of the disruption, as would having back-up fulfillment solutions. 

Diversification is a long-proven tactic for risk mitigation, and it applies just as readily to ecommerce fulfillment as anywhere else. 

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Originally published on Forbes.

At the end of 2020, Amazon boasted a $1.6 trillion valuation and employed more than 1.1 million people. In a blog post by Jeff WilkeAmazon’s former CEO of Amazon Worldwide Consumer, Amazon reported that they delivered over 1.5 billion products worldwide during their biggest holiday season ever. According to Marketplace Pulse, nearly 200,000 new third-party sellers hopped onto the Amazon bandwagon in 2020. In 2020, investors sunk over $1 billion into companies focused on acquiring Amazon-centric brandssuch as Thrasio, Heyday, and Perch 

With Amazon’s scale and the shift toward consolidation within the marketplacebrands not yet on Amazon may be wondering if they’ve missed the boat. Is 2021 too late to enter the Amazon game?  

No. But, the boat is very crowdedGone are the days when you could build the plane on the way down.” In 2021, you have to enter Amazon ready to hit the ground running.  

My company has served over 4,000 brands and helped launch thousands of products on Amazon. Drawing on that experience, here are 5 critical steps that I would suggest your brand take before you’re ready to start selling on Amazon in 2021. 

#1 Select Your Catalog 

The first step is deciding what you want to sell on Amazon. How you decide may differ depending on whether you are expanding an established brand to Amazon or launching an Amazon-exclusive line.  

If starting with an established brand, you could take your top sellers and evergreen products to Amazon. Alternatively, you could differentiate your Amazon offerings from your other sales channels, listing different colors or sizes than what’s available elsewhere, online-exclusive bundles, or new products. You could even use Amazon for liquidation, selling end-of-season products and excess stock.  

If you’re launching an Amazon-exclusive product line, then you can take the traditional route of researching consumer interest, competition, and costs to identify which products and features offer the greatest potential.  

#2 File Paperwork 

Perhaps the least glamorous step, filing the appropriate paperwork is nevertheless critical for success. As soon as you’re able, you should file for a trademark with the United States Patent and Trademark Office, as it takearound 6 months to complete. While you’re at it, also file for a patent, if applicable. Having a trademark will enable you to enroll in Amazon’s Brand Registry program, which provides access to additional marketing services and brand protection tools. 

You should also obtain universal product codes (UPCs or colloquially, bar codes) for every product in your catalog through GS1.  

Last but not least, you must conduct safety and product testing. Amazon’s compliance requirements are often stricter than federal requirementsIn my company’s experiencethe most restricted Amazon categories are Baby, Beauty, Health & Personal Care, and Grocery. You should have your product tested in a reputable labsuch as Intertek, UL, CTT, or Bureau Veritas. Such labs often provide a regulatory analysis that can help you determine all relevant compliance requirements for your product. 

#3 Determine Inventory Logistics 

Next, it’s time to map your supply chain. Connect with your manufacturers to discuss lead times and material accessibility so you can account for it in your demand planning.  

From the manufacturer, the product’s next stop is a warehouse, which means you need to secure a warehouse solution that can store inventory and take returns. The obvious choice here is Fulfillment by Amazon (FBA), but as 2020 showed us, it’s dangerous to keep all your eggs in one basket. You’d be wise to create secondary solutions that can supplement FBA in the event of Amazon-imposed shipment restrictions to FBA warehouses. This may involve creating a dropship solution or using a third-party fulfillment provider 

#4 Create an Amazon Account 

You’ve selected high opportunity products, filed the necessary paperwork, and planned your supply chain. Now, you’re ideally positioned to create an Amazon Seller account. Though they are infamously easy to ignore, you should take the time to read Amazon’s Terms of Service so you understand your rights as a seller.  

Once your account is created, you can start creating product listings on Amazon. Create these listings in advance, but don’t publish them until your first round of inventory is in stock. 

#5 Prepare a Marketing Strategy 

As you near the finish line, it’s time to focus on your marketing strategy, which is essential to your success on this crowded marketplace. Start with the basics: Research 5-15 competitors on Amazon, then perform a SWOT analysis to identify opportunities. What features do they highlight in images and copy? How many reviews do they have and what do they say? What are their prices? Are they running ads? 

Once you understand the landscape, create content that highlights your differentiating factors. Amazon is only growing more saturated, so you need highquality images, videos, and search engine optimized copy to stand outA+ Content and Amazon Stores are also helpful assets. To help generate brand awareness quicker, you should create an active social media account for audience engagement. 

You should also allocate a sizable marketing budget for Amazon advertising. Sponsored Product Ads are the highest converting ad types on Amazon, but Sponsored Brand Ads and Sponsored Display Ads are also useful for increasing brand name recognition. Using a mix provides the best results for new brands, in my experience. 

Success Takes Time 

Launching on Amazon is exhilarating, and you’re likely eager to see some immediate resultsBut still, be patient; building relevancy for SEO and advertising takes time. Amazon is a flourishing platform that has enabled tremendous growth for many brands. Starting with these five steps is a great way to become another one. 

2020 accelerated the adoption of ecommerce. Companies that are obsessed with customer experience are among the most successful, with Amazon being a prime example. This is true for brands selling on Amazon as well: with more choices than ever before for both products and marketplaces, online shoppers have high expectations for product selection, shipping speed, listing content, price, and more. 

Many of the trends that emerged in 2020 and persist into 2021 can be traced back to how well customer expectations are met. 

Kaspien’s CEO, GM of Retail, and VP of Business Development sat down for a roundtable discussion of how 2020 changed the ecommerce landscape and what’s likely to come in the year ahead. You can watch their conversation below or keep reading for a summary. 

Trends & Predictions for Ecommerce in 2021 

Ecommerce Growth Rates Will Slow 

With all its turbulence, 2020 did bring strong tailwinds for ecommerce. As that turbulence gradually subsides, so too will the tailwinds. We expect that US ecommerce sales will continue to grow throughout 2021, albeit at slower rates than seen in 2020. 

Greater Fulfillment Diversification 

2020 exposed the surprising fragility of ecommerce fulfillment networks, with FBA taking the spotlight. A sudden spike in demand for certain goods led Amazon to temporarily restrict entire categories from shipping new inventory into FBA. Amazon also temporarily prioritized Fulfilled by Merchant (FBM) orders over Fulfilled by Amazon (FBA) orders. Impacted brands that lacked alternative fulfillment methods were left out to dry.  

Many brands learned the hard way not to be dependent on only one fulfillment strategy. This lesson will likely persist into 2021, with brands diversifying their fulfillment strategies through FBM, dropship, and third-party logistics providers.  

This situation also led to the emergence of local fulfillment providers who stepped in to fill the excess demand. It will be interesting to see if these local fulfillment providers maintain a foothold as larger networks restabilize (Amazon increased warehousing space by 50% in 2020). 

In a similar vein, many brands saw shoppers trying to buy products in different quantities than their standard unit sizes. We expect that more brands will cater to their audience by updating their product preparation capabilities to allow for more options. 

Omnichannel will Become More Important 

COVID-19 showed that Amazon FBA is not impervious. Delivery times were delayed by weeks on Amazon in late spring and early summer, and shoppers turned to other marketplaces to fill the gaps. Capitalizing on Amazon’s stumble, Walmart, Target, Shopify, and more experienced strong growth in ecommerce sales in 2020. 

Modern commerce is a game of meeting shoppers where they are at. As more shoppers use more marketplaces, the most successful brands will be those that are there to meet their target audience, regardless of platform. 

Brand Representation Matters More 

With more brands, more sellers, and more marketplaces to choose from, shoppers have a plethora of options. To win them over in 2021, brands need to make strong, positive first impressions. The best way to do that is through high-quality copy, images, and videos that help shoppers understand important product details, like color, size, ease of use, etc. 

If shoppers cannot easily understand such details when they are unable to inspect products in person, they’ll seek another product. It’s also critical that brands provide a consistent experience no matter where shoppers encounter their products, as inconsistency can lead to confusion or doubts about authenticity, resulting in lost sales. This includes consistent branding across direct websites, social media, and marketplaces. 

Retention Strategies will Grow 

Because shoppers have more choice, the cost-of-acquisition will continue to increase. To counteract rising customer acquisition costs, brands will develop more robust retention strategies to keep customers in the family. This will include dedicated efforts for retargeting campaigns, customer newsletters, nurturing engaged social media communities, and more. 

