Amazon is flexing its muscles to push merchants onto its platform to use its logistics services.
This week online merchants selling via Amazon, and which are on the Seller Fulfilled Programme (SFP), received an e-mail telling them to up their delivery performance or “suffer the consequences”.
Lamenting a poor delivery performance record, the e-commerce behemoth wants them to offer deliveries on Saturdays and live up to next-day and second-day delivery pledges.
Amazon told them: “We know that, as a seller enrolled in SFP, you work hard to provide customers with a delightful shopping experience. Despite these good intentions, before Covid-19, fewer than 16% of SFP orders in the US met the Prime Two-Day delivery promise customers expect – in large part because many sellers do not operate on weekends.”
The new requirements will apply from February, but this month Amazon is launching a new dashboard that enables sellers to track their performance for one- and two-day deliveries.
Chase Flashman, co-founder and CEO of transport consultancy ShipSights, said more than 60% of the purchases on the Amazon platform involved third-party vendors. Those enrolled in the SFP scheme are in a position to ship out their merchandise faster than other sellers on the platform.
However, the largest benefit for them, which Amazon’s threat puts into jeopardy, is a high listing in the search algorithm on the platform.
So far, vendors have not faced repercussions if they failed to meet Prime delivery window targets, but now Amazon is threatening that they could lose their Prime status, which would push them way down the list, undermining their chances of selling.
“If Amazon takes away their Prime badge, that’s a major impact,” Mr Flashman said.
To maintain their status, SFP participants will have to use a premium delivery service, or Amazon’s proprietary fulfilment arm, he noted.
Observers reckon the move primarily serves to bring up Amazon’s overall delivery record as it faces strong competition from the likes of Walmart and Target. Both of these large retailers reported large increases in their same-day services in the third quarter.
Still, Amazon also stands to gain a considerable increase in revenues from its fulfilment activities as a result. Income from its third-party seller services (which include logistics) reached $18.2bn in the second quarter, a rise of 52% on a year earlier.
According to data from ShipMatrix, Amazon delivered two-thirds of its US parcel volume through its own operation last month, up almost 12% from July 2019.
And its management is looking to grow this: in June, it embarked on a drive to recruit small operators to build up its delivery network and is inviting entrepreneurs to form small delivery companies to cover final-mile transport.
Observers have pointed out that Amazon’s latest pressure on merchants which participate in SFP may have antitrust implications. Already, before this move, there have been accusations from online sellers that Amazon leverages its marketplace to force them to use its fulfilment services.
“There are antitrust issues there. There is some validity to the concern,” said Mr Flashman.
Besides the strongarm tactics, he adds, the timing of the new Amazon policy is raising eyebrows, coming as all e-commerce providers are struggling to meet regular delivery windows and have suspended service guarantees.
“Amazon is having an issue with this itself,” Mr Flashman noted, and he questioned: “How well will they be able to handle the additional volume if sellers hand over their fulfilment?”