eCommerce Strategy Consultant - Rick Watson - RMW Commerce Consulting

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The Need For A Two-Tier Supply Chain Strategy

Rick Watson

We are perhaps entering one of the most accelerated Q4 in generations, something I call "super Q4.” In the meantime, Amazon is making plans. They are starting to limit the SKUs you will be able to send to FBA (Fulfillment by Amazon) this holiday season to ensure that selection of fast-moving SKUs is available consistently.

This is part of a campaign to ensure that holiday season is 100% optimized on every level and they aren't leaving revenue on the table. I am also interested in seeing if Amazon adds back some of its affiliate revenue heading into Q4 or they keep things at this reduced level.

Another important thing to note - and significant factor contributing to what will make this a “super Q4” - is that Prime day is now in Q4. October is the report. That is another huge accelerant to Q4.

I was interviewed by Emma Cosgrove at Supply Chain Dive about Amazon's recent announcements.

This will have a few effects:

  1. Most obviously, it creates a big opportunity for third-party logistics facilities with great Seller-Fulfilled Prime (SFP) support to step in. Examples include ShipMonk, ShipHero, Cahoot, Deliverr, FLEXE, Fulfillment by 3LINX, and Ruby Has.

  2. FBA will get cleaned out of slow-moving SKUs, and you will have to replenish faster, even the fast-moving. Already, SFP facilities are a kind of "second-tier" for Prime. If you think about it like a pyramid, the top of the pyramid is FBA. FBA will be a place to send wide and deep, and then replenish quickly.

Amazon’s announcement says they raise the threshold on the inventory performance index. That is the ratio of quantity to sell-through. Also, they will place a per-seller, per-ASIN (Amazon Seller Index Number) limit. This means you won't be able to just send too much more than you need, and discourage sellers from using Amazon as their personal warehouse.

Absolutely everyone (if they didn't already) will need a two-tier supply chain strategy. We are really moving to a place where you need unique SKUs in every channel. All the world's like mattress shopping these days.