I suspect … Amazon might be reducing limits more in an effort to only have what they might be able to fulfill based on employee levels.
A wise choice is to have both FBA and FBM, even if you have to find a reliable 3P to ship your FBM.
“It’s beginning to look a lot like Christmas…”
I agree, that seems like a reasonable conclusion.
I don’t like the limit decrease but if they communicated to me what my levels would be I could work with it; these weekly guesses on what they will allow are not helpful to me or my employees.
All I ask for is for some basic common decency and communicate with me; we give Amazon a lot of $$ every year, this should not be that big an ask.
I enjoy railing against Amazon on many things, because it’s well earned by them, but in this one area (employees) I find it hard.
Anyone who has ever owned a business recently, of any relative size anyway, knows this:
- Good employees are getting much harder to find
- Employees willing to actually work are getting much harder to find
- 1 bad employee can cost you big
I can’t imagine how a big company can staff lower level positions these days in the numbers needed.
I’m just guessing though based on stated cutbacks and what I’ve personally seen. If I did have a brother-in-law in management over a few FCs, this is likely what he would tell me,
Throw in the huge increase in sales for Q4 and I can actually imagine a near disaster with Amazon FC shipping if they can’t manage both the order flow and sellers better.
Meanwhile Forbes tells us this morning…
Andy Jassy’s Woe: Amazon Stock Cut In Half As Customer Satisfaction Falls
CEOs can’t alter the macroeconomy but they should control how their company adapts to its ups and downs. Indeed, an economic slowdown can be an opportunity for a CEO to take market share from weaker rivals.
Click to expand
If a company delights its customers by introducing exciting new products and providing great service, its market share will rise even as overall demand declines. If it fails to innovate and its customer satisfaction deteriorates, that company will lose market share to rivals who deliver expectations-beating delight.
This comes to mind in considering the many woes of Amazon CEO Andy Jassy. Since taking over the company from founder, Jeff Bezos, its share price has declined 51%, and as I wrote last month, its latest earnings report forecast record low fourth quarter growth of 5%.
Since then, Amazon began layoffs of some 10,000 workers — or 0.6% of its 1.54 million payroll and on November 21, the Wall Street Journal wrote that Amazon’s customer satisfaction is slipping.
Jassy is famous for his appetite for details so he is no doubt aware of the problems he faces. Can he solve them and reignite Amazon’s growth in the face of slowing consumer demand?
In order to gain market share, a company needs happy employees who are excited about getting and keeping customers. Evidence below suggests that the mood among Amazon employees and customers is not great.
Click to Expand
Therefore, I expect its stock to keep falling before happy days return to Amazon.
It looks to me as though Amazon is cutting a small number of people in business lines that are unprofitable and in overhead areas in which people are not likely to be very busy.
Jassy sent out a memo last week that left it up to leaders in affected parts of its business to decide how many people to cut. While the New York TimesNYT -1.5% reported that the number of affected employees could total 10,000, Jassy’s memo made it clear that the layoffs would continue into next year, according to GeekWire.
Last week Amazon cut people “across the Devices and Books businesses, and offered voluntary reduction to employees in its People, Experience, and Technology (PXT) organization,” wrote GeekWire.
Macroeconomic factors outside of Amazon’s control are inhibiting demand for its products and services. As CFO Brian Olsavsky told analysts in its third quarter earnings call, “increased foreign currency headwinds, global inflation, fuel prices, and rising energy costs” are all inhibiting Amazon’s growth.
But these external headwinds are not the only thing cutting into Amazon’s success. Indeed, its devices team — including Alexa — where most of the layoffs happened — has lost billions of dollars due to what looks to me like mismanagement.
How so? According to BusinessInsider in first quarter of 2022, Amazon’s Worldwide Digital unit — which includes the Echo smart speakers, Alexa and Prime Video — posted “an operating loss of over $3 billion.”
A former employee told BusinessInsider, “Alexa is a colossal failure of imagination. It was a wasted opportunity.” Other current employees said that over the last few years, the “team was deadlocked” due to “low morale, failed monetization attempts, and lack of engagement across users and developers.”
This does not bode well for Amazon’s efforts to create a faster-growing future.
Declining Customer Satisfaction
While it is unclear whether the woes of the Worldwide Digital organization extend throughout Amazon, low employee morale would help explain why customer satisfaction with shoppers is dropping.