Amazon Prime launched a movement of 2-day deliveries, which has shifted from a competitive advantage to an expectation today. Walmart has Walmart TwoDay Delivery, eBay has eBay Fast ‘N Free, Wish has Wish 2-day, and even individual D2C websites are sporting 2-day delivery tags.

(Source)

Marketplaces and independent shops across the web leverage fast delivery as a standard practice of business.

If you’re selling online, fast delivery is quickly moving from nice-to-have to increase sales, to must-have to maintain sales. Understanding why can help you to evaluate fast delivery as part of your own sales strategy, while delivering the right delivery speed offerings to provide results. 

The Prime Effect 

When Amazon first introduced discounted 2-day delivery in 2005, it was to a relatively small audience of new “Amazon Prime” subscribers. Few then would have thought that a bookstore, which had been in business since 1995 and turned its first profit of just 1 cent per share in 2001, would define eCommerce as we know it.

Today, Amazon owns 52.4% of eCommerce sales in the U.S. and 13.7% globally. Much of that massive success is attributed to Amazon’s take on fast delivery, allowing eCommerce to move from an inconvenient necessity for out-of-the-way consumers, to quick gratification for shoppers worldwide.

With more than 112 million Prime subscribers, Amazon now nets more than $13.3 billion in subscription fees alone, and a large percentage of subscribers use the service for its fast delivery benefits.  

That success prompted eCommerce giants to take on fast delivery in an attempt to compete in the space.

Walmart TwoDay

Walmart launched a 2-day delivery program, and then opened it up to everyone without any subscription needed. Walmart also introduced Express Delivery, for 2-hour delivery at over 2,000 stores. 

eBay Fast ‘N Free

eBay started out with eBay Guaranteed Delivery, which then evolved into eBay Fast ‘N Free for products that offer free 3-day or fewer fulfillment. 

Wish 2-day

Wish is an exciting new marketplace that offers Wish Express (5-day delivery) and Wish 2-day delivery exclusively through Deliverr.

Google Free and Fast

Google Shopping has also introduced a fast delivery option, wherein products are tagged with “Free 2-day” or “Free 1-day” delivery badges to highlight fast delivery options to shoppers.

While these eCommerce giants introduced fast delivery to compete with Amazon, you also have to do it to compete with them, and to succeed on their marketplaces. 

Customers Prefer Fast (and Free) Delivery

Anyone looking for a product on Amazon can easily check a little box in the sidebar, indicating a preference for 2-Day delivery. eBay, Target, and Walmart now do the same, allowing customers to filter out products that won’t arrive as quickly as they expect.

  • 76% of customers say they’re more likely to order items if they can get same or next-day delivery.
  • 85% are more likely to buy a product with 2-day delivery, but 88% will pick “free” over “fast” in most cases.
  • COVID-19 resulted in changing expectations for delivery. 45% of customers now expect longer wait times but slower delivery actively reduces brand loyalty. Exceeding expectations and delivering in 4 days or less boosts customer loyalty. 
  • 47% of customers are willing to pay $2.99-$5.99 for 2-day delivery, but most expect to see a free delivery option as well.
  • 52% of shoppers list fast delivery as extremely important in making a purchase decision.
  • 77% of abandoned shopping carts relate to no or slow delivery estimates or high delivery costs.
  • 67% of Amazon customers have filtered for 2-day delivery.

Essentially, the cost and speed of delivery can dramatically affect sales. With customers actively filtering for fast delivery on some marketplaces, not offering it can reduce total exposure and sales. In other cases, lack of free, fast, or transparent delivery options directly contributes to shopping cart abandonment. 

Customer Experience 

While fast delivery contributes to increased sales, it also contributes to customer loyalty. For example, customers consistently leave better reviews when products arrive within 3 days.

A survey by Clutch, a B2B market insight firm, shows that 45% of customers are unwilling to place a second order with a brand that delivered later than promised. If you do promise fast delivery, make sure you can back it up.

Tip: Learn when it’s time to shift from in-house to outsourced fulfillment

Consumers value fast delivery. That’s important in a world where, until recently, brick and mortar accounted for more than 85% of all sales in the U.S. Quick gratification is essential to the customer experience. It also increases the likelihood of impulse purchases, because customers looking for a quick shopping fix also want fast delivery. 

Free Delivery vs Fast Delivery

While fast delivery is crucial for almost half of consumers, many also want free delivery. Balancing the dual demands for fast and free delivery can prove costly for small businesses, especially as big marketplaces offer more and more ways to qualify for faster and cheaper or free delivery. 

While, obviously, the golden standard is the fast and free used by Walmart, Target, and Amazon, many small businesses simply can’t afford it without heavily cutting into profit margins. 

In many cases, the best alternative is to rely on an outsourced fulfillment partner to simplify and reduce costs. 3PLs leverage economies of scale to reduce total warehousing costs. Many also utilize inventory and warehouse management to reduce distribution times and costs by better allocating inventory.

Tip: Calculate your outsourced fulfillment costs.

Outsourcing Inventory and Fulfillment 

Eventually, most small businesses won’t be able to grow and scale while keeping fulfillment completely in-house. At the same time, using marketplace solutions, like Fulfillment by Amazon, can be restrictive to separate channels.

Finding a fulfillment partner like Deliverr, that offers infrastructure as a service and keeps your SKUs close to demand to speed up delivery times, is a great option.

Offering fast delivery is a great way to increase conversions, delight your customers, and stay competitive in the current landscape. You need to ensure you can keep up with increased demand and high-velocity seasons.

With 95% of consumers increasingly considering next-day delivery to be “Fast” and 2- or 3-day delivery to be “normal,” it’s increasingly important to offer fast delivery across your marketplaces. Instead of running to keep up with your competitors, go on the offense and offer lightning-fast delivery affordably with the right partner.

About Deliverr

Deliverr’s FBA-like multi-channel fulfillment comes with clear pricing, easy onboarding and a hassle-free experience so you can focus on growing your eCommerce business.

How to Start Selling on Amazon

As a First-to-Market (FTM) brand, you carry the exciting burden of readying your products for a successful expansion onto the marketplace. Being the captain of your fate can be equal parts exciting and overwhelming, especially when breaking ground in a foreign market.  

If we’ve learned anything from 2020, it’s that anything can happen. It’s important to understand that there’s no ‘silver bullet’ for launching a new product or brand, but there are proven tactics recounted here to help you successfully navigate the ecommerce seas.   

Why Amazon? 

Amazon is turning into a marketplace that is well positioned for brands, as having made strides to keep brands safe on the channel through programs like Brand Registry. Amazon seems to understand and hold stock in the fact that brands invest in research and development, advertise through other media outlets, engage with customers, and create a shopping experience that excites folks so they come back for more.   

The Two Types of FTM Products 

An FTM launch will look different for each brand, but we can divide the launch types into two very broad buckets: emerging products and established products.  

Often, an Amazon launch consists of a manufacturer creating a product or products with specific intent to sell them on the Amazon channel only. We would call this an emerging product. 

Established products, on the other hand, are products that have been selling for years in small brick and mortar stores, large box stores, Etsy, direct websites, and even farmer’s markets, and the brand now wants to transition their catalog to online marketplaces.  

Brand genesis is an important factor that will play into a brand’s overall FTM strategy, so it’s an important distinction. 

farmer's market

Established Products 

For those brands who do have some form of exposure already, be it online or in a physical store, step one will be determining which products from your catalog will be added to Amazon.  

With the pandemic forcing many brands to look to online platforms to maintain profitability, there’s been a rapid and unique shift in the ecommerce landscape, so again, remember that the FTM strategy will look different for all brands.  

Emerging Products 

For manufacturers that are looking to create a product line exclusively for Amazon or ecommerce marketplaces, there are fewer ‘keeping everyone happy’ hoops and more ‘what products can I rely on to sell’ hoops, which is just as tricky of a situation.  

With roughly 12 million items on Amazon.com, you need to know who and what is out there before you drop your anchor. There is a range of free and paid options to help research product opportunities, which are highly recommended for existing brands and new products alike. 

Company owners often turn to index & rank checkers and search volume tools to ascertain what products currently sell well on the channel, then further research whether the items are viable for production, and then finally, launch.  

