Amazon is offering deep warehouse discounts to its sellers in a bid to jump-start its Prime one-day shipping program.
The company last month announced plans to transition its popular Prime membership deliveries from two-day shipping to one day. To increase the number of items it can offer for one-day delivery, Amazon will need to have more stuff spread around its US warehouses, where it can be closer to more customers.
So, the company on Wednesday sent out an email to sellers, offering discounts of up to 75% on Amazon warehouse storage fees in exchange for sellers storing more of their most popular products with the company. Amazon stores, packages and ships independent sellers' items through a program called Fulfillment by Amazon.
If the plan works as expected, these merchants will sell more stuff and Amazon will be able to promote a large selection of one-day shipping inventory. Plus, consumers will benefit from faster shipping of more products. These independent merchants are particularly important for Amazon to power one-day shipping, since they account for about 58% of Amazon's total online sales. Amazon directly sells the rest.
A potential loser in this scenario would be a rival retailer who ships items more slowly and ends up losing sales to the e-commerce juggernaut.
"We did this because customers love getting their orders quickly, and we have found they order more products when there is a one-day delivery promise," the email said about the move to one-day shipping.
The warehouse promotion starts in June and will run through January. To receive the discount, sellers will need to have sold 60 or more of a product every month, or have products that were selected specifically by Amazon. Sellers also will need to maintain certain inventory levels with Amazon.
Amazon last month helped kick off a push for more one-day shipping of online purchases, with e-commerce experts predicting fellow retailers will try to speed their deliveries, too, to keep up. Walmart was the first to act, with the company announcing plans to start one-day shipments of up to 220,000 products in Las Vegas and Phoenix. By year's end, Walmart expects to reach about 75% of the US population.
This push could encourage people to spend more online, which still accounts for just 10% of US retail spending, helping companies like Amazon continue to grow.
"As we evolve our Prime shipping offer to a one-day delivery promise, we're continuing to invest in opportunities, like lowering fees, to help selling partners provide even more one-day selection for customers and increase sales," an Amazon spokeswoman said in a statement Thursday.