Amazon makes it harder for sellers to handle own shipment

Seattle

AMAZON.COM Inc plans to make it harder for merchants to ship products themselves, meaning they'll be more likely to pay the company to handle the task.

New shipping performance requirements, announced in an email to merchants on Tuesday, will require third-party sellers to make deliveries on Saturdays and meet new one- and two-day delivery pledges starting in February. If the merchants fail to meet the targets, they risk losing a coveted Prime fast-shipping badge that influences which products shoppers buy.

The move has potential antitrust implications because merchants could be forced to raise product prices if using Amazon logistics costs more than paying United Parcel Service Inc, FedEx Corp or the US Postal Service.

Amazon introduced Seller Fulfilled Prime five years ago to help expand the number of products shipped quickly by letting some merchants handle the delivery themselves. The aim was to ease bottlenecks in Amazon warehouses since products would go directly from sellers to Prime subscribers, who pay monthly or yearly fees for delivery discounts and other perks - and typically spend more than other Amazon shoppers.

Now Amazon says the programme's performance is abysmal and is raising standards as part of an effort to reduce delivery times for many products from two days to one. Before the Covid-19 outbreak, fewer than 16 per cent of Amazon orders shipped through Seller Fulfilled Prime in the US met a two-day delivery promise, largely because participants couldn't make weekend deliveries, Amazon said.

"Amazon is making significant investments in our fulfilment and transportation capabilities to make Prime faster, transitioning from a Two-Day to a One-Day delivery program," the email said.

"As we continue to improve the Amazon Prime experience for customers, we want to ensure Seller Fulfilled Prime meets customers' expectations of Prime."

By raising performance metrics that Amazon itself adjudicates, the company will entice more merchants to pay Amazon for logistics rather than competing services, said Shaoul Sussman, a legal fellow at the Institute for Local Self-Reliance, a frequent Amazon critic.

"Amazon is holding these sellers to a very high standard that Amazon itself doesn't even follow," he said.

"It looks like the decision is to kill this programme. The way to kill it is with very high cost of operating and forcing those who want to do their own delivery into Fulfillment By Amazon."

In a letter to federal lawmakers last year, an online merchant accused Amazon of forcing him and other sellers to use the company's expensive logistics services, which in turn forces them to raise prices for consumers.

The letter also accused Amazon of "tying" its marketplace and logistics services together, a potential antitrust violation in which a company uses dominance in one market to give itself an advantage in another market where it's less established.

Sellers said that delivering products on their own was potentially less expensive than Amazon's services. But most used Fulfillment By Amazon anyway to avoid being punished for performance issues and because doing so meant their products had more visibility on the site. In the letter, the merchant said Amazon had raised its fees by 20 per cent over the preceding four years until they were 35 per cent more than competing services. Amazon disputed the allegations.

"As we move towards One Day Delivery, we are making changes to Seller Fulfilled Prime to provide customers with fast, consistent delivery, regardless of the fulfilment method," an Amazon spokeswoman said. "We are informing selling partners now so they have time to adjust their business and have set up a dedicated support team to guide them through these adjustments and help them succeed." BLOOMBERG