Ever since the inception of the Prime membership program, Amazon has given preference to items shipped using its own fulfillment system. But its warehouses and logistics systems continue to strain under the heightened demand for online shopping, resulting in significantly delayed shipments for most non-essential items.
Up until Friday last week, Amazon was still giving “Buy Box” preference to offers that were fulfilled by Amazon’s own logistics network, even if the shipping time was considerably longer (delays were reported of up to a month) and the price was more expensive. In a welcome change, and for the first time known to most in the industry, Amazon’s Buy Box algorithm appears to now give preference to offers from merchants who expect to be able to fulfill the order faster.
22 January 2020, Saxony, Lampertswalde: An Amazon sorting employee is working on a laptop in a ... [+]
Instead of an item being processed from Amazon’s facilities with a much longer shipping time, merchants can ship an order from their own facility, potentially with a faster delivery date. Shoppers, who are used to checking out with the default option that Amazon serves up in the Buy Box (which was previously heavily weighted toward Prime-eligible, Amazon-fulfilled options), will now see faster shipping options from 3rd party merchants.
Amazon is struggling under the weight of demand for their fulfillment network and has enacted various measures to cope. First, the company barred inbound shipments of ‘non-essential’ categories. But it was unclear why some products within essential categories were able to be shipped in to Amazon from merchants, versus others that continued to be suppressed. Amazon has also paused a long list of other promotional and merchandising programs to free up warehouse capacity.
Amazon’s warehouse workforce is under pressure and considered at the front lines of the COVID-19 pandemic. While the company grapples with worker strikes and recruiting more workers to satisfy demand, this change will allow customers to receive items faster, and reduce pressure on Amazon’s fulfillment network. It also provides merchants with the ability to stabilize revenues that were impacted by the delays. Some brands saw conversion rates drop on items with extended delivery times. It also impacts cash flow, since Amazon only pays a merchant for a sale after when the order ships.
But there is some risk involved in the move as Amazon relinquishes control of the delivery experience. It’s relatively easy for an individual or entity to start selling on Amazon and shipping their own inventory, which leaves the door open for “gray-market” sellers. And for merchants, fulfilling their own orders generally means a significant amount of extra work - both processing orders and dealing with customer service inquiries related to delivery and returns. There’s no indication yet of how long Amazon will keep this policy in place either - making a switch to this model a potentially expensive fix for merchants. Finally, shoppers have also been ‘trained’ to trust Prime-eligible items more than merchant-fulfilled items, so conversion rates on these products might still be lower than usual.
It’s not a perfect solution, but in these challenging times it will offer shoppers, merchants, and Amazon themselves much more flexibility.
