Danger Ahead for Amazon Sellers Hawking Long-Tail Products

By Joe Waynick
June 3, 2016

Is Amazon planning more draconian changes for FBA sellers?

Since 2010 Amazon has unleashed a barrage of policy changes that have had devastating consequences for small sellers on its platform.

It started with long-term storage fees, where Amazon imposed massive fee increases to sellers who maintain more than one SKU of a single ASIN for more than one year in their warehouse.

Simultaneously, Amazon drastically increased its FBA selling fees. For example, the pick and pack fee was increased from $.50 to one dollar — overnight!

Then inventory placement was implemented shortly thereafter. In the "good old days", FBA inventory was directed to an Amazon distribution center that was geographically close to the seller as the primary criteria.

The Winds of Change Are Blowing

Everything changed in 2011 when Amazon started directing inventory to distribution centers based on their own internal criteria. Suddenly, instead of paying an economical $150 to ship a pallet of books into an Amazon distribution center, sellers are now faced with shipping that same pallet across the country at $750 a pop.

That policy shift effectively put an end to selling penny books for $4 as FBA listings. Sellers who continue the practice either have massive volume and can ship inventory from their own distribution centers into an Amazon center at drastically reduced rates, or they are losing money on each sale and use penny books as a loss leader.

There's no point in delving into the economics of past business models involving penny books. Those models don't work anymore.

Where we need to focus our attention is on the economic business models in use today, and how coming policy changes will affect the way we all do business on the world's largest eCommerce platform.

Small FBA Sellers Seem to Be Targeted

Each year tighter controls are implemented on Amazon sellers, especially FBA sellers.

Simply getting inventory into a distribution center is far more complex than it was just five years ago. Sellers used to be able to include up to 1,500 SKUs and a single shipment. Now it you can only include 250 SKUs at a time.

To make things even more complicated, as you process your shipment Amazon requires you to correct item dimension errors in their catalog without compensation.

I completely understand the need for accuracy in the Amazon catalog. But to force sellers to maintain the accuracy of the catalog as a right of passage to listing the items on the website seems a bit draconian to me.

And the latest policy change is the scariest of all because they are now doubling down on long-term storage fees by flagging your listings with the warning that the item you're listing is a slow seller and may be subject to long-term storage fees.

Is The Game Changing Yet Again?

Let's be honest. Changing market conditions force every company to ajust their business practices, policies, and even economic models to stay alive. As much as many may like to believe to the contrary, Amazon is no exception.

The truth be told, Amazon must adapt to the constantly shifting global economy in which it operates or it will not survive. That means we must also adapt or we won't survive either.

Therefore, FBA sellers must ask themselves, ' What are the implications of this new obstacle in listing FBA inventory?'

The current policy says sellers can have a single copy of each ASIN in the distribution center without incurring any long-term storage fees.

The new warning messages in the shipment creation process seem to indicate that the single copy per ASIN policy may be changing in favor of high turnover inventory.

Are the days of building a large long-tail backlist of titles and storing them in an Amazon distribution center numbered? Many large sellers list items with very long tails, especially books, at highly subsidized storage fee rates as FBA items. Those sellers give them a premium price knowing that there's a high probability that the item will eventually sell.

Who can blame them? When monthly storage fees average $0.015 per ASIN, it pays to keep a single copy of everything you find that fetches a $10 profit or more sometime in the future.

However, it appears that Amazon is putting an end to that practice too. Sellers who profit from long-tail merchandise had better make sure that they have sufficient margins to absorb draconian fee increases or else they ignore Amazon's warning signs at their own peril.

Are the Days of Long-Tail Products Numbered?

It seems to me that Amazon is determined to force sellers into only shipping high turnover merchandise into their distribution centers. No more will they tolerate long-tail merchandise without the seller paying a hefty premium. Maybe they don't even want long-tail inventory at all.

What do you think? Do you agree with me that the days of the long-tail seller may be numbered? Your feedback and perspective would be greatly appreciated.

Good hunting.

Joe Waynick is author of several eCommerce books covering the bookselling and publishing industry. His books are available on Amazon.com.You can also follow him on Twitter @JoeWaynick.

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