This morning I received an important announcement from Amazon Advantage, the program for publishers of physical media (books, DVDs, etc.) to ship physical stock to Amazon warehouses which can then be sold on Amazon’s websites and mobile apps. It’s how I supply paperback copies of Lean Media to sell on Amazon, as well as a series of popular technology cheat sheets.
First, some background. The Advantage program has been around for years, but it doesn’t have a good reputation. It’s been jokingly called “Amazon Disadvantage” in some circles for its slim margins (they demand a 55% discount off retail) and error-prone back-end interface.
Earlier this year, things took a turn for the worse. My company, i30 Media Corp., and several other small publishers experienced a major shift in Amazon Advantage purchase orders. Instead of receiving medium-sized orders several times per week to a single warehouse in Kenosha, Wisconsin (interestingly and perhaps not coincidentally, Reince Priebus’ hometown) we started receiving lots of tiny orders to more than 10 warehouses scattered across the country. Alarmed, I sent this message to Amazon on June 7:
Advantage recently changed the delivery destinations from a single warehouse (Kenosha) to multiple warehouses all over the country. Not only that, I am getting orders for a single item at a time. These are mostly low-cost items and this change has resulted in increased shipping, packaging, and time costs for me to the point where many shipments are unprofitable, even if combined. What is the reason for doing this and how can I just ship to one destination, as before?
The reply was classic Amazon “squeeze the supplier” language:
I understand that it is causing inconvenient for you to ship the units to different Fulfillment centers.
Amazon uses multiple locations for Advantage products, which helps your product reach customers more quickly.
Using multiple locations allows us to receive Advantage orders in a more timely manner and reduces the possibility that we may order an Advantage title from a distributor instead of directly from members.
This will also increase the time your title is listed with an availability of “Usually ships within 24 hours”
All of these factors combined should result in greater availability of titles for customers, faster fulfillment of retail orders, and quicker delivery of your products to the customer. This should translate into increased customer satisfaction and sales of your titles, which is good for both Amazon.com and you.
Translation: We’re shifting our costs to you, by forcing suppliers to ship directly to our warehouses across the country, instead of to a single location. It’s great for customers and great for us … and you as a small supplier will just have to eat the extra shipping and handling costs.
The part about “increased customer satisfaction and sales”? Highly unlikely, as most customers won’t notice much of a difference, and few leave reviews or re-order one-off purchases like books and CDs.
The part about this being good for my company? Laughable.
I scrambled to cut costs. The only practical way to do so: I began delaying delivery of product to Amazon to combine more tiny orders into a single shipment. This was absolutely necessary to avoid losing money on the purchase orders for a handful of cheat sheets to, say, Bakersfield, California or Middleton, Delaware. I also resolved to stop supplying certain items to Amazon after my inventory ran out, because it just wasn’t worth the time or money to supply Amazon in this manner.
A change in Amazon Advantage purchase orders after August
But I may have to rethink this, after I received the following message from Amazon Advantage this morning:
First, we are reducing our planned and reactive ordering cadences. Currently, our systems can issue orders up to six times per week (two planned, four reactive). Going forward, our systems will issue orders up to three times per week (one planned, two reactive). We anticipate this will reduce the operational complexity required on your end, and allow you to process larger order volumes across fewer shipments.
Second, we are changing the Amazon fulfillment centers to which you ship. Our fulfillment center network has expanded in recent years and this required us to rethink how we ingest Advantage inventory into the network. Going forward, you will be eligible to ship to 1-4 cross dock facilities depending on your average weekly shipment volume to Amazon. These facilities have been chosen to give your products enhanced coverage across our fulfillment center network and will help ensure customers receive your products as quickly as possible.
This is potentially big news for any publisher using Advantage to ship stock to Amazon, if it actually results in larger POs to a smaller number of fulfillment centers, which makes it easier and cheaper for suppliers. I believe “cross-dock facilities” are not warehouses but rather are transshipment centers where incoming inventory is immediately shipped out to fulfillment centers.
I’ll get a chance to test out the new system in a few weeks, and will update this post accordingly.