Amazon FBA Holiday Prep: What You Need to Know

E-Commerce|Blogs
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Amazon FBA Prep

When the holiday season begins, consumers flock to one of the biggest marketplaces in the world. Amazon is an easy, convenient place to find suitable gifts for the whole family, leverage holiday deals, and access reliable fast shipping. According to Jungle Scout, over two-thirds of U.S. consumers (67%) bought holiday gifts on Amazon during the 2022 holiday season alone.

So, it's not surprising that selling on Amazon is the key to a successful holiday season for many e-commerce brands. Amazon allows you to expand your reach and give you more exposure to potential customers. It's also a significant value-add to your e-commerce fulfillment strategy – if you know how to manage Amazon FBA effectively during peak season.

When sales volumes ramp up and FBA services are under heavy demand, there are several things that brands need to keep top of mind to ensure they don't jeopardize holiday selling.

In this blog, we're going to cover how to prepare for using Amazon FBA as a fulfillment method during the holiday season – and how to avoid the sting of processing delays and extra fees!

What is Amazon FBA?

Fulfilled By Amazon, also known as FBA, is an e-commerce fulfillment service operated by Amazon. It allows Amazon sellers to take advantage of the e-commerce giant's nationwide fulfillment and storage network. Amazon sellers will prep and ship their inventory to Amazon fulfillment centers for storage. When a customer places an order, Amazon is responsible for picking, packing, and shipping that order, as well as handling any potential returns or exchanges.

To be eligible for Amazon FBA, a business must have active Amazon listings and comply with all product and inventory restrictions on the platform. The Amazon FBA service can only be used to fulfill orders placed on Amazon. To fulfill orders placed in other sales channels, you'll have to sign up for Amazon's companion fulfillment service, Amazon Multi-Channel Fulfillment (MCF).

The benefits of Amazon FBA during the holiday shopping season

A great addition to your hybrid fulfillment strategy

It's not a good idea to put all your eggs in one basket when investing - or fulfilling customer orders. Hybrid fulfillment, where businesses use more than one fulfillment method to fulfill and ship orders to customers, has become increasingly common as brands expand their sales channels beyond e-commerce or wholesale. By spreading the load between different providers or channels, the fulfillment process is more resilient to disruption.

As brands look to invest in more sales and fulfillment channels, Amazon FBA has emerged as a compelling option for e-commerce sellers during the holiday season. It allows brands to outsource fulfillment while still maintaining direct control over product listings and promotions, helping to maximize sales during a critical period for revenue generation.

Meet customer expectations for fast shipping

FBA become a popular fulfillment option because Amazon's massive logistics network can support customer expectations for rapid delivery timeframes.

Many brands struggle to achieve fast shipping via in-house fulfillment, as their order volume is too small to qualify for wholesale shipping rates with major carriers.

In addition to having a large network of delivery partners, Amazon has also launched its very own ground shipping offering as a separate service. At a time of year when speed is of the essence - especially for those last-minute gift purchases - using FBA during the holiday season can make your business much more appealing to potential customers.

Increased visibility to potential buyers

As one of the world's largest retailers, Amazon draws millions of consumers to its platform every year in search of convenience and good deals. Having a regular presence as an Amazon seller - even for just a small selection of popular SKUs - gives e-commerce brands a huge boost in exposure to potential customers.

During the holiday season, brands can leverage unique aspects of the platform to get in front of shoppers with specific needs. Conducting keyword research to find the right season-specific keywords to add to your product descriptions makes it easier to make your brand visible to the right audience.

7 Steps for effective Amazon FBA holiday prep

While Amazon FBA offers e-commerce merchants a lot of advantages, there are several things that merchants will need to keep in mind if they plan on using FBA during the holiday season.

Because November and December are peak selling months for the platform, Amazon FBA has some different conditions in place compared with the rest of the year. Unless brands can do their due diligence ahead of time, it's easy to get caught out and end up spending unnecessary time and money on order fulfillment.

1. Save the dates!

There are some key dates that Amazon sellers need to take note of to ensure they have enough inventory in their Amazon fulfillment center in time for the holiday season. Otherwise, you may not have enough inventory to meet peak season demand.

Amazon sales typically peak around key holiday sales events, when exclusive discounts can be found. This includes the BFCM weekend as well as Amazon Prime days. For this reason, Amazon has a list of dates that FBA inventory must be received to ensure it can be processed in time for these events.

The Amazon FBA holiday calendar for 2023 is as follows:

Prime Fall Deal event: September 12, 2023

Black Friday and Cyber Monday: October 26, 2023

Christmas: December 1, 2023

Note that these dates are subject to change, so keep checking Amazon Seller Central to know when you should start preparing your inventory.

2. Take account of Amazon FBA holiday fees

It's commonplace for 3PLs and shipping carriers to rely on peak season surcharges to manage increased demand during the holiday rush.

These temporary rate hikes are designed to cover higher operational costs during the holidays and can apply to everything from additional handling to oversized packages and residential delivery. Most demand surcharges are in place from November to late December, though this will depend on the carrier and the type of surcharge.

Some Amazon sellers using FBA might not be aware of peak season surcharges, as the e-commerce giant hasn't traditionally used fees to manage increased costs during the holidays. This changed in 2022 when Amazon decided to add a peak season fulfillment fee for services rendered during the holiday season. Amazon has blamed inflation for making it impossible to continue absorbing these cost increases.

