Recently, the news of Amazon's sudden drop in storage capacity has quickly spread in the cross-border e-commerce circle. Many sellers' storage capacity has been reduced, and sellers on the forum are showing the appearance of all beings.

"The capacity of the warehouse has been reduced by 2/3 overnight, and the inventory of 20,000 remains less than 10,000."

"What is Amazon doing?"

"What's the big deal with Amazon?"

Recently, this topic on the cross-border e-commerce forum quickly broke the circle and became popular.

1. 95% of sellers are affected by Amazon's storage capacity restrictions?

The owner who posted the post said that his Amazon US site storage capacity has decreased by 2/3 overnight, and the original 20,000 inventory is now less than 10,000, and he also received a replenishment limit adjustment notice on the inventory performance page. The original text is as follows:

“We are preparing for the busy holiday season. During this process, we want to ensure timely receipt, storage and delivery of items for all sellers using FBA. As a result, we will be adjusting restocking limits for standard and apparel storage types to allow All sellers can store at least four months’ worth of inventory in FBA. After the restocking restrictions are updated, about 5% of FBA sellers will be temporarily unable to restock more items because their inventory levels are already high. For more information, see Replenishment Limits by Storage Type: Frequently Asked Questions."

The notice of the adjustment of the replenishment limit shows that about 5% of FBA sellers are affected, but in the comment area, some sellers have spoken or told the truth. The seller said that 95% of the sellers are mentioned in the notice. The 5%, in other words, the adjustment of the replenishment limit will affect not only 5% of sellers, but may be as high as 95%.

From the comments of many sellers in the comment area, we can also know that many sellers are affected by replenishment restrictions. Some sellers said that there are only 10,000 left in 40,000 stocks; some 20,000 become 10,000; some are It was cut by 60%; what's more, the storage capacity was directly compressed to almost no more.

2. The adjustment of Amazon's replenishment limit is early in sight

Looking at the essence through the phenomenon, Amazon’s adjustment of the replenishment limit this time is actually early signs.

1. Amazon slows down warehouse expansion According to data, as of early August, Amazon has canceled, closed, sublet or shelved more than 25 warehouses and distribution centers across the United States, and delayed the construction of 15 logistics facilities scattered across the United States. Multiple warehouses are affected. The slowdown in Amazon’s warehouse expansion is closely related to the cooling of consumption. During the epidemic, the number of online consumers in the United States surged. The short-term prosperity drove Amazon to continuously build new warehouses to meet the needs of commodity distribution. Its logistics and warehousing capacity has almost doubled in two years. Fan, when the dividend of the epidemic disappeared, and the inflation rate in the United States remained high this year, consumption dropped sharply, which immediately exposed the problem of overcapacity in warehouses.

Huge logistics and warehousing spending has overwhelmed Amazon, and Amazon CFO Brian Olsavsky said in announcing its first-quarter 2022 earnings report that the company was building more distribution infrastructure without taking into account the potential volatility in demand prospects, leading to the first quarter The company's operating costs increased by $6 billion. In the first quarter, Amazon lost $3.8 billion, and in the second quarter, Amazon's net loss was as high as $2 billion. Amazon has slowed its operational expansion plans for 2022-2023, Amazon's CFO said on its second-quarter earnings call. 40% of capital investment in 2022 is expected to be in warehouse or transportation capacity, down from 55% in 2021. It can be seen that it is not surprising that the seller's storage capacity has been reduced.

2. The wave of layoffs leads to a shortage of manpower. As mentioned above, the huge logistics and warehousing expenses have overwhelmed Amazon. On the one hand, Amazon has slowed down the expansion of warehouses, and on the other hand, it has also started layoffs. At the beginning of August this year, Amazon disclosed that the first and second In the quarter, nearly 100,000 employees were laid off directly by the company, most of whom were employees in warehouses and distribution centers. As of the end of the second quarter, the number of Amazon employees had dropped by 6%. The current Amazon warehouse staff is insufficient, and the sellers begin to Actively stocking up for the upcoming peak season, Amazon has to limit sellers' inventory.

