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Amazon recently introduced its Warehousing & Distribution service that will provide third-party sellers with long-term inventory storage in Amazon distribution centers. It’s a cost-cutting solution for sellers, but there might be a catch.
What Is Amazon’s Warehousing & Distribution Service?
According to the e-commerce giant, Amazon Warehousing & Distribution (AWD) is a pay-as-you-go service that offers sellers “low-cost, long-term storage.” In essence, Amazon will store your inventory in their warehouses as they await to be delivered to fulfillment centers. In other words, it will do what your 3PL already does.
This can potentially ease supply chain issues as everything is done through Amazon. In its announcement, the company says enrollment will be easy, and inventories can be sent to Amazon distribution centers with just one click.
The service is available to FBA sellers who store and distribute their inventory within the Amazon fulfillment network. And in 2023, sellers will also be able to send their products to other locations, including brick-and-mortar stores and wholesale customers
Is There a Downside for Sellers?
The Warehousing & Distribution service seems like a win-win for both Amazon and its selling partners. However, this is another way of making sellers more dependent on Amazon’s ecosystem, a la Apple.
This has some advantages, but it does give Amazon more power over sellers and how they run their business.
For example, a long-term storage solution like this might be used to justify lower restock limits (since the company offers a place to store your products anyway). This can spell problems for fast-selling products because it may take some time to deliver from the distribution center to the fulfillment center.
This move also makes Amazon more powerful and may become another cause for stricter scrutiny by the FTC.
A Solution for Its Warehousing Problems?
Amazon doubled down on its logistics network during the pandemic, but it had to cancel, close, or sublease some of its warehouses this year because of e-commerce slowdowns. The launch of this new service is a creative way of utilizing these warehouses while providing sellers with (hopefully) cheaper storage.
If this service becomes successful, we’ll be seeing more Amazon facilities around the globe that will cater to sellers’ storage needs.
What Does This Mean for Other 3PLs?
With the launch of the Warehousing & Distribution Service, Amazon third-party sellers can manage their inventory using Amazon services almost exclusively. Imagine this service coupled with Amazon Global Logistics and FBA. Your products from China can be shipped to the US and stored directly at an Amazon facility, which streamlines its shipment to a fulfillment center when your restock limits allow.
This service may weaken FBA sellers’ needs for other 3PLs, especially if Amazon offers cheaper storage. The effects of going back to normal after the pandemic have already slowed down ecommerce-related businesses—including Amazon.
Last week, ShipBob, one of the most popular 3PLs in the United States for e-commerce sellers, announced that it would lay off 7% of its employees following a decline in online shopping. This comes only a year after it raised $200 million in a Series E round.
The Amazon Warehousing & Distribution service is good news for third-party sellers (not so much for other 3PLs). It’s a convenient cost-cutting feature that can potentially ease supply chain problems.
You can read the full announcement here.