As US Manager of Customer Success, it’s not uncommon for my team and I to discover a seller making a serious misstep, and often without any knowledge of their mistake.

 In the spirit of helping you make your Amazon processes spick and span, this blog series reveals the 7 Amazon Mistakes You Didn’t Know (& Might Be Making!). 

Mistake #1: Covering Customer Service Emails Monday through Friday

The seller metric “Contact Response Time” measures the percentage of customer-generated inquiries that have seller responses within 24 hours.  The ideal goal is 100% attainment on Contact Response Time (CRT), meaning every message gets responded to within a 24 hour window.

Most likely, your business hours are Monday through Friday.  Amazon understands that, right?  Think again. CRT is calculated based on absolute time and measures the average time between the customer’s message and the seller’s response. Weekends are not excluded.

Why It Hurts: Fortunately poor performance here doesn’t generally result in account suspension.  So if you won’t get the boot, why does it matter? Amazon notes that there is a correlation between slow response time and negative feedback, both of which impact selling privileges. Further, research shows that orders with messages responded to within 24 hours receive 50% less negative feedback, so response time is crucial to keeping customer service in tip-top shape.

What’s more? While it’s not reported by Amazon, we estimate that Buy Box attainment and seller-ranking algorithms consider CRT, since Amazon is resolute to provide end-customer satisfaction.

The Fix: Pay attention to Contact Response Time metrics and staff customer service coverage on Saturday and Sunday. It’s likely your inquiries will be so light that it won’t interrupt your Saturday morning, but it’s important to have a presence, just in case.

Mistake #2: Assuming All Feedback is Permanent

If you shop online, you’ve been there. A product arrives at your doorstep and doesn’t quite meet expectations: the shoes are not “burnt orange,” or the electronic isn’t as high-quality as you thought. It happens; products fall short of expectations. Unfortunately, retailers often take the hit. Shoppers commonly misdirect product disappointment at Amazon merchants, leaving product-focused negative feedback in Seller Feedback.

Why It Hurts: If a customer leaves product-focused feedback, it still affects your Seller reputation, even though it’s technically “not your fault.” In addition to scaring away buyers, you risk Buy Box attainment and, in some cases, the suspension of your account.

Here’s a test. Which of the following feedback is eligible for removal?

A

B

C 

If you said A and B, well done. These provide feedback about the product, whereas in review C, the customer appropriately reviews her purchase experience and satisfaction with the seller.

The Fix: Product-focused feedback is eligible for removal when the entirety of the Seller Review is about the product alone. To do so, submit a TAM Support ticket with Amazon identifying the offending feedback and requesting it be removed.

We’re conquering these Amazon mistakes in stride, so stay tuned for Parts II and III in the coming weeks! In the meantime, check our Complete Guide to Being Seen on Amazon, or Design Your Solution to see how ChannelAdvisor can help you Be Seen and Sell More online.

Follow @ChannelAdvisor on Twitter for FREE multichannel selling tips and tricks, and all things retail e-commerce.

Blog post by Rachel Miller, ChannelAdvisor US Manager of Customer Success.

The updates will be rolled out gradually over the next month and will touch:

• All selling categories
• All Amazon marketplace locations
• Both Amazon Retail and third-party Marketplace Sellers

Amazon says that the changes will make the page faster for faster for customers. Additionally, according to Amazon, the HTML source code is also changing to a more flexible format, which will make it easier for Amazon developers to continue to innovate on behalf of customers.

This week Amazon released a preview of the updated screen on Seller Central:

Another change we noticed a few months ago was the updated main listing page in Shoes and the removal of the slightly dated blue buy box area. The listing page combined with new requirements for Sellers to provide white-only backgrounds makes the listing look clean, modern and more accessible.

Why are We Excited About the Changes?

While the current changes may not be overly dramatic, we like that Amazon is making updating the user interface a priroity. A more modern look-and-feel and better page performance will improve the buying experience and will be good for third-party sellers.

Additionally, Amazon’s comment about underlying changes to make the screen more flexible means that they probably have some more updates being queued up. It will be interesting to watch what they have planned next and if a bigger redeisgn is in the works.

At ChannelAdvisor, we are keeping track of these updates. We are always looking to identify areas that may impact our sellers and ways that we can help them to be more successful in competing and selling on Amazon.

Blog post by Gina DeFrank, ChannelAdvisor Product Manager, Marketplaces

Interested in more information on Amazon? Visit the ChannelAdvisor Resource Library for customer success stories, webinars, eBooks, data sheets and more.

