Amazon turns to third party sellers to extend one of the fastest shipping options – and ask them to pay for it.
The e-commerce giant is asking some sellers who use Fulfillment by Amazon (FBA) to submit bids to make their products eligible for same-day delivery, according to an email sent to sellers earlier this month.
Same-day deliveries arrive as quickly as two hours after customers place an order and are available in 2,300 metro areas, according to Amazon. Items sold through same-day delivery “received an average of 12% more sales” than items delivered through the regular FBA service, Amazon wrote in the email.
“You will only pay for units actually shipped via Sub Same Day, at the per unit price you bid,” the email reads. “Participation is optional and you will never be charged more than the unit price you set.”
The bidding system could increase what sellers pay to Amazon, people who advise sellers told Business Insider.
Under FBA, sellers already pay Amazon to store and pack their inventory. Amazon charges some fees per item, while others are a percentage of each sale.
“For the first time, merchants can choose which additional products to offer at higher speeds based on their own business expertise and customer insights,” a company spokesperson told Business Insider about the bidding system.
Amazon will evaluate bids based on factors such as customer feedback, the company said. Items sold by third-party sellers for same-day delivery include several categories, from groceries to toys.
Amazon “will continue to offer a wide variety of products from independent sellers within our Same Day network at no additional cost to sellers,” the spokesperson added.
An Amazon logistics facility in Utah Charles-McClintock Wilson/NurPhoto via Getty Images
Pay to ‘continue to play at the highest level’
Over the past year, Amazon has expanded the range of products that can be delivered within a few hours. It is also offering 30 minutes delivery in some cities for some groceries and other essential products.
To meet these types of delivery times, Amazon wants to use inventory stored in its warehouses from third-party sellers, who account for the majority of unit sales on the platform. And it’s not afraid to let sellers compete with each other.
“Amazon will prioritize in search results (or even in Alexa results) what comes up faster,” said Vanessa Hung, CEO of Online Seller Solutions, an agency that advises Amazon sellers.
“If you want to continue playing at the highest level, you have to bid for it and pay more,” she added.
FBA is still “a good deal” for fast shipping, even with the change, says Scott Needham, who has been selling on Amazon for 13 years and is the CEO and founder of SmartScout, which provides market intelligence about Amazon to sellers.
Amazon’s introduction of a bidding system makes using FBA more complicated for sellers, who now have to do the math a winning offer to ship more of their inventory with the fastest shipping option, he said.
“I would prefer if they just charged higher” for same-day shipping and invited sellers to participate rather than using an option, Needham said.
That way, he said, “there is no game theory.”
An Amazon fulfillment center near London JUSTIN TALLIS/AFP via Getty Images
For some sellers ‘this is another fee’
Sellers will likely spend more on same-day delivery even without the bidding system, Hung said.
To meet faster shipping deadlines, sellers must store their products closer to customers — a move that usually means buying more inventory and storing it in more Amazon facilities.
“It used to be that the same warehouse could serve Raleigh and Charlotte,” Hung said. “Now you have to have inventory in Raleigh and Charlotte to guarantee the 30-minute delivery time.”
Amazon says its sub-Same Day facilities stock about 100,000 products — a fraction of the millions found in the company’s traditional fulfillment centers.
Third-party sellers have pointed out the rising costs of selling on Amazon in recent years.
In April, some vendors organized a one-day event Boycott Amazon ads after the company started deducting advertising costs directly from sales revenue instead of charging them with a credit card.
Some sellers are trying to increase sales on other platforms, such as TikTok Shop, where selling costs are lower, Hung said.
For anyone looking to access the high sales volumes Amazon offers, Amazon’s request for bids is a new hurdle, she said.
“I roll my eyes and I think, OK, this is another fee,” Hung said.
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