3. Amazon shifts its focus Although Amazon also posted a net loss of $2 billion in the second quarter, AWS grew. According to the financial report data, AWS revenue increased by 33% year-on-year to $19.739 billion, accounting for 16% of total revenue from 13% in the same period last year, and operating profit reached $5.715 billion. It is not difficult to predict that AWS, as the core of Amazon's profit, will surely receive more attention and inclination in the future. Amazon has also said internally that it will shift the focus of spending over the next year to AWS' technology infrastructure rather than e-commerce logistics.

4. The non-rigid demand has dropped under inflation. I wonder if you have noticed that in the notice of adjustment of the replenishment limit issued by the landlord, there is such a sentence – "We will adjust the replenishment limit of the standard and clothing storage type", and also That is to say, Amazon's adjustment of the replenishment limit this time is also related to the category. As a non-rigid product, consumer demand has declined under high inflation in the United States. In the Prime Day that ended in mid-July, Numerator data, which tracks Prime Day consumption, pointed out that inflation affected 83% of Prime Day consumers. . Of these consumers, 34% said they waited for a promotion to buy a specific item at a discount, and 28% said they forgo the offer because it wasn't a necessity. U.S. consumers appear to be more inclined to buy essentials and big discounts this year, data research shows.

From this, it is speculated that Amazon’s adjustment of the storage capacity this time will compress the storage capacity of non-rigid-needed categories, and release the restrictions on just-needed categories, high-selling and higher-profit categories, because in the comments on the forum, although the vast majority of sellers’ storage capacity is It has been reduced, but some sellers still say that their storage capacity has increased instead of falling, which may be a signal that Amazon is focusing on categories.

5. Need to ensure sufficient cash flow At present, the world is facing the pressure of "economic downturn". The colder the winter, the more important cash flow is. Amazon founder Jeff Bezos emphasized the importance of cash flow in a 2004 letter to shareholders. Bezos said in the letter: Our ultimate financial metric, and the one we most hope to drive over the long term, is free cash flow per share. Bezos used an example to illustrate that even if a company is profitable on paper for a few years, but free cash flow is negative, it is not good for the long-term development of the company. If a company has relatively slow or even loss-making earnings growth, but has sufficient free cash flow and can put cash into businesses that are beneficial to the company's development, the company will be healthier in the long run. Therefore, he believes that free cash flow per share is the most important financial indicator.

In the comment area of ​​the forum, some sellers also said that the average rent of industrial warehouses in the United States in the second quarter exceeded / square foot, which was 21% higher than the same period last year, and many places in the United States had bottlenecks of insufficient warehouse capacity, and it was difficult to find one warehouse. Many retail giants do not hesitate to rent container trailers to store goods at zero hours. Therefore, if it is said that the purpose of not expanding (warehouse) is to save costs, then cut off the seller's warehouse capacity and then sublease the warehouse, it can be seen that the seller's uncertain commission is not as real as the readily available warehouse rental. To sum up, Amazon does not expand its warehouse to save money. It is actually open source to cut off the seller's warehouse capacity but resell it for rent. Compared with the seller's use of FBA's uncertain commission, it is more fragrant to sublease out and directly close the warehouse and rent. After all, this is a real deal. The real money and silver are more secure in your hand.

3. The impact of replenishment restrictions on FBA sellers

On the forum, sellers who have been restricted from replenishing their products wailed because the policy had a big impact on them.

1. Stocking during peak season is affected
After September, the platform gradually entered a state of "fighting". Halloween, Thanksgiving, Black Friday, Cyber ​​Monday, Christmas… These festivals with strong consumption power are all concentrated from September to December. It can be said that the annual revenue of the e-commerce platform depends on the performance of these 4 months. But now, Amazon has adjusted the replenishment limit, which happens to be stuck at the node where sellers stock up, affecting sellers stocking up.

2. Charges for excess storage capacity Amazon's unexpected replenishment restriction not only affects sellers who are in the domestic stocking stage, but also affects sellers whose goods have entered the FBA warehouse. For example, a seller with a storage capacity of 50,000 originally stocked 30,000 to the FBA warehouse, and suddenly received a notification that the storage capacity was only 20,000. The excess storage capacity of 10,000 will be charged an excess storage fee. Fees ranging from a few thousand to ten thousand dollars were paid. According to the latest feedback from sellers, after the new replenishment restrictions take effect, there will be no charge for the excess shipments, but the volume beyond the storage capacity will still be charged.