Every Q we go over the highlights from the Q that we believe online retailers/sellers should takeaway from Amazon's results.  This quarter had a lot of interesting tidbits about 3P marketplaces, so let's dig in.

Amazon Q1 2013 Key Performance Indicator (for sellers) Dashboard

 Each Q we look at the ky metrics sellers and they are collected in this handy dashboard that has columns for the results, Wall St's consensus estimates and Amazon's guidance.  This Q we have added two new Key Performance Indicators: 

Highlights from the Q:

• Revenue and profits - As it has been for the last year, Amazon's top-line revenue rate has been slowing (due to the rise of 3P).
• Growth rates  - In our regular feature, the quarterly Amazon growth rate cube in the next section we detail these.
• Active users - Amazon grew active users to 209m - a 21% y/y increase (Q4 was 200m).
• Paid unit growth - Paid units grew 30% which was a material step down from last year's Q1 49% and even Q4's 32% - this single number has wall-st pretty spooked.  It's important to put this 30% y/y unit growth in perspective and remind everyone that this is still 2X the rate of e-commerce.

• % paid items from 3P - Amazon reported that 40% of paid items were from 3P sellers.  

The conference call had some interesting datapoints:

• 58% of revenue is NA and 42% is international
• 31% of sales were from Media and 64% were from EGM
• On the call, I found it interesting that the CFO said (paraphasing) - If you back out digital units, 3P would be an additional 3% of sales (43% vs. 40% is what I believe he was saying).

Note: EGM stands for Electronics and General Merchandise - Amazon-speak for anything that isn't a (e)book, movie, dvd, cd, mp3, videogame. Also, the industry 'watermark' we use is ComScore who forecasts e-commerce growth (ex travel and grocery) at 14% y/y.

In the following cube we summarize all of the different Y/Y growth rates that Amazon reports (ex-FX).  We find this helpful as you can quickly see where the growth is (Intl EGM) and where things are slowing (intl media).

Looking at the categories of media/egm - Amazon's media business is now growing slower than e-commece (10% vs. 14%), and Amazon's EGM business is growing 2X. From a geographical standpoint, North America really started growing substantially faster than International.

If you think of another dimension to this cube which would overlay the 1P and 3P growth rates, you can see that the fastest growing segment at Amazon would be: 3P international 3P followed by North America 3P EGM.  Amazon doesn't disclose that detailed segmentation, but given that 3P units grew over 35%, each of these segments are growing at least that fast and probably 2-5%  higher - giving the non-media Amazon 3P business a growth rate 3X that of e-commerce (14% as per ComScore).

How big was 3P in Q1 2013?

Amazon provides a couple of datapoints that we use to triangulate the 3P GMV.  For our analysis, we choose to use the % of items that are 3P as the 'anchor' and use some educated (and conservative) guesses around take rate, and 1P/3P average prices.  

Here's our analysis for Q1 2013

For Q1 2013, our analysis indicates:

• $14.5b in 1P GMV
• $16.1b in 3P GMV
• Total GMV: $30.6b

Here's what that looks like historically:

In Q4 2012, we noted that for the first time Amazon's 3P GMV exceeded eBay's GMV.  Our thesis was that this was a seasonal factor that was not a full-year trend.  The following chart illustrates eBay's GMV vs. Amazon's 3P GMV to compare the two marketplaces:

Conclusion and looking towards Q2

Amazon's Q1 results were best described as mixed.  The marketplace remains very healthy and domestically the business did very well.  Unfortunately, international growth rates (especially media) were light as was the overall unit growth rate coming in at 30%.

Amazon gave guidance to Wall St. that implies a before FX growth rate of 16-29% (22.5% at the midpoint).  

If you're coming to Catalyst this year, we look forward to hearing what Sebastian Gunningham, VP of Services, has to say about many of these broad topics.

Written by Scot Wingo, CEO, ChannelAdvisor.  eBay is an investor in ChannelAdvisor.

Customer satisfaction is at the core of Amazon’s business model, and there are a number of performance measures that Amazon uses to determine how well you are doing as a seller. The Amazon POP metric is one of these performance measures; it tracks the number of perfectly accepted, processed and fulfilled orders.

Before we dive into the POP metric, it is worth defining what constitutes a Perfect Order on this channel. According to Amazon, a Perfect Order is one that does not experience issues such as: A-to-z claims, negative feedback, chargebacks, cancellation, late shipment, refund or a buyer-initiated message.