Getting That Paper. (Not the Green Kind. Yet). 

We’ll be the first to admit that this isn’t the sexiest section of this guide, but it could be the most important. Having your general business in order is key to avoiding frustrating lag times during set up.  

The enclosed checklist is a fantastic aid for maneuvering through this section, since the majority of the tasks discussed below will require you to work with government agencies and third parties to compile the necessary paperwork. We’ve included helpful links that will take you exactly where you need to go. 

  • Secure your trademark with USPTO. In totality, this process can take 6 months, so the earlier you begin, the better. You will need to have a trademark in order to file for the Brand Registry program on Amazon.  
  • Secure UPC codes (synonymous with barcodes and international EAN) for every unique product in your catalog. This includes product variations, like size or color.  
  • Certain products require testing and material information in order to be approved for resale on Amazon.  
  • Set up processes for tracking, storing, and filing sales and use tax. Once you are a registered business within that state, you will need to file a report annually with the Secretary of State and track the expiration date of your license so you can renew, as needed.  
  • Pull together all contact information, identification, and accounting paperwork necessary for opening an Amazon Seller Central account.  
  • Determine your fulfillment strategy, as the route you take will determine whether you get the highly sought-after Prime delivery badge. 

Download our free First-to-Market Checklist to see if your brand is ready to launch new products on Amazon.

Planning Logistics

Next up, it’s time to plan how you’re going to get inventory from point A to point B in the most effective and secure way possible. This became quite a bit trickier in 2020, which strained supply chains at every juncture. As such, approaching these steps with care is even more important.

Plan Early with Your Manufacturer 

Start planning with your manufacturer early to confirm availability of raw materials and start calculating cost of goods. Confirm lead-times with your manufacturer to assess timing for your initial shipments into Amazon, as well as align your future inventory planning ability for stock replenishment and gauging timing for any new product development. 

Apply Amazon-Compliant Packaging during Production 

For sake of efficiency, having your product packaging modified for Amazon compliance during production is highly recommended. Be sure to include expiration dates, shelf-life, age restrictions and UPC/barcode on the product packaging for Amazon. 

  • If you plan to launch on Amazon Global marketplaces in the future, include multi-language packaging and product directions 
  • If you sell temperature sensitive products, note that Amazon removes any meltable product from warehouses April-October

The actual product packaging (the box the product comes in), it doesn’t have to be pretty! Feel free to shave off some costs and use a plain brown box that has a scannable barcode on the outside. Or, if you choose to polybag the product, then you’ll need to make sure your warehouse can apply all product prep to be acceptable at FBA.   

Amazon FBA shipping requirements

Secure Your Distribution Contracts 

For brands that are established in the market already but looking to expand into the Amazon marketplace, you should notify your distributors and develop parameters to ensure other resellers do not become instant competition. Having iron clad online distribution policies and strict MSRP will be extraordinarily useful as your brand gains momentum on the channel and outside parties become interested in claiming a piece of the pie.  

There are legal resources and consulting partners that specialize in strategy development to keep online channels clean, such as Amazon Sellers Lawyer, that can help you understand your legal options and reduce the chances of channel conflict or price degradation post-launch.  

Create a Warehousing Plan 

Begin building relationships with a warehouse solutions partner quickly. Many brands will use an independent warehouse solution to hold stock that has been manufactured domestically or imported to reduce monthly storage fees to Amazon. Most often, independent warehouse partners will have a competitive fee structure compared to Amazon FBA.  

Product that sits at FBA longer than 12 months will be subject to increased fees under their Long-Term Storage policy. Other brands may lean on established supply chain partners like Deliverr to facilitate storage and shipping which guarantee Amazon compliance. 

Send a Small Initial Shipment 

Your initial shipment into Amazon should be small to help troubleshoot any unforeseen issues and reduce fees as you ramp up sales velocity. Roughly 20-50 units should suffice, with a secondary shipment sent 1-2 weeks after. Once product has been selling on Amazon for 30 days, subsequent shipments should include roughly 4-6 weeks of coverage, increasing upwards of 8-12 weeks during relevant seasonality.   

Time Your Launch Strategically 

Having time is a luxury. But timing is a necessity. Do not rush a launch for sake of excitementExamine your product and pick your launch timing with intent. Will your catalog align with the back to school season, Valentine’s Day, Father’s Day, etc.? Kick off the main event when the opportunity is greatest 

Keep the Learning Going with our Free eBook

The above only tips only scratch the surface. Deep dive into everything your brand should do before launching on Amazon in our free eBook, “How to Launch New Products on Amazon.”



Amazon Agency vs Amazon Retail

Expansion into Ecommerce has Accelerated 

Before 2020, ecommerce had been steadily growing its share of all retail. But when the coronavirus hit and countries around the world issues stay-at-home orders, it forced consumers and businesses to turn to online sales channels in numbers never seen before. As a result, we’ve seen an acceleration in brand and consumer adoption of ecommerce.

Road Bumps Along the Way 

But, 2020 also saw brands face many hurdles on online marketplaces. Amazon struggled to keep pace with the surge in purchases, and they had to restrict which types of products they would accept into their fulfillment centers for a time. Amazon’s first-party (1P) division, Amazon Retail, and third-party sellers (3Ps) alike struggled to remain in stock as supply lines locked down, manufacturing was interrupted, and consumer demand skyrocketed for products well outside of their typical peak season.  

Charting a New Course 

After the turbulence of 2020, many brands are reconsidering their approach to ecommerce. To help brands make an informed decision, we’ve put together a list of the key factors that brands should consider when deciding if they should work with an Amazon retailer (1P or a 3P) or transition to working with an Amazon agency.

Should You Work with an Amazon Retailer? 

Now that we’ve covered the primary options, let’s dig into key factors for making a decision about working with an Amazon retailer, an Amazon agency, or transitioning from one to another. 

What is an Amazon Retailer? 

Starting from the top, when a brand partners with a retailer, the retailer buys product from the brand at wholesale prices, then sells it for retail prices on Amazon.  

The brand’s profits are payment for their product, minus the cost of manufacturing. The retailer’s profit is the consumer’s payment for the product, minus the wholesale expenses and channel management costs, which includes things like shipping, storage, fulfillment, commission, and marketing fees. 

When it comes to Amazon, brands that sell through a retailer can partner with Amazon directly (first-party or 1P) or with a third-party seller (3P). Learn about their key differences in our blog post, Amazon 1P vs 3P. 

Many brands choose to sell through a retailer because it provides cash up front, and the brand doesn’t have to get involved in the hassle of actively managing an Amazon channel. 

Pros of an Amazon Retailer 

Let’s start with the pros for partnering with an Amazon retailer (1P or 3P): 

  • Paid upfront via a retailer’s purchase order, which can be useful for funding manufacturing costs 
  • Not responsible for managing consumer-facing sales channel (fewer infrastructure costs) 
  • They handle online sales tax 
  • They are already registered for international value-added taxes (VAT), making international expansion much faster 
  • They provide the expertise and resources  
  • Perhaps the simplest way to start selling on Amazon 

Cons of an Amazon Retailer 

Now for the potential cons of working with an Amazon retailer (1P or 3P): 

  • Limited control over your brand’s representation online 
  • Limited control over product pricing 
  • Limited visibility into channel performance 

It’s worth noting that some of the cons of working with a retailer can be mitigated by partnering with a trustworthy partner. If you’re interested in this business model but concerned about the cons, seek out a retailer that’s committed to building a healthy relationship with your brand. 

Costs of an Amazon Retailer 

As mentioned, in a retail model, the retailer pays the brand for their product. However, retailers may ask for various discounts from the brand so they can pay the numerous Amazon fees (commission, shipping fees, tiered storage fees, and fulfillment fees) while still having some margin left over to generate revenue for themselves.   

Making a Decision 

Work with an Amazon retailer if: 

  • You want to focus on the manufacturing and brick and mortar side of your business, while they handle taking your products to market 
  • You don’t want to be responsible for paying shipping, storage, fulfillment, and commission fees 
  • Your business’s cashflow model relies on large purchase order payments 
  • You want to expand sooner rather than later into foreign markets 

Should You Work with an Amazon Agency? 

If you’re not interested in starting with a retailer or you’re working with a retailer and want to take more ownership of your Amazon channel, you may consider working with an Amazon agency. 

