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Warehouse worker places a cardboard parcel into a yellow sorting rack filled with mail and packages.

Amazon is asking some of its third-party sellers to bid for access to one of its fastest shipping options. Watchara Phomicinda/MediaNews Group/The Press-Enterprise via Getty Images

Amazon is turning to third-party sellers to expand one of its fastest shipping options — and asking them to pay up for it.

The e-commerce giant is asking some sellers who use Fulfillment by Amazon, or FBA, to submit bids to make their products eligible for "sub-Same Day" delivery, according to an email sent to sellers earlier this month.

Sub-Same Day deliveries arrive as soon as two hours after customers place an order and are available in 2,300 metro areas, according to Amazon. Items sold through sub-Same Day delivery "have experienced 12% higher sales on average" than those delivered through regular FBA service, Amazon wrote in the email.

"You pay only for units that actually ship through Sub Same Day, at the per-unit price you bid," the email reads. "Participation is optional, and you're never charged more than the price per unit you set."

The bid 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 on a per-item basis, while others are a percentage of each sale.

"For the first time, sellers can choose which additional products to offer at faster speeds based on their own business expertise and customer insights," a company spokesperson told Business Insider about the bidding system.

Amazon will evaluate bids using factors such as customer feedback, the company said. Items sold by third-party sellers for sub-Same Day delivery span several categories, from groceries to toys.

Amazon "will continue to place a wide variety of products from independent sellers throughout our Same Day network at no additional cost to sellers," the spokesperson added.

A delivery van outside of a large Amazon logistics facility with an Amazon logo on it in Utah

An Amazon logistics facility in Utah  Charles-McClintock Wilson/NurPhoto via Getty Images

Paying to 'keep playing at the highest level'

Amazon has expanded the range of products available for delivery in as little as a few hours over the past year. It's also offering 30-minute delivery in some cities for some groceries and other essential products.

To meet those kinds 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 make sellers compete against each other.

"Amazon will prioritize in search results — or even in Alexa results —whatever gets there faster," Vanessa Hung, CEO of Online Seller Solutions, an agency that advises Amazon sellers.

"If you want to keep playing at the highest level, you need to bid for that and pay more," she added.

FBA is still "a good deal" for fast shipping even with the change, said Scott Needham, who has sold 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 bid system makes using FBA more complicated for sellers, who now have to calculate a winning offer to ship more of their inventory with the fastest shipping option, he said.

"I would rather that they just have an elevated cost" for sub-Same Day shipping and invite sellers to participate instead of using an option, Needham said.

That way, he said, "there's no game theory."

A worker with a hand operated forklift in an Amazon fulfillment center near London

An Amazon fulfillment center near London  JUSTIN TALLIS / AFP via Getty Images

For some sellers, 'this is another fee'

Sellers are likely to spend more on sub-Same Day delivery even without the bidding system, Hung said.

To meet faster shipping deadlines, sellers have to warehouse their products closer to customers — a move that usually means buying more inventory and keeping it in more Amazon facilities.

"Before, the same warehouse could serve Raleigh and Charlotte," Hung said. "Now, you need to have inventory in Raleigh and in Charlotte in order to have the 30-minute delivery window."

Amazon says that its sub-Same Day facilities stock about 100,000 products — a fraction of the millions found at the company's traditional fulfillment centers.

Third-party sellers have pointed to the rising costs of selling on Amazon over the last few years.

In April, some sellers staged a one-day Amazon ads boycott after the company began deducting ad costs directly from sales proceeds instead of letting them pay by 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 who wants to access the high sales volumes that Amazon provides, though, Amazon's request for bids is a new hurdle, she said.

"I roll my eyes, and I'm like, okay, this is another fee," Hung said.

Do you have a story idea about Amazon's shipping or third-party sellers? Contact this reporter at abitter@businessinsider.com or via encrypted messaging app Signal at 808-854-4501. Use a personal email address, a nonwork WiFi network, and a nonwork device; here's our guide to sharing information securely.

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Alex Bitter is a senior retail reporter covering the gig economy, food, and retail. His work focuses major gig delivery and ride-hailing apps, including Uber, Lyft, DoorDash, Instacart, and Walmart's Spark. He is interested in everything from what it's like to work on the apps to the companies' business strategies.Some of his recent stories feature gig workers who have been deactivated on the apps, DoorDash hiring traditional employees to make deliveries, gig workers' use of bots, and gig work expanding into new professions, such as nursing.Alex has also written about Aldi's US expansionStarbucks' turnaround efforts, and the fallout from Kraft-Heinz's budget cutting. Convenience store chain Sheetz ended its "smile policy" after his reporting.Before joining Insider in September 2020, he wrote about consumer and retail companies for S&P Global Market Intelligence. He's a graduate of the University of Hawai'i at Mānoa and grew up on the Big Island.Alex lives in the Washington, DC, area, where you can find him studying ancient coins or searching for Civil War artifacts with his metal detector in his free time.Got a tip? Reach out at abitter@businessinsider.com or via encrypted messaging app Signal at +1 (808) 854-4501.

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