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Amazon to Reduce Warehouse Access to New Merchants

In preparation for the busy holiday season ahead, Amazon is carrying out warehouse limitations.

According to unnamed sources, the e-tail tycoon is limiting merchant access to its warehouses during the 2016 holiday season due to concerns over past capacity issues, Bloomberg reported.

New merchants will be opted out of Fulfillment by Amazon, Amazon’s fast delivery service, until Dec. 19. The move means new merchants won’t be able to send inventory to Amazon’s distribution centers before the holidays hit this year.

“They’re preparing for a very busy holiday, and given the constraints they’ve had in the past, I think they are being more careful about what they are taking,”Colin Sebastian, an analyst at Robert W. Baird & Co., said. “The concern around this news is that they won’t have the capacity they need over the holiday.”

Amazon’s warehouse limitations also come with the digital retailer’s new merchant policy. Unlike previous holiday seasons, new merchant restrictions will apply to all item categories without warning. Usually, Amazon offers new merchants cut-off times in select item categories to get their inventory to warehouses ahead of the holidays. This won’t be the case this year, and Amazon hasn’t commented on the change.

The company’s new merchant restrictions are its most recent effort to establish more efficient warehouse space during the holiday season. Earlier this year, Amazon adjusted its fees to penalize merchants for storing off-season merchandise in its warehouses during the holidays, and merchants that sent in fast-moving products, including popular technology devices, were rewarded by Amazon. Amazon brings in more profit from merchandise revenue share than products, which is why it prioritizes particular items during the season.

Independent merchants are responsible for nearly half of the products sold on Amazon and they pay the company to access more than 300 million online consumers on a daily basis. Similar to eBay’s marketplace, merchants can post items on the site and handle shipping themselves, or they can pay more to send inventory to Amazon distribution centers, where they are handled and shipped by the company. Merchants said Fulfillment by Amazon was worth the additional fees since the service boosted sales volume. According to Amazon, sales for its fulfillment business rose 60 percent in the fourth quarter 2015.

In order to further prepare for the upcoming holiday season, Amazon also opened 21 new warehouses during the first nine months of this year, a significant jump from just 10 last year.