Your POP score by itself is not a performance target. However, some metrics included in this metric have performance targets and may result in action if they fall below the stated goals. These metrics include order defect rate (<1%), pre-fulfilment cancellation rate (<2.5%), and late dispatch rate (<4%).[i]

While this metric is not used by Amazon as a performance target, it can be used as a great tool for assessing your Amazon performance and identifying areas where you can improve.

95% or higher

To review your POP metric, visit the Account Health tab, under Performance in your Amazon account.  Alternately, ChannelAdvisor customers can look at their Amazon 360 dashboard. Amazon recommends that a retailer’s POP metric remain over 95% at all times. You can calculate this percentage by counting the number of perfect orders from the past 90 days divided by the total number of orders received during that time. You can also download a Perfect Order report for the last 7, 30 or 90 days to identify your performance by product. You can use this report to diagnose and respond to the issues that are impacting your Amazon metrics.

Improving your POP Metric 

Amazon is clearly striving for perfection with all sales, and in order to keep your percentage over 95% you need optimised listings, the best fulfilment options and customer services offerings. Once you have identified your current POP percentage, the next step is to identify your poorest-performing products. If a large numbers of refunds, negative feedback or claims are associated to a specific brand or product, you may want to remove this from your Amazon inventory while you try to rectify any issues.

Amazon has found that inaccurate listings, late shipments, missing tracking information and cancelled orders are the most common issues that negatively  impact retailers’ POP metrics, so these can often been a good place to start when working on improving your metric. You should also look to your best-performing products and identify if you can implement any of those successes to the poorer performing products.

• Incorrect or unclear listings: Any inaccuracies or missing information in your listing can lead to an unsatisfied customer. Each customer has their own buying criteria and will search for individual benefits from one product. Providing the most detailed information and description as you can gives you a better chance of satisfying more consumers. However, burdening consumers with too much information can also be off-putting; stick to a maximum of 200 words for your description. Most categories also allow up to five bullet points in product descriptions, so use these to convey a high-level overview of the product with bullets that provide the broadest appeal.
• Cancelled orders: Cancellations caused by out-of-stock inventory or pricing errors create a poor buyer experience and can really diminish your brand. Keep your inventory up-to-date on Amazon, and if a product is out of stock pause the listing so that customers are not attempting to complete a purchase on something you cannot fulfill.
• Late shipments: When customers do not receive orders or shipping confirmations by the stated date, they often contact sellers to inquire about the order status and tend to be less satisfied with the overall buying experience. If you find this is a regular issue, work to streamline your fulfilment process or consider using Fulfilment by Amazon (FBA) to deliver your products. Buyers also like to be updated as their product is being delivered, so try to offer accurate product tracking information that they can check regularly.

Though the POP score is not used as a performance target by Amazon, some metrics used to calculate this number have targets, and may result in action if they fall below the stated goals. Monitoring and improving your POP score along with your other Amazon reporting will not only give you a great h

olistic view of your sales, but should help you identify ways to optimise and improve your Amazon performance.

Blog post by David Le Roux, ChannelAdvisor Account Manager

______________________________________________________________________

Our latest eBook explains how to leverage this marketplace to meet Amazon’s customer service expectations and increase your product visibility.

This How to Optimise Your Amazon Sales eBook explains:

• How to improve your overall performance on Amazon
• How you can increase your product’s visibility
• Why meeting Amazon’s customer service expectations is so important

______________________________________________________________________

[i] Amazon, Perfect Order Percentage, http://www.amazon.co.uk/gp/help/customer/display.html/ref=hp_rel_topic?ie=UTF8&nodeId=201156000

The following table details the usual key metrics we track in Amazon's results for sellers/retailers that we think most illustrate how not only Amazon is doing, but most importantly for readers of this blog, the health of the third-party (3P) marketplace.

Out of all these metrics, what I look at most closely to get a pulse on the Amazon marketplace:

• 3P unit growth -Q4 was 40% y/y growth which will be hard to maintain given the EU malaise and the bad Feb weather.  I imagine this will come down a bit in Q1.
• % of units from 3P - Q4 was 39% 3P units.  Amazon has been shifting substantially from 1P to 3P, so we look to see that trend continue.
• Active users - eBay has seen acceleration on this metric due to mobile.  It will be interesting to see if Amazon sees this as well.  Q4 grew at a 22% y/y clip, we will see if Amazon can keep up this pace, or if it accelerates or decelerates.

What else to look for?

Additionally, we will be keen to hear anything about:

• Any Prime/Fire updates - Prime is the turbo-booster of Amazon and we're always keen to see if there are any interesting new tidbits that Amazon shares.  The