Click to Expand
As the Journal reported, here are the customer satisfaction indices that have slipped:
Dropping percentage of highly satisfied customers. The number of Amazon customers who said they were “extremely” or “very satisfied” with the company in a recent survey has fallen from 88% over a decade ago to 79% in 2022 (although that is an improvement from 65% in 2020), according to investment firm EvercoreEVR -0.1% ISI.
Shopper approval declining below rivals. Between 2016 and 2021, Amazon’s American Customer Satisfaction Index — which tracks shopper approval at more than 400 of the largest companies in the U.S., noted the Journal — fell from 86 to 78 — its worst performance since 2000. Moreover, in 2020 and 2021, Costco and NordstromJWN +0.1% surpassed Amazon’s score.
Increasing complaints of late shipments and low product quality. About a third of more than 1,000 Amazon customers in the U.S. surveyed “reported regularly receiving products late or getting an item of low quality,” according to Consulting firm Brooks Bell.
Painfully slow delivery and poor service. Two customers interviewed by the Journal complained of delivery and service problems. Ken Higgins, an Amazon Prime member since 2005, bought a baby stroller with a two-day shipping promise. The delivery took seven days. he said, “It feels like they used to care more.” Jackie Guerrero recently ordered a watch on Amazon. It had not arrived two weeks later when she received an email saying it was undeliverable. After multiple tries, she finally reached someone at the company to receive a refund.
An Amazon spokeswoman told the Journal that customers “are still highly satisfied with their experience, and [we have] worked in recent years to improve how customers find products on its website. [Our] delivery promises fluctuate because of factors such as time of day and customer location.”
Amazon says its phone answering is good. Amazon said it “consistently exceeds its goals of answering at least 80% of phone calls in 60 seconds or less and responding to 80% of chat support requests within 30 seconds or less.”
Moreover, Amazon said that in recent months its shipping times have improved since the pandemic when the typical delivery time was six days. In recent months, Amazon says the averages have fallen to around two days.
Misfiring Growth Engines
Last week Jassy concluded his layoffs memo with enthusiasm for the opportunities in Amazon’s future. As he wrote, these growth opportunities reside “in its more established businesses like Stores, Advertising, and AWS [and in] newer initiatives such as Prime Video, Alexa, Kuiper, Zoox, and Healthcare.”
But Amazon — whose revenue bounded ahead at a 27% average annual rate between 2010 and 2021 — grew 15% in the third quarter and forecast a painful 5% rate of growth in the current quarter.
In the third quarter, Amazon put in a mixed growth performance in its businesses. The good news was 7% growth to about $53.5 billion in online store sales and 25% growth to $9.5 billion in advertising.
Most ominous was slowing growth in AWS. While AWS sales rose 27% to $20.5 billion it was “one of the lowest rates of growth posted by the unit in recent quarters,” according to the Journal, and well-below the 31% growth rate expected.
At $136, the median analyst price target for Amazon suggests its shares are 45% under-valued.
MoffettNathanson analyst Michael Morton sees online shopping as more convenient and cheaper for consumers and with e-commerce representing 14% of the retail market, Amazon is best poised to take advantage of this opportunity, according to Barron’s.
BNP Paribas has a sell rating on the stock with a price target of $80. BNP’s Stefan Slowinski is concerned that AWS — Amazon’s “growth engine” — posted disappointing growth in the third quarter which added to his “concerns about their consumer business,” reported Bloomberg.
Slowinski is right. With unhappy employees and less satisfied customers, Amazon is not likely to gain market share as macroeconomic headwinds intensify.
I get it, the labor markets are so tight but the lack of communication is unacceptable.
We can work with almost anything, flexibility is the name of the game with Amazon, but this makes a work schedule almost impossible for us. If you want me to do more FBM, I can do that but I need people and supplies; waking up Monday morning and have to scramble for both is not a good business practice.
mine said I could send 25 units on sinday.
Today, it says I am 2K overstocked.
This one looks like a mixed bag, some got cut pretty hard and others were either left alone or got minor increases.
I feel your pain on this though, really tough way to run a business.
No Notice and No Communication is Amazon’s standard operating policy with Marketplace sellers.
Amazon doesn’t care if we think this exploitation is acceptable. If you or I leave, we can be replaced in an instant. Marketplace sellers are disposable in Amazon’s eyes. The large-volume Marketplace sellers on Amazon like to think that Amazon values them, but it’s an illusion.
