Amazon Taps Merchants for Warehouse Space
Amazon is turning to merchants who sell on its marketplace for extra warehouse space, a less-costly way to expand inventory available for quick delivery, according to Bloomberg. Inventory available for delivery within two business days expanded by 6 million items under the Seller Fulfilled Prime program, the company announced. Earlier this year they introduced the program, which lets independent merchants sell goods on Amazon as “Prime Eligible” even if Amazon isn’t handling packaging and delivery.
It’s the latest sign the world’s biggest online retailer can’t build facilities quickly enough to meet demand for an ever-expanding assortment of goods that customers want delivered fast and free. Warehouse capacity issues and the cost of new facilities helped increase Amazon’s spending on order fulfillment 34 percent in the third quarter. The big expenses caused the company to miss analysts’ profit projections, driving down shares 8.8 percent since the results were reported.
Amazon’s revenue is projected to increase 28 percent to $137 billion this year, according to analysts’ estimates compiled by Bloomberg. The fast growth prompted the company to accelerate its warehouse building spree, with more than 15 fulfillment centers opening in California, Texas, Illinois, Kansas, New Jersey, Georgia and Florida that will collectively employ more than 12,000 workers.
Earlier this year, Amazon began restricting access to its warehouses due to capacity concerns and it changed its fee structure to penalize merchants who store slow-moving and off-season products during the busy holiday shopping period.