Why is Amazon paying full-price for third-party inventory?
Apparently sacrificing margin aspirations, Amazon.com is reportedly paying full price to third-party sellers to expand its inventory.
According to a CNBC report, Amazon has reached out to thousands of third-party sellers participating in its Fulfillment by Amazon (FBA) program to purchase their inventory at regular price. Under the fast-expanding FBA program, third-party sellers pay a fee to have their inventory stored and shipped by Amazon.
“For a limited time, there will be no additional fees, and we will purchase inventory from you at your local marketplace offer price,” Amazon stated in its e-mail to third-party sellers.
A spokesperson told CNBC, “When items are unavailable in a particular geography, we provide customers with selection from another marketplace. This offers customers a wider selection of great brands and helps sellers increase sales.”
Amazon last November rolled out a similar program called “Simplify Global Selling” in Europe.
Some reports noted that although Amazon may make no margin on the sale, it is earning a fee from the sellers in its FBA program and may make some money on shipping. Writing for Ars Technica, Valentina Palladino said gaining larger inventory access helps Amazon ship more efficiently. She wrote, “Even if Amazon doesn’t make a ton of money from sales coming from this program, easier shipping processes lead to faster shipping and delivery schedules, which keep customers happy and shopping on Amazon.”
The program may also provide access to brands that refuse to sell on Amazon’s platform. Many retailers of Birkenstock who are not authorized to resell on Amazon received the e-mail and the comfy shoe leader has vowed to crack down on any resultant unauthorized sales.
- Amazon is buying products from some US retailers at full price to build global inventory – CNBC
- Amazon will pay full price to US retailers to boost its inventory – Ars Technica
- Amazon Snatches Up U.S. Marketplaces For Global Domination – Pymnts
- Amazon keeps popular items stocked by buying from other retailers – Engadget
- Amazon want to buy from US Merchants to resell their stock overseas – Tamebay
DISCUSSION QUESTIONS: Do you see Amazon’s third-party seller purchases as a short- or long-term solution to managing inventory shortages? Is it a “win-win” for Amazon and its third-party sellers?