Warehouse workers are exploited by Amazon, Marketplace sellers are exploited by Amazon, Amazon delivery drivers are exploited by Amazon. We work for a s*#thole company.
When will Amazon learn that there is a connection between 3rd party seller satisfaction and customer satisfaction; it is really hard to give amazing customer service (although we will try) when Amazon has it’s 3rd party sellers jumping through needless avoidable obstacles every day. We only have so much time and energy every day and Amazon uses a lot of it up on non value added activities (re-stco limits, high price errors, suspected IP, …).
It should be noted that Amazon FBA has a “limited” space and not infinite inventory and each FBA facility probably has stats of how much they can ship out monthly and a projection of what they expect to output. Inventory will just be directed elsewhere as facilities reach capacity. So each square inch is a valuable commodity.
The number of 3P sellers has increased throughout the years and if you seen reports of how much it has jumped in the past year compared to the year before, you’ll understand space is Amazon’s commodity. With the increase in sellers there’s also a increase in demand for FBA. While a business may have enjoyed X amount of space the year before, that “real estate” is now more prime as more sellers attempt to submit goods to Amazon to house for them. Then from Amazon’s point of view, it’s a seller’s market. They have the space and staff, we have the product. They will limit the space for slow moving products and set aside space for high turn around products. Amazon makes a fee off every transaction but has set picking/processing fees and if they can increase the number of orders shipped out each hour, they’ll push out products or limit space for products that don’t measure up.
If you were provided a large space in August and you did not use it, Amazon system recorded that you were unable to hit whatever threshold you needed for them to allocated any more space so they started reducing to what they believe was adequate for your products speed. One of the things a seller might do that also hurts them is sending in product once a month rather than weekly so that there is a steady flow of goods going into Amazon as goods go out. If you’re not selling cases a week, you can’t expect Amazon to reserve spaces for multiple cases a month.
You seem to ignore the fact that Amazon knows 3P sellers are replaceable along with their products. If not we would be called vendors and have a contract.
I think Amazon wants the sellers who don’t have to worry about those things. Instead of gating them or giving them the boot outright, they just make them suffer to filter them out.
Ours were actually increased slightly, but our products have a 6 month lead time, so in some markets it was just too late to take advantage of it. Like you, if I had information in advance, I could plan for it and expand my offerings, but restock limits have actually forced me out of one marketplace completely and made two others so difficult to plan for that I am carrying a reduced selection there. Tripling my restock limits in mid-November is not helping me at all, and I have no idea if Amazon will follow the same pattern next year, so I can’t plan for it.
Thanks, Amazon! Glad is working so well for you!
Storage Limit Manager
Request more storage space for your FBA inventory
With Storage Limit Manager, you can request more storage space—potentially at no additional cost, with performance credits based on sales.
The thing is, as a matter of policy, restricting restock levels is not unreasonable. There are obviously velocity and capacity crunches in Q4, and this is one way to bring those under control.
I suspect there are two reasons for the apparently capricious and fickle restock limits:
- Publishing a metric or rubric would eventually backfire, as sellers find loopholes and end up swamping the system regardless. Obviously I want them to publish it, so I can plan accordingly and manage Q4 cash flow.
- Publicly acknowledging capacity and logistics weaknesses doesn’t do their stockholders any favors.
I feel like there’s a middle ground:
- Employ some sort of lead-time model, where you’re told “In X days we’ll be restricting you by this much”. Obviously, if X=90, then everyone has time to swamp the FCs with inventory before that date. But how about 7-14 days? Enough time to adjust ordering, at least?
In the meantime, my on-site storage space is overflowing with inventory waiting its turn, probably until January. Thankfully we’ve been at this long enough that I can weather the throttling.
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The WSJ this AM had an article on increased customer dissatisfaction with Amazon. To paraphrase, increased late deliveries and crappy products.
Also had another article on customer returns policies and the issues they cause which included Amazon but dealt with the wider issue.
Overall retail returns are way up.
Expect more action that affects sellers/
I am currently experiencing a late delivery on a cheap, crappy product myself!
My assumption on the cause for the decrease in custom sat is the influx of generic brands pumping tons of cheap foreign products into the marketplace which the algorithm tends to favor due to price…