Amazon peak fulfillment fees are in effect from October 15th, 2023, to January 14th, 2024. These fees are determined by the greater unit weight or dimensional weight, and equate to roughly $0.20 extra per item. For detailed information on peak fulfillment fees, check the US FBA fulfillment fee change guide.

While an extra $0.20 may not sound like a lot, these additional costs quickly add up for sellers who are processing huge order volumes through Amazon FBA. Many sellers will need to factor these additional fees into what they are charging their customers for shipping, especially for expedited services.

3. Improve your IPI score

Space already comes at a premium in Amazon fulfillment centers, but this increases further during the holiday season. Amazon sellers should start preparing for the holidays by making sure that any SKUs they're storing at an Amazon facility are likely to experience good demand. Otherwise, you're paying additional fees to store inventory which is not contributing to sales volumes.

Excess inventory is extremely costly during any time of the year, but especially during Q4. FBA sellers are penalized for excess inventory because it causes Amazon to tie up valuable storage space. Amazon uses what it calls an Inventory Performance Index (IPI) to measure the efficiency of inventory management among sellers and to allocate space. This takes into account several factors, including:

  • Excess inventory percentage
  • Sell-through rate
  • Stranded inventory percentage
  • In-stock levels of popular items

Similarly to a credit score, an IPI score affects Amazon sellers' storage limitations. A score below 350 could mean Amazon restricting your storage capacity, which could cause you to miss out on valuable sales opportunities. Moreover, costly long-term storage fees kick in once SKUs have been stored for a year or more. This equates to $6.90 per cubic foot of storage or $0.15 per product (whichever is greater).

Amazon sellers can improve their IPI by doing the following:

  • Increasing your sell-through rate
  • Replacing slow-moving SKUs with more popular inventory according to sales data
  • Avoiding overstocking inventory
  • Making sure in-demand items don't run out

All of these activities help you to achieve a good IPI score, which lowers storage fees and may even see you awarded additional storage space ahead of the holiday shopping season.

4. Assess your restock limit

During the holiday season, Amazon implements what is known as restock limits, which restrict how much inventory sellers are allowed to store within fulfillment centers at one time.

The size of your restock limit will depend on your IPI score and how well your Amazon business is managing its inventory. Storage space is allocated according to how successful you are in securing sales and minimizing excess or slow-moving inventory. The bigger your order volumes and the higher your inventory turnover, the higher your restock limits will be.

Restock limits are something of a catch-22 for brands. An Amazon business wants to sell products as frequently as possible during the holidays, but they may be constrained by not having enough inventory on hand to meet demand. According to some reports, some sellers can face as much as a 40-60% drop in storage capacity during the holidays – right when they need it most.

There are several ways that sellers can deal with this problem. Shipping small replenishment orders more frequently, for example, will help you stay within restock limits while having enough stock to serve more customers. You can also partner with a 3PL provider who can store your overflow inventory until it's ready to be shipped to an Amazon warehouse.

5. Review your pricing strategy

Amazon is a cut-throat platform on which to attract customers. In such a saturated marketplace, there's always another brand ready to undercut competitors - especially during the holiday season.

But with millions of product listings on-site, it's virtually impossible to keep track of how your pricing strategy compares with other sellers, especially if you're selling hundreds of items.

Fortunately, Amazon offers a pricing automation tool that can automatically adjust your listed price based on what your competitors are asking for the same or a similar product. As well as keeping your pricing competitive, this increases the odds of your product becoming a Featured Offer, which is a great way to boost sales.

While automated pricing helps to save valuable time managing product listings during the holidays, you need to calculate appropriate pricing rules to avoid making a loss on sales.

6. Be prepared to enforce Amazon's holiday returns policy

It's sensible for e-commerce businesses to adjust their return policy during the holiday season to accommodate gift-buying behaviors. Brands experience more sales during peak season, which also means higher return rates post-holiday when consumers return or exchange gifts in favor of other items.

Lengthening your return window during holiday sales not only gives shoppers more flexibility, but also helps Amazon sellers to spread returns over a longer period to avoid processing delays.

One of the conditions of being an Amazon seller is that you must enforce the platform's return policy on Amazon sales – even if it may differ from what you offer on other sales channels. According to Amazon's return guide, products purchased between November 1 and December 31, 2023, can be returned until January 31, 2024.

Naturally, a generous holiday returns policy will result in more returns overall for Amazon sellers to process. Since there is no opt-out, brands using FBA will need to make sure they have all their ducks in a row to manage returns effectively.

7. Consider outsourcing to a 3PL to manage your Amazon inventory

In addition to peak fulfillment fees and tough restock limits during the holiday season, Amazon FBA has precise requirements for packaging and labeling products stored in its fulfillment centers. Struggles with Amazon inventory management can result in unnecessary stockouts and missed sales opportunities, which in turn could hurt the reputation of your Amazon business.

This is where onboarding a 3PL partner like Ryder to manage your Amazon inventory is invaluable to streamline your operation and stay on top of changing storage requirements. During the holidays, outsourcing inventory management and shipping saves precious time and allows you to better focus on your other selling channels.

While Amazon FBA can be a highly convenient e-commerce fulfillment option for Amazon sellers, it's important to be aware that FBA does come with strings attached during the holiday season that can make order fulfillment and storage challenging and expensive. By preparing early for the demands of Amazon and outsourcing to a 3PL for some extra support, you can ensure that this 2023 Amazon holiday season is a successful one.

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