What Value does an Amazon Agency Add? 

Now, let’s say a brand doesn’t want someone else representing them on Amazon; they want to sell their products themselves. That’s an increasingly popular decision, and one that we’ve seen more and more brands transition to in recent years.  

However, there’s a challenge in representing yourself. Managing an Amazon channel requires three things that can be hard to come by: 

  1. Personnel: You need bodies dedicated to managing your Amazon channel. If you’re using existing personnel, what projects are you pulling them off of? If hiring new personnel, you need the budget for salaries and benefits. 
  2. Expertise: At over 25 years old now, Amazon is a mature marketplace that requires complete attention. With millions of sellers on the platform, you must enter the platform with a strong understanding of the landscape and strategies if you want to succeed. 
  3. Time: If you manage your brick-and-mortar relationships, do you have time to also manage your ecommerce relationships (and critically, keep the two in balance so that one relationship doesn’t sour the other)? 

 

If you lack in any of the above, then you may need outside help to fill in the gaps. That’s where Amazon agencies come in.  

What is an Amazon Agency? 

Amazon agencies can typically offer services in two ways: complete Amazon management or selected services. The former means that they provide everything needed to run every aspect of your Amazon channel. The latter means they provide only a handful of services that you specifically need help with, such as managing your Amazon advertising campaigns, while you handle the rest. 

Pros of an Amazon Agency 

Pros for partnering with an Amazon agency: 

  • More control over your brand’s representation online 
  • More control over product pricing 
  • Increased visibility into channel performance 
  • Your profit margin may exceed that of a retail model 
  • They provide the expertise and resources 

Cons of an Amazon Agency 

Cons for partnering with an Amazon agency: 

  • You’re paying the agency instead of having a retailer pay you 
  • You may be responsible for inventory and supply chain management (some agencies offer this service, but not all) 
  • Since you are selling through your own Seller Account, you are responsible for collecting and remitting online sales taxes 
  • You’re also responsible for VAT in international markets, slowing your ability to expand internationally 

When determining if you’re willing to pay for an agency’s help, think of it as an investment. If you pick the right investment, it may set you back at the start, but soon, it will pay for itself and then some. 

 

Costs of an Amazon Agency 

In an agency model, the brand pays for all the Amazon fees themselves (commission, shipping, storage, fulfillment, marketing), but you have more margin to work with. Because the brand holds the inventory risk in an agency partnership, the agency fee can be significantly lower than the retailer’s margin. The agency then collects either a monthly retainer or a commission. 

Making a Decision 

Either start by working with an Amazon agency or transition to one if: 

  • You want more control of your brand’s representation online 
  • You want a greater share of product margin 
  • You need additional personnel, expertise, time, or resources to effectively manage your Amazon channel 
  • Your budget allows for you to pay a retainer or commission  
  • Your business’s cashflow model can adapt to using revenue from end-consumer sales 

Should You Sell Yourself (Direct to Consumer)? 

If you want to represent your brand yourself on Amazon and you have the personnel, expertise, time, and resources to do so, then you don’t need to partner with a retailer or an agency.  

This route is the end goal for many brands, but it has by far the most and greatest requirements. As such, we often see brands start in retail or agency partnerships, then transition toward selling themselves.  

In this post, we’re focused on comparing working with a retailer to working with an agency, but you can learn more about a Direct-to-Consumer model in this blog post. 

 

Amazon Retailer vs Amazon Agency: Which is Better? 

The annoying but honest answer is that it depends.   

Retail is generally the better choice for brands that need immediate cash flow to fund their manufacturing. Working with a retailer also simplifies domestic and international taxes, as brands do not need to deal with VAT or sales tax when selling online through a retailer; the retailer handles it for them. This also enables brands to expand into foreign markets quicker, since the legal infrastructure is already in place. 

Agency is generally the better choice for manufacturers with tight margins, want larger margins, and/or want more ownership over their brand’s presence in online marketplaces. 

Service That Grows with You 

Kaspien holds a unique position in brand services for online marketplaces, as we’re able to serve brands in both capacities: We can be a brand’s Amazon retailer, Amazon agency, or help them migrate from one to the other. Through our platform, brands can continue building upon the same foundation of data, products, services, and solutions, no matter how their ecommerce needs evolve. 

Related Content 

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How Much Inventory Should I Store in Amazon FBA? 

Amazon’s logistics network received quite a bit of attention in 2020. Quarantines led to surges in online buying, and Amazon’s fulfillment centers struggled to keep up (although Amazon grew 40% year-over-year in Q2)To cope, Amazon temporarily restricted which product categories it would accept into fulfillment centers, increased the minimum performance requirements for utilizing their systems, and limited the maximum number of products that could be stored in their warehouses. 

But even before COVID-19, Amazon logistics were a hot topic. In the great game of supply and demand, the question has always been how to provide enough inventory without overstockingHere at Kaspien, we live by the idiom “always buy enough, but never too much.” That, however, is much easier said than done.  

Running out of stock can result in cascading repercussions that damage the velocity of a listing, so it’s imperative that we consistently strike a balance between having enough but not too much inventory. – Joy Kuykendall, Account Manager

There are many factors to consider when deciding how much inventory to ship and store at Amazon, several of which we’ll cover here. Your first step: determine your goals before assigning a strategy. 

What are My Company Goals? 

Is your strategy geared towards cash flow management? If so, you’ll more than likely consider a more conservative approach, what we call a “lean model” here at KaspienIf your goals are focused more on revenue this year, you’d probably consider a more aggressive approach, pushing higher quantities to market and supporting sell-through with pricing and marketing strategies. 

Inventory Management Strategies 

Once you have goals in place, you can determine if you want a lean model or an aggressive model. Obviously, both come with their own set of considerations and risks. But what exactly are the consequences for stocking too much or too little inventory at Amazon? 

Overstocking Results in Fees 

Most Amazon sellers are aware that Amazon charges monthly storage fees per item (by cubic foot)If, for one reason or another, you wind up with too much inventory at Amazon, you’ll be subject to what are referred to as “Long-Term Storage Fees” in addition to monthly storage fees. Per Amazon, “Inventory that has been in a fulfillment center for more than 365 days will be charged a monthly long-term storage fee (LTSF) of $6.90 per cubic foot or $0.15 per unit, whichever is greater.” These fees compound the longer the inventory sits in the warehouse without selling, eroding your bottom line.  

At Kaspien, we have a devoted team to monitor our inventory levels and ensure listing price supports a healthy sell-through rate. 

“It’s important for sellers to find the optimal level of inventory. Overstocking inventory increases storage costs and can negatively impact a seller’s IPI [Inventory Performance Index] score.” said Autumn Roybal, Pricing and Inventory Manager.  

The best way to avoid these fees would be to not overstock at the warehouse or to conduct a removal, which has its own set of associated fees. 

Understocking Costs Sales & Impacts Marketing 

Sellers also face repercussions when they run out of stock at Amazon. If you run out of stock, then competing sellers or competing brands will win the sale. But running out of stock has more than just an immediate impact. Once out of stock, your listing won’t hold its rank, and product rank ties directly to product searchability and discoverability. As a result, marketing and sales performance suffer even after you replenish inventory. 

As Joy KuykendallPartner Optimization Account Manager, puts it, “We must closely monitor inventory cycles of each listing to ensure there is enough inventory to prevent stocking out, especially in listings for which we are the only Prime seller. Running out of stock can result in cascading repercussions that damage the velocity of a listing, so it’s imperative that we consistently strike a balance between having enough but not too much inventory.” 

How Much Inventory Should I Buy? 

As with most things, a balanced approach is generally the safest and most impactful route to managing inventory levels. One of the most valuable tools for determining your ideal inventory level is historical sales data, ideally for 30-60 days. You can also reference year-over-year trending, if you have the data available, to further help forecasts.  

Using historical sales data, you can predict how the product will sell over multiple months, though it’s not quite linear. You must also account for seasonal trends and channel details, such as seller saturation, rank, and reviews. Thirdparty sales estimators can give you a good idea where to start if you don’t have access to historical sales data, such as when you’re launching a new product or product line. 

Also, keep in mind product specific nuances. Is the product at a high price point? Does Amazon consider it oversized? Is it meltable? Hazmat? Not only will these items have different sales velocity, they will also have different implications when it comes to fees associated with longterm storage at Amazon. 

