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Amazon is making improvements to a tool that helps third-party sellers stay aware of whether they are up to date on complying with account policies that the company sets out.
For the two million sellers on its marketplace, Amazon will now provide a metric that’s designed to provide an overall picture of where sellers stand, as opposed to only providing a list of violations. Known as the Account Health Rating, it will appear as a score of 1-1000.
Along with simplifying the presentation for sellers, it will also be an enforcement mechanism. Amazon said this number will be the “determining factor for account suspension based on accumulated policy violations.”
The rating will additionally detail whether the account is “Healthy,” “At-Risk,” or “Unhealthy.”
Alongside the number, sellers will be able to see the severity of any violations they’ve incurred, and prioritize the most important issues for correction. Amazon said it is also adding support team resources to respond to queries over the phone, or via email.
Some of Amazon's seller policies include requirements to provide accurate information, and prohibitions on things like influencing reviews or ratings and maintaining more than one account without a legitimate business need.
“We’re excited to help sellers better understand exactly where their account health stands, prioritize potential issues, and ensure that their account status remains healthy so they can focus on selling amazing products and growing their businesses,” wrote Dharmesh Mehta, Amazon VP of worldwide selling partner services, in an announcement. “This is one of many new offerings we are rolling out to improve sellers’ overall experience.”
Amazon plans to roll out the Account Health Rating in the US and Canada beginning in August, with additional countries gaining access in 2023.
In all, Amazon said it provides more than 150 tools and services to third-party sellers.
The company is also in the early stages of rolling out Amazon Seller Wallet, a tool for converting funds from Amazon to their bank account.
"This early stage solution gives sellers an easy, hassle-free way to hold, view, and transfer Amazon store proceeds directly to their bank account on their schedule—all within Seller Central," which is Amazon's hub for managing accounts, Max Bardon, VP of Amazon Worldwide Payments, wrote.
Now available to a select group of sellers, Amazon said it is planning to collect feedback, make improvements and expand the scope of the tool to other uses, such as third-party payments and foreign exchange rate tools.It has been a time of flux for third-party sellers lately. Amazon has been increasing various fees for Fulfillment by Amazon, the logistics service used by many sellers. Most notably, it added a first-of-its-kind fuel surcharge to account for inflation in April. The same month, it introduced Buy with Prime, a service that will allow sellers to embed Prime checkout and the delivery guarantees that come with it on websites beyond Amazon.com. On the recently-completed Prime Day, Amazon said the growth of third-party seller sales outpaced Amazon’s, adding that customers spent over $3 billion on more than 100 million items from small businesses included in a program called the Support Small Businesses to Win Big sweepstakes.. Nevertheless, sellers have said they face the same challenges with supply chain snarls and overstocked inventory as Amazon and other retailers.
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The company is pulling back after breakneck pandemic expansion. Will it sacrifice the shopping experience along the way?
Amazon is in a period of rebalancing.
The company has long scaled at a relentless pace as it sought to not only provide a marketplace for commerce, but the infrastructure that enabled it, as well. Amazon found another level of overdrive over the last two years, as demand spiked to unseen heights during the pandemic and the company tried to build to keep up.
This wasn’t necessarily a period that saw the kind of invention that Jeff Bezos made an existential tenet of the company, but it nonetheless seems to be shaking out as a cycle that included risk and fallout.
In this case, the risk was not a new device like a smartphone or a move to bend the future to Amazon's will like drone delivery. Rather, it was an expansion that took its already-vast operations to new heights.
Nowhere was this more evident than the company’s logistics network. As CEO Andy Jassy described it to analysts Thursday on an earnings call, the company doubled the size of a fulfillment network it took a quarter-century to build in two years. It also built out a last-mile delivery network that was the size of UPS, which is one of the top two carriers in the U.S.
In 2022, all of that expansion ran into 40-year-high inflation, war in Ukraine and a pullback in demand for goods amid reopening. The company first admitted the problem: It had overbuilt.
But the solution is not to tear down. It had to keep expanding as only Amazon does, while still cutting back in a period of “belt-tightening,” as executives have put it.