3. May miss the peak sales season
In the peak sales season after September, there are festivals such as Halloween, Thanksgiving, Christmas, etc. These festivals are the time periods when American consumers focus on consumption. According to data released by Adobe Analytics, online consumers during Thanksgiving in the United States in 2020 Spending rose nearly 22% year over year to a new record of $5.1 billion. During the 2021 holiday shopping season, U.S. consumers saw a dip in online purchases in late November, but they rose again in the weeks that followed, driving overall spending levels for holiday spending in 2021.

Judging from past consumption trends, in 2022, although American consumption will shrink, American consumers will still pay for maidan for related products necessary for holidays. However, related products for Halloween, Thanksgiving, Christmas and other festivals are highly time-sensitive, and sellers usually stock up according to the best sales node. This time (or earlier) is the time for stocking, but the storage capacity is limited. In this case, if the seller can't stock up in time, it will miss the sales opportunity. Once the peak sales season is missed, the goods can only be eaten in the warehouse, and the slow-moving goods will be charged higher storage fees by Amazon.

Fourth, the overseas warehouse in the United States solves the urgent needs of sellers

In the Prime Day that just passed, many sellers did not actively participate. They concentrated their energy from participating in Prime Day in the next peak sales season, but unexpectedly, Amazon suddenly came to adjust the replenishment limit. , disrupted the seller's plan, and the horn of the peak sales season was about to sound, and the seller was really burning his eyebrows at this time. Sellers with insufficient storage capacity turn to third-party U.S. overseas warehouses for stocking and delivery, which can not only solve their immediate needs, but also a good choice in the long run.

1. Not affected by Amazon's storage capacity restrictions. If the seller makes a drop-shipment through a third-party US overseas warehouse, it can be completely unaffected by Amazon's storage capacity restriction. The goods are stored in the US overseas warehouse and delivered directly to consumers from the overseas warehouse. , do not need to go through the Amazon logistics service system. If the seller does FBA transit through the overseas warehouse in the United States, the impact of Amazon's storage capacity restrictions will be smaller. The seller can reasonably plan the inventory according to the sales situation of Amazon. When replenishment is required, the replenishment instruction can be sent to the overseas warehouse. Convenient and flexible.

2. The seller's overall logistics cost is lower
From 2022 to the present, in less than a year, the FBA fee of Amazon US has been adjusted 4 times, and the seller's FBA fee is rising at a rate visible to the naked eye: On January 18, 2022, the fee changes for the seven major FBA items will take effect; On April 28, 2022, FBA fees will increase with a 5% fuel and inflation surcharge; on May 9, 2022, U.S. Multi-Channel Fulfillment fees will begin to adjust; October 15, 2022 to January 14, 2023 will be Holiday peak delivery fees are charged during peak seasons. With the continuous increase of FBA fees, third-party US overseas warehouses gradually show their price advantages, especially for some medium and large-sized goods, the overall logistics cost of using US overseas warehouses will be lower.

3. The service quality of overseas warehouses has been continuously improved. From the first appearance of "overseas warehouses", in 2017, the State Council made a clear request: to expand cross-border e-commerce and build a batch of "overseas warehouses" for export products. These conditions have brought opportunities for overseas warehouse enterprises to develop rapidly. In recent years, the development speed of overseas warehouse enterprises has also accelerated significantly. The accumulation of big data, the accumulation of experience, and the investment of technology have made the service quality of overseas warehouse enterprises continue to improve. , while improving the delivery time, it can also help sellers save logistics costs.

As an important logistics supporting facility for the development of cross-border e-commerce, overseas warehouses have formed a situation of full bloom with FBA warehouses after years of development. If sellers are limited in using FBA, it is undoubtedly the best solution to use third-party US overseas warehouses. No matter whether you choose FBA or a third-party overseas warehouse, cost reduction and efficiency increase are the common demands of everyone.