Amazon Inventory Storage Fees 

The below fees are accurate as of November 2020.  

Monthly Amazon Inventory Storage Fees (Non-Hazmat) 

Standard Size 

  • January – September $0.75 
  • October – December $2.40 

Oversize 

  •  $0.48 
  •  $1.20 

Monthly Amazon Inventory Storage Fees (Hazmat) 

Standard Size 

  • January – September $0.99 
  • October – December $3.63 

Oversize 

  •  $0.78 
  •  $2.43 

Determine Amazon Inventory Carrying Costs 

In addition to storage fees, you should also keep in mind other costs your inventory will accrue so you can factor it into your margin calculations. Amazon inventory carrying costs refers to the total expenses associated to managing, shipping, and storing inventory at Amazon. This includes the aforementioned storage fees, as well as general operational costs to your business in discovery and planning, manufacturing or acquiring, shipping and handling, and any insurance or taxes for the item. Lastly, FBA fees should be considered part of the Amazon inventory carrying cost: The Fulfillment by Amazon (FBA) fee is a per-unit fee, based on the dimensions and weight of the item. 

How can I Prepare for Supply Chain Disruptions? 

As we all learned in 2020, supply chain disruptions can be a very real threat to a seller’s ability to “always buy enough, but never too much.” Some of these disruptions can be accounted for, such as major holidays in the countries where you produce products (Chinese New Year is a great example). In these cases, you can plan ahead and prepare for these events. You can also extend forecasts and stock up more than normal to account for the months where the lead times won’t support timely inventory fulfillment.  

For unexpected disruptions like we all experienced with COVID-19, it may behoove you to develop a “backup plan,” such as a dropship listing you can turn on in a pinch in the event that your FBA inventory runs out. Seller Fulfilled Prime (SFP) and Fulfilled by Merchant (FBM) are other worthwhile options to protect against out of stocks if you have the means to support them.  

How Should I Plan for Peak Seasons? 

Sellers generally see improved sales across the board during peak seasons. You can determine peak seasons for your specific product or brand based on historical sales, but generally, trends on the marketplace are common sense. Sunscreen sells well in the summer months; Toys sell well around the Christmas holidays.  

Make sure you prepare early to ensure you have enough inventory allocated for the higher velocity season. You could consider negotiating discounts or improved payment terms to offset the larger cash investment for allocation. Obviously, be mindful of your normal best practices for ordering, and always expect Amazon to impart some sort of kink in the chain (see Amazon Inventory Restrictions at the top of this post).  

Peak seasons also tend to have longer lead times due to port delays and increased freight velocity/surcharges, so be sure to account for those during your planning. 

In Closing 

There’s plenty to consider when determining how much inventory to ship into and store at Amazon, and when you’re first developing your strategy, it can take some trial and error. Remember that not all SKUs are created equal and tailoring your most effective strategy can take some time. Using the above tips and tricks will  help you on your way! 

Learn More about Inventory & Supply Chain Management 

Walmart vs Amazon: How the two companies compare

Amazon has long dominated online marketplaces in the US. However, in 2020, Walmart launched a series of initiatives that would borrow from Amazon’s learnings to bring Walmart into a competitive position, such as Walmart Fulfillment Services and a subscription service, Walmart+ (Walmart Plus) 

The success of these initiatives immediately underwent a trial by fire as the coronavirus pandemic swept the US. Amidst quarantines and dramatic swings in consumer buying behaviors, Walmart’s online segment has conducted itself admirably.  

So, in this post, we’re taking a closer look at how Walmart Marketplace compares to the great leviathan of US ecommerce. 

Walmart vs Amazon – History 

Amazon’s History 

Amazon was founded as an online book seller on July 5, 1994. The company went public just under three years later in 1997then expanded into music and DVDs in 1998.  

Amazon as we know it today, with millions of third-party sellers selling alongside Amazon on its platform, began in 1999, when Amazon launched its third-party seller marketplace. Amazon Web Services, or AWS, joined the fray in 2003.  

2005 brought the introduction of Amazon Prime. From there on out, Amazon continued to grow into the behemoth we know today. The last 15 years have been filled with acquisitions and ventures into all types of industries, including mobile phones, robotics systems, the Washington Post, Twitch video game streaming service, Whole Foods, the creation of Echo and Alexa, prescription medication, and more.  

This article contains a thorough summary of Amazon’s major milestones over the years. 

Walmart’s History 

Walmart is far older than Amazon, founded in 1962. The company went public in 1970.  

The next 30 years saw rapid growth in physical store locations, but it wasn’t until 2000, just five years after Amazon launched, that Walmart launched online stores. Likewise, it wasn’t until 2009 that Walmart launched a third-party seller marketplace, 10 years after Amazon.  

However, Walmart beat Amazon to the online grocery game, starting online grocery pickup in 2015.  

Walmart acquired Jet.com in 2016, a move that would ultimately teach Walmart many lessons about ecommerce, but not drive any immediate, significant growth. 

Walmart launched TwoDay Delivery in 2017 to compete with Amazon’s 2-day shipping, then NextDay Delivery in 2019. 

Though Walmart had been making progress in developing its online marketplace, it wasn’t until 2020 that their online marketplace really began to capture brands’ attention as a high-opportunity ecommerce marketplace 

In February 2020, Walmart launched Walmart Fulfillment Services. In September 2020, they launched Walmart+, a subscriptions service with exclusive benefits, similar in theory to Amazon Prime, but each offering a different set of perks enabled by their unique positions. 

Walmart vs Amazon – Size 

Ecommerce Share 

Amazon currently controls roughly 38% of the United States ecommerce retail market, according to eMarketer. On the other hand, Walmart only controls approximately 8% of the ecommerce retail market.  

Amazon has over 95 million monthly unique website visitors in the US, while Walmart.com has over 100 million monthly unique visitors. 

Physical Locations 

It should come as little surprise that Walmart’s physical locations vastly outnumber Amazon’s, given each company’s history. Walmart has 5,353 US stores as of July 2020, while Amazon ha589 physical stores as of August 2020. 

International Presence 

Amazon has marketplaces in 16 countries, while Walmart has its online marketplace available in 10 countries and physical stores in 27 countries 

Walmart vs Amazon – Customers 

How do Walmart shoppers differ from Amazon shoppers?  

The answer? Not a whole lot. According to Walmart, Walmart’s and Amazon’s customer demographics are nearly identical when viewed by generations or by income levels. 

Walmart’s VP of Walmart Fulfillment Services delved into more Walmart vs Amazon myth busting in our co-hosted webinar. You can watch it for free on-demand. 

Walmart Fulfillment Services (WFS) vs Fulfillment by Amazon (FBA) 

Speaking of Walmart Fulfillment Services (WFS), let’s take a look at how it compares to Fulfillment by Amazon (FBA). 

For the moment, WFS and FBA share many similarities. Both services allow third-party vendors to ship their product at a fulfillment center, where the product is stored until purchased, then fulfilled. Both will: 

  • Pick, sort, pack, ship, and track products 
  • Handle shipping, returns, and refunds  
  • Provide 2-day shipping 
  • Provide same-day shipping in select areas 

One big difference is that Walmart.com allows for item pickup at any of its stores, while Amazon only has a few stores that do online pickup. 

WFS vs FBA eBook & Webinar

We offer a comprehensive breakdown of WFS vs FBA in our free eBook. If you’re interested in learning more about WFS, watch our on-demand WFS webinar that we co-hosted with Walmart’s VP of WFS. 

Walmart Fulfillment Services vs Amazon FBA

Walmart vs Amazon – Marketing Services

In terms of marketing, Amazon and Walmart.com are very similar, but Amazon has many more options to choose from.  

Amazon Marketing Services 

Amazon marketing products available to sellers include:  

Walmart Marketing Services 

Extensive right? In contrast, Walmart offers a limited selection of marketing products for sellers, including:  

This difference in selection is not surprising though. Amazon has been focused on ecommerce for 25 years, while Walmart has only really made ecommerce a heavy focus in the last five years. Over time, Walmart Marketplace will develop new marketing services to match Amazon’s list. 

For the time being, online sellers will see far greater returns from marketing dollars invested into Amazon marketing than in Walmart marketing. Amazon’s services offer greater control over audience targeting and more data insights, which, in turn, yield higher profitability. 