That’s evident in watching developments out of the logistics network alone. Amazon pulled out of some areas, and canceled plans to expand into some new warehouses. Yet, as Business Insider reported, it still added 79 million square feet – a footprint that is equal to half of next-closest competitor Walmart’s entire distribution network. It is also expanding Buy with Prime, a new program that will allow direct-to-consumer brands to offer Prime benefits, and, by extension, access to Amazon’s logistics network. Another service, called Amazon Warehousing and Delivery, is designed for upstream storage, necessitating more space to be made available in the network.
At the same time, it will seek to keep doing more for consumers.
Jassy indicated as much when he was prompted to outline his priority areas. Beyond cost-cutting, he said speed is the second highest priority for Amazon. As if to conform this, he said later in the call that one-day shipping is getting off the ground in North America.
Selection is another priority area. At Amazon, that phrase translates to a few things, but top of mind is “expanding the third-party seller marketplace.” Third-party sellers accounted for 59% of sales in Q4. Beyond sales, Amazon’s work with the sellers who post their products on the marketplace is also lucrative for the company. Amazon allows these sellers to tap its logistics network to offer Prime through the Fulfillment by Amazon program. Its business segment called third-party seller services grew 20% year-over-year in the fourth quarter, right in line with the massively profitable cloud computing division Amazon Web Services.
Price, Jassy said, is another area of importance, especially with the consumer pullback on discretionary purchases being observed amid inflation.
“I think pricing being sharp is always important,” Jassy said. “But particularly in this type of uncertain economy, where customers are very conscious about how much they're spending, having the millions of deals that we put together with our selling partners in the fourth quarter was an important part of the demand that you saw.”
Finally, Jassy cited a priority of improving the customer experience. He said Buy with Prime would give subscribers the ability to use their benefits across the web, and noted that virtual try-on for shoes brings change to the shopping experience.
But it’s in this area that the tradeoffs that may be happening under the surface may rear their head again. GlobalData Managing Director Neil Saunders noted that online shopping generally is becoming “more difficult" on Amazon.
“While the Amazon marketplace is far from a terrible place to shop, it has become more complex and cluttered with a multitude of products, delivery options, and prices levels for shoppers to sift through,” Saunders wrote in note released at the time of the earnings call. “The result is that impulse buying has dropped and that more people are migrating away to other retailers. This is not yet a serious problem as erosion has only happened at the margins, but it is something Amazon will need to address and arrest to prevent further decline.”
Taking a rhetorical step further, the journalist John Hermann wrote this week that a “junkification” of Amazon is taking place, while arguing that “everything is going according to plan" for the company.
He placed the growth of the third-party seller marketplace at the center of this trend. But it also comes as Amazon grows its advertising business, with many taking note of a growing number of ads on the platform. The company also wants to keep growing Prime, and is now using content such as Lord of the Rings and NFL’s Thursday Night Football as key acquisition channels. Both had “record” signups of new Prime members, CFO Brian Olsavsky said.
“We see a direct link between that type of engagement and higher purchases of everyday products on our Amazon website,” he said.
It will have to do each of these things at once, while entering a period that will require it to be “more targeted with its growth ambitions,” as Saunders put it.
"Since its inception, Amazon has had a culture of throwing dollars at many different things to see where they led and what they could learn," Saunders said. "That approach worked well for a younger, fast-growth business. It works far less successfully for a more mature entity. In our view, management deserves credit for recognizing this and quickly responding. However, the shift requires a lot of care because Amazon needs to find a new balance between being ambitious and innovative and being more frugal with its spending – which will be very challenging."
Jassy said the changes of the pandemic made its logistics a "different network." That may be true of the whole company. Rather than an isolated cycle of overbuilding and pulling back, this may prove to be a period that changes Amazon altogether. The bets will still be there, but the risk will be magnified with fewer dollars that don't pay off to go around. As hinted by the logistics buildout of the pandemic and even Buy with Prime, they also may look more operational.
Less delivery robot, more delivery optimization.
As Jassy put it: “We're going to be very thoughtful about how we streamline our costs, and I think you see a lot of that, but we're also going to continue to invest for the long term.”
The recipients of those investments will say a lot about where it wants to head in this next year.