Amazon warehouses were overflowing last holiday season, and the costs associated with that dented the company’s profit. Amazon is trying to make sure that doesn’t happen again.
Amazon just raised its warehouse fees because it ran out of room last holiday season
If its warehouses are as full as they were during the 2015 holidays, Amazon’s profit will suffer.
Peter Macdiarmid / Getty
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.
Earlier this week, Amazon notified Amazon sellers that it is raising warehouse storage fees for the months of November and December. The goal is to get merchants storing goods with Amazon to only stock inventory during the holidays that has a high likelihood of selling by year’s end.
The move comes after a 2015 holiday season that saw Amazon run out of space in its U.S. warehouses, which increased the company’s fulfillment costs and led to lower-than-expected profits for that quarter.
Amazon offers storage and shipping services to merchants selling goods on Amazon through a program called Fulfillment by Amazon, or FBA. The program has grown in popularity since it launched in 2006 and is responsible for around one quarter of all items that Amazon sells. That growth, however, comes with some pains.
Until recently, merchants had to use FBA in order to have their items qualify for express shipping under the Amazon Prime program. But, last year, Amazon started letting some reliable merchants sell goods to Prime customers that they store themselves, and not in Amazon facilities.
The move was seen, in part, as a way to increase product selection on Amazon without taking up more warehouse space. By the end of the year, Amazon had added more than 500,000 items to its Prime-eligible catalogue through this new program.
Amazon is decreasing storage fees for the month of October, to help offset the increases in the busiest two months. It is also lowering weight fees, charged per pound, for FBA items it ships during November and December.
This article originally appeared on Recode.net.