Walmart Plus vs Amazon Prime 

Until recently, Walmart did not have a competitor to Amazon Prime, Amazon’s premium paid subscription service. In July 2020, Walmart announced Walmart+, its own premium paid subscription service. These subscriptions are very similar as both give you access to perks and benefits like two-day shipping and one-day shipping on a host of products.   

Walmart Plus vs Amazon Prime

Walmart Plus Member Benefits 

  • Free 2-day shipping 
  • Early access to deals 
  • Express delivery for groceries and select goods 
  • Fuel discounts at Walmart gas stations 
  • Scan & Go service in Walmart stores 
  • Walmart dropped its minimum $35 purchase requirement for 2-day shipping in December 2020 
  • Planned Walmart Plus credit card 
  • Planned Walmart Plus entertainment package 

Amazon Prime Member Benefits 

  • Free 2-day shipping 
  • Early access to deals 
  • Express delivery for groceries and select goods 
  • Prime video 
  • Free video games 
  • Free access to Amazon library 
  • Ad-free Amazon Music 

Amazon Prime costs $119/year, while Walmart Plus costs $98/year. Amazon Prime has 126 million members in the US as of October 2020, so Walmart has a lot of catching up to do. 

Walmart vs Amazon – Challenges 

Counterfeit Products Plague Amazon 

Amazon has the ignominious reputation of being rife with counterfeits and unauthorized sellers. In January 2020, the United States Department of Homeland Security released a report detailing counterfeiting on the Amazon marketplace platform. The company has been slow to face the issues but has been making some strides.  

Unlike Amazon, Walmart.com is a gated marketplace, which has helped mitigate the risk of counterfeits and unauthorized sellers. 

Amazon Accused of Stealing Third-Party Data 

Another problem facing Amazon is the accusations of stealing data from businesses that use its marketplace or Amazon Web Services (AWS). Jeff Bezos, founder and CEO of Amazon, testified before United States Congress about these allegations on July 29, 2020, and Amazon provided written answers on September 4, 2020 to the committee’s follow-up questions. 

Walmart is Playing Catch Up 

Walmart Marketplace’s greatest hurdle is that it is starting so far behind Amazon in the ecommerce game. However, Walmart has an extensive infrastructure, capital, and the benefits of learning from Amazon’s successes and failures. As we touched on regarding marketing, Walmart is still well behind Amazon, but they have made admirable progress this year with the launch of Walmart Fulfillment Services and Walmart Plus.  

Walmart vs Amazon – Ecommerce Growth 

As anyone can see, there are pros and cons for both Amazon and Walmart. Amazon may be the giant in the ecommerce space, but that means they have a large target on their back. Both Amazon and Walmart have seen tremendous growth in 2020: 

Walmart Ecommerce Quarterly Net Sales Growth 

  • Q1 2020: 74% year-over-year 
  • Q2 2020: 97% year-over-year 
  • Q3 2020: 79% year-over-year 

Amazon Quarterly Net Sales Growth 

  • Q1 2020: 26% year-over-year 
  • Q2 2020: 40% year-over-year 
  • Q3 2020: 37% year-over-year 

Clearly, both companies’ offer huge growth potential. In general, we recommend prioritizing Amazon over Walmart because the sales potential is, currently, so much greater on Amazon. However, Walmart is growing rapidly, and you would be wise to try to get on Walmart sooner rather than later so you can grow with it. 

Want to learn about selling on Walmart.com? Check out our free eBook!

Download the eBook

WFS: Walmart’s Gamble to Challenge Amazon FBA


FBA Seller Reimbursement Services

Selling on Amazon offers many opportunities and is an excellent way to grow your brand. One of the most helpful tools that Amazon offers sellers is Fulfillment by Amazon (FBA)which boasts a sprawling network of Amazon-owned warehouses across the country. Sellers ship inventory to these Amazon fulfillment centers for storage and eventual fulfillment to the end consumer. Amazon’s fulfillment services are a foundational component of Amazon’s success. 

However, these fulfillment centers aren’t perfect. They regularly make mistakes that cost sellers money, and sellers must petition Amazon for reimbursement if they don’t want to eat the costs. With many sellers unaware that they need to take action, we often see significant amounts of money left on the table. 

Why Does Amazon Owe FBA Sellers Money? 

Amazon’s fulfillment centers regularly lose or damage inventory, overcharge fulfillment and storage fees, or under-reimburse sellers. To get fully reimbursed, FBA sellers have to cross reference up to 17 reports to identify and submit cases. 

Most Common Types of Mistakes in Fulfillment Centers 

There are quite a few mistakes for which Amazon may owe an FBA seller reimbursement, but two case types in particular account for the vast majority of inventory reconciliation cases: 

Inbound Discrepancy 

Inbound shipments with items that have a discrepancy between shipped and received after 15 days.   

Lost Inventory

Inventory lost minus inventory found and reimbursed. 

At Kaspien, we see these two case types account for 95% of all FBA seller reimbursement cases. Below are other types of cases that account for the minority of reimbursement cases. 

Amazon Inventory Reconciliation Case Types 

Carrier Damaged Return

Customer returns that were damaged by Amazon-partnered carrier minus reimbursed. 

Commission Discrepancy

Orders with SKUs where the charged referral fee (commission) exceeds Amazon’s estimated referral fee for the order date. 

Damaged Inventory

Inventory damaged in the warehouse. 

Destroyed Without Permission

Inventory destroyed. 

Dimension Discrepancy

ASINs with either dimensions or weight that have significantly increased compared to previous values, affecting fulfillment fee and/or monthly storage fee. 

Failed Return

A refund was issued to customer for a return, but the items returned were fewer than the number that was refunded. 

Fulfillment Center Damaged Return

Customer returns that were damaged in an Amazon fulfillment center. 

Fulfillment Fee Discrepancy

Orders with SKUs where the charged fulfillment fee exceeds Amazon’s estimated fulfillment fee for the order date. 

Missing Reimbursement

Customer return flagged as ‘reimbursed’ but the seller doesn’t see the reimbursement come through. 

Missing Return Unit

Customer return was flagged as ‘Unit returned to inventory’ but the unit was not actually returned to inventory.  

Over Refunded

Refund issued to customer exceeded the actual order total.  

Returned Inventory Discrepancy

Customer returns with units returned to inventory under a different SKU than that which was purchased. 

Under Reimbursed Failed Return

A refund was issued to customer for a return, then the customer failed to return the item, and the reimbursement was issued but the reimbursement amount is less than the refunded amount. 

Under Reimbursed Return

A refund was issued to a customer for return, the customer returned the item, and the reimbursement was issued but the reimbursement amount is less than the refunded amount. 

Unfulfillable Damaged Inventory

Damaged inventory that has been damaged for more than 20 days and is therefore unfulfillable. 

How to Get an FBA Reimbursement 

Manual Amazon FBA Reimbursement 

Due to the ambiguity of Amazon case management, managing inventory reconciliation manually is laborious and inefficient. Here’s the general process for manual case management:  

  1. Download separate business reports (in some cases, this may add up to 12 separate reports). 
  2. Cross-reference reports to identify reconciliations.  
  3. File and manage separate Amazon cases for each instance where Amazon owes you money while complying with each case’s unique allowance window.  
  4. Manual case management can take up to a month to actualize, which requires careful tracking and frequent follow-up on all submitted cases.  
  5. Review your Amazon statements to ensure you were reimbursed for the correct amount, even after the case is closed. 

As you can see, the FBA reimbursement process is arduous. In the long-term, few brands can afford to spend the time managing the manual process, but neither can they allow cash to bleed from FBA errors. 

Automated Amazon FBA Reimbursement 

Luckily, there are plenty of software solutions for this problem, including our own proprietary seller reimbursement software, Channel Auditor 

What is Channel Auditor? 

Channel Auditor is a software that helps FBA sellers mitigate fees and recover lost funds. It does so by automatically identifying cases that are eligible for reimbursement and expediting case creation. It’s your Amazon auditor that never sleeps.  

Does Channel Auditor Automate Case Creation? 

Amazon’s policies expressly forbid automating case creation in Seller Central. Those violating this policy can be fined, suspended, or banned.  

Channel Auditor does not automate case creation, but it does the next best thing. It automatically identifies cases that are eligible for reimbursement, then provides the exact text and evidence needed to petition for reimbursements. All you have to do is copy and paste, click submit, and Channel Auditor does the rest. 

How Channel Auditor Automates Amazon FBA Reimbursements

Automatic Case Identification

First, sellers connect Channel Auditor to their Seller Central account, allowing it to pull inventory reports for their channel. Channel Auditor immediately and automatically starts cross-referencing multiple reports to identify Amazon reimbursement cases. Using this information, Channel Auditor can forecast how much money a seller can be reimbursed.

Expedited Case Creation

After inventory reconciliation cases are identified, sellers select the cases they want to create from within Channel Auditor. Channel Auditor provides the exact text needed, including links to evidence that supports the claim.

Easy Case Management

From there, Channel Auditor automatically tracks case progress and notifies the seller of their results.

Channel Auditor Case Study

A brand in the Health & Personal Care category started using Channel Auditor in June 2020. In a single month, they were reimbursed over $7,000! In less than five months, they recovered over $13,000 in Amazon seller reimbursements! 

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If you’re curious how much Amazon owes you but aren’t ready to start a subscription, that’s alright. Request a quote from Channel Auditor – for free – and we can tell you exactly how much money Channel Auditor could recover for you if you used it.  

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Dropshipping Business for Amazon

Since the outbreak of COVID-19, you may have been hearing more about Amazon dropshipping, and for good reasonWhen the pandemic hit the US and shelter in place orders went into effect, several things happened in quick succession: 

  • Online purchases surged as shoppers turned to ecommerce instead of brick and mortar stores 
  • Some product categories experienced out-of-season sales peaks, resulting in out-of-stocks 
  • Amazon’s fulfillment centers buckled under the strain of new orders, and to recover their footing, they restricted inbound shipments 

As a result of the out-of-stocks, brands needed to ship more goods into Amazon’s fulfillment centers so they could resume selling to Amazon shoppers, but Amazon’s category restrictions prevented them from doing so quickly enough. 

That’s when many brands and sellers discovered the enormous benefits of Amazon dropshipping. 

What does an Amazon Dropshipping Business Look Like? 

Dropship is a selling and fulfillment model wherein a brand acts as the manufacturer, fulfillment provider, and potentially also the seller. It can be a key component in creating a dynamic fulfillment network. Let’s take a look at the most common dropship approach vs. the fulfillment by Amazon (FBA) model: 

Dropship Model 

  1. Manufacturer and seller agree to dropship together, which involves creating an EDI connection between their inventory management and warehouse systems 
  2. Seller lists product on marketplace 
  3. Shopper orders product and seller is paid 
  4. Seller places order with manufacturer and manufacturer is paid 
  5. Manufacturer ships product from their warehouse directly to the shopper 

 

Fulfillment by Amazon (FBA) Model 

  1. Manufacturer and seller agree to FBA together 
  2. Manufacturer is paid as seller places a purchase order, then manufacturer ships inventory into Amazon fulfillment center 
  3. Seller lists product on marketplace 
  4. Shopper orders product and seller is paid 
  5. Amazon fulfillment center ships the product to the shopper 

 

TL;DR: Dropship differs from FBA in two significant areas: when sellers and manufacturers are paid and who provides fulfillment services. In FBA, the seller pays the manufacturer upfront via a purchase order. FBA also requires inventory to be on-hand in the Amazon fulfillment center before consumers can buy the product. Dropship does not require this. Instead, manufacturers double as fulfillment centers. 

Pros and Cons of Dropshipping on Amazon 

Pros of Amazon Dropshipping 

1) Expand catalog selection.
Through dropship, brands can list products on Amazon for which sellers won’t place a product order. For example, if a brand wishes to offer a large product selection, but a seller cannot justify buying a large volume of product due to slow sales velocity, dropship enables sellers to still list those slow-moving products without taking on inventory risk. Then, if products perform well in dropship, they can be migrated to FBA.  

2) Easier prep requirements. 
Because inventory is not shipped into Amazon fulfillment centers, brands do not have to meet Amazon’s strict product preparation requirements. This eases the burden on brands and opens the door to sell products on Amazon that exceed Amazon’s FBA size or weight thresholds. 

3) Mitigates FBA-dependency.
As mentioned previouslydropship provides a degree of agility and resilience to a brand’s fulfillment strategy. If they have a dropship infrastructure already established, sellers can respond quickly to unexpected consumer demand since brands don’t have to send inventory to Amazon first or be limited by Amazon’s inventory restrictions. 

Cons of Amazon Dropshipping

1) Shipping speed depends on you.
Dropship sellers are not guaranteed a Prime badge or 2-day shipping on Amazon because the manufacturer is fulfilling orders. This can result in fewer sales, especially if you’re operating in a saturated category, as consumers are more likely to purchase products with 2-day shipping than products without.  

2) You handle customer service.
In dropship, brands are responsible for promptly shipping out orders, processing returns, and addressing customer inquiries. This requires committing additional resources, not the least of which are time and personnel. 

3) Requires constant maintenance.
Dropship on Amazon requires an always up-to-date connection between the manufacturer’s warehouse and the marketplace listing. If the brand is working with a seller, this means that the seller’s inventory system must be in sync with the manufacturer’s inventory system. Being in sync involves connecting technology, but also that manual inputs are being maintained. If this is not done, it can result in out-of-stocksharming sales velocity and creates a poor customer experience. 

When Should You Dropship on Amazon? 

Amazon Dropshipping is generally seen as an excellent backup to FBA because FBA offers so many benefits for brands, sellers, and consumers. However, we saw dropship become a massive asset in March 2020, when Amazon’s fulfillment centers ran out of stock of essentials. Through dropship, we were able to help our partners continue fulfilling orders even when they were restricted from replenishing inventory levels, resulting in a 3.25x increased in Amazon orders year-over-year 

In short, dropship is an excellent safety net and a great way to expand your product selection on Amazon as your grow your channel. If you’re looking for someone to help in your Amazon dropshipping efforts, check out our dropshipping services. If you’re interested in learning about other fulfillment options for ecommerce, check out our post, Walmart Fulfillment Services vs Amazon FBA.

1. Dropship Vendor (DSV): A business model where sellers list their products on Walmart.com, but hold the products in their own warehouse or a third-party logistics provider’s warehouse. Walmart appears as the seller in the listing. When a customer orders a seller’s product from Walmart.com, the seller ships it to the buyer. Walmart requires the merchandise to be shipped with a Walmart packing slip. If the customer chooses the “pick up in store” option, the seller must send the product to that Walmart retail location. As a plus, Walmart will cover the shipping cost.  
Learn More >

2. Everyday Low Price (EDLP): A pricing strategy by Walmart that promises customers that Walmart will have consistently lower prices than their competitors. Customers can access these prices without coupons, promotions, or special discounts. Everyday Low Price (EDLP) is one of Walmart’s key customer retention strategies. For sellers, this methodology ties into Walmart’s pricing parity requirement, which says that sellers must ensure that their price is the lowest price on the market or else they risk Buy Box suppression.  
Learn More > 

3. Free & Easy Returns: Walmart allows customers to exchange or return an item within 90 days after purchase. Customers can return their items in-store, by mail, or by pickup at their home. All the customer needs is a receipt. There are some, but not many, expectations to this rule. 
Learn More > 

4. NextDayDelivery: If a customer purchases a product with the NextDay delivery designation, the seller must deliver it by the end of the following day. For the customer, orders over $35 are free. Most products sold on Walmart.com are eligible for the program, but products sold by Walmart Sellers are not.  
Learn More > 

 

5. Order Defect Rate (ODR): The number of orders with a minimum one defect divided by the total number of orders (both within the same period). Defects include cancellations, returns, delivery defects, and customer complaints. Sellers must maintain an ODR of 2% or lower to meet Walmart’s performance standards. 
Learn More > 

6. Pricing Parity/Reasonable Price Not Satisfied: To ensure a great customer experience, Walmart set automated rules that eliminate non-competitive priced items from the Walmart.com marketplace. Walmart enforces this by identifying identical products on other platforms, such as Amazon, and seeing if they are listed at a lower price than listed on Walmart. The Price Parity rules unpublishes products when the offer price is higher than a competing website. The Price Parity rules are slightly different from the Reasonable Price Not Satisfied rule, which unpublishes products if the offer price is drastically higher than competing websites.   

Amazon enforces a similar price parity policy, which is one reason it’s so important to maintain consistent strategy, marketing, promotions, and pricing across all online sales channels. 

7. Referral Fees: Walmart charges a category-based referral fee ranging between 6%-20% (most common is 15%) for selling on their marketplace. 

8. Seller Center/Seller Portal: A Walmart platform,similar to Amazon’s Seller Central, used by Walmart sellers to market and sell products to Walmart customers. 

9. Seller Scorecard: The Seller Scorecard,found in Walmart Seller Center,provides an overview of how well your products are performing under the Walmart Seller Performance Standards.  

10. TwoDay Delivery: If a customer purchases an item with TwoDay delivery designation, then the seller must deliver the product by the end of the following day. For the customer, orders over $35 are free. Most products sold on Walmart.com are eligible for the program, but products sold by Walmart Sellers are not.  
Learn More > 


11. Walmart 3P Merchant: An independent company that sells products on Walmart’s online marketplace.This can be a brand selling its own products directly or a dedicated wholesale retailer selling products to consumers on a manufacturer’s behalf.  

12. Walmart Buy Box: A section on the product page near the “Add to Cart” button that shows from which seller shoppers will be buying. A seller earns sales only when they win the Buy Box. When multiple sellers are in the same listing, each will win the Buy Box for a certain percentage of time. Walmart awards the Buy Box to sellers based on product price, availability, and seller performance.  

 

13. Walmart Enhanced Content: This Walmart.com feature allows sellers to create listings with additional media, such as more images, banners, comparison charts, descriptions, interactive product tours, and videos. These features help capture shopper interest and can lead to higher conversion rates.  
Learn More >

14. Walmart Fulfillment Center: A physical location to which Walmart sellers ship inventory. Inventory is stored in and fulfilled from the fulfillment center.   

15. Walmart Fulfillment Services (WFS): A Walmart service in which third-party vendors keep their product at Walmart’s warehouses. Walmart will pick, sort, pack, ship, track, and handle product returns and refunds for a fee. 
Learn More > 

16. Walmart Marketplace: The official name of Walmart’s online platform.The Walmart Marketplace allows Walmart and approved third parties to sell goods online to Walmart customers. 
Learn More > 

17. Walmart Media Group (WMG): Walmart’s first-party media branch. Brands who sell on Walmart can work with WMG to promote their products rather than hiring a third-party seller, marketing agency, or an internal marketing team to do it for them. 
Learn More > 

18. Walmart Plus: A Walmart subscription-based service similar to Amazon Prime that gives members access to unlimited same-day delivery for eligible items, discounts at Walmart gas stations, and early access to Walmart deals. The current cost is $98/year, which is roughly $20 less than Amazon Prime.  Walmart Plus is expected to officially launch in August 2020. 
Learn More > 

19. Walmart Solution Providers: Third-party providers who offer a wide range of ecommerce services for the Walmart Marketplace. Services can include item setup, inventory, order fulfillment, pricing, marketing, and more. Walmart categorizes Walmart Solution Providers into three categories: Full-Service Solution Providers, Specialty Solution Providers, and Content Solution Providers. Kaspien is a Specialty Solution Provider. 
Learn More > 

20. Walmart Sponsored Products: Similar to Amazon Sponsored Product Ads, these cost-per-click (CPC) ads are used to promote products on com website, mobile platform, and app. 
Learn More > 

Also check out our list of 100 Terms Every Amazon Seller Should Know.

Want to learn about selling on Walmart.com? Check out our free eBook!

Download the eBook: “WFS: Walmart’s Gamble to Challenge Amazon FBA”


 

On August 4th, Amazon published a press release announcing the impending launch of Amazon Sweden. On August 11th, Amazon sent an email to sellers with more details about what to expect with the new marketplace.  

In this email to sellers, Amazon stated that Amazon Sweden will be available within EU Seller Central accounts as Seller Central Sweden. All Professional Selling fees and referrals fees will stay the same with this expansion.  

The email also outlined how products currently in Amazon’s European Seller Central will synchronize to Seller Central Sweden. Amazon has created the Build International Listings (BIL) tool to automate and accelerate this process. If a seller does not wish to have his or her listings synchronized, they must override it manually. Amazon notes that products subject to the Swedish Chemical Tax will be excluded. 

It is uncertain when Amazon Sweden will launch. In January of this year, Amazon sent a similar announcement for Amazon Netherlands, which was publicly launched in March. If Amazon maintains a similar timeline for Sweden, we could see the marketplace publicly launch in October, though an official date has not yet been released. In the meantime, Amazon asks sellers to go into their EU Seller Central account and check to ensure all of their product listings are synchronized accurately. 

If you’re interested in expanding your brand to Sweden, we can provide a full suite of Amazon services for marketing, brand protection, logistics, and more. 

Amazon’s Email Announcement to Sellers 

“Dear Selling Partner, 
 
We are pleased to announce that we have started the work to launch the Swedish Amazon.se Store, to delight local customers and give Selling Partners the opportunity to expand their European business even further.

Seller Central Sweden will soon be available to you as a seventh country option in your EU Seller account. With the same monthly Professional Selling fees and referral fees, you can access all seven European Amazon Stores.

To support you with the expansion of your business, we will synchronize your eligible product selection with your Seller Central account for Amazon.se. You will be notified via email once Seller Central Sweden is available and the synchronization is complete. You can then revise your synchronized selection.

How will we synchronize the existing product selection: 

  • We will enable the Build International Listings (BIL) tool in Seller Central, which allows us to list your eligible existing products from your Home Marketplace on Amazon.se on your behalf, to save you valuable time. You can edit the BIL connection between the Seller Central accounts of your choice afterwards at any time here by clicking “remove connection”. 
  • Please note: When the BIL tool is active, it will regularly synchronize your existing listings and prices for all linked Seller Central accounts. Please check your preferred tool settings here after the synchronization is complete.  
  • The product descriptions will automatically be translated to Swedish, using BIL’s Machine Translation functionality. 

Learn more about BIL and its functionalities here 

What product selection will be synchronized? 

  • We will synchronize your eligible selection which is currently exportable to Sweden and prices that are active on Amazon.co.uk and Amazon.de. For your self-fulfilled listings, we will synchronize your prices from your BIL source marketplace, adjusted for exchange rate* to Swedish Krona. 
  • For your Fulfilment by Amazon (FBA) Pan-European FBA (Pan-EU) listings, we will take into account:  
  • VAT differences between BIL source marketplace and Sweden. Example: If you are selling a product on Amazon.de for 10.00€, we will synchronize the product price on Amazon.se as SEK 114.5, taking the VAT differences in Germany (16%) and Sweden (25%) into account. 
  • Fulfilment fee differences between your BIL source marketplace and Sweden. 
  • You will be able to benefit from the Fulfilment by Amazon (FBA) and Pan-European FBA (Pan-EU) programs with domestic fees and offer your products to local customers. You can find the promotional fees that are valid until June 31st, 2021 here. 
     
    *The BIL tool adjusts prices periodically to reflect currency conversion fluctuations in the target marketplaces’ currencies. The frequency of these updates might vary from daily to weekly. These updates will not show changes of less than 1%.

Please note: If you are selling Consumer Electronics, we will not synchronize products that will become subject to the Swedish Chemical Tax that is expected to become effective in Sweden from 1st of October, 2020. We will provide you with more information in the upcoming weeks. Please reach out to your tax adviser for additional information.

What you need to do: 

  • In the next few weeks, we will notify you via email once the product synchronization is complete. Check here under Account Notifications, if your email address for important Technical Notifications and Business Updates is still up to date. 
  • Check your synchronized listings and prices under Manage Inventory in Seller Central.  
  • If you are already using the Build International Listings (BIL) tool, you can edit the connection between the Amazon Stores of your choice and prevent product listings from synchronizing here at any time. If you wish to opt-out from selling on Amazon.se, click here to “remove connection”. 
  • If you are not using the BIL tool yet, we will activate it on your behalf to synchronize your selection to Amazon.se. You can edit and remove the BIL connection here afterwards. 
  • Once Amazon.se launches, your listings will become available to our local customers from the start of the new Amazon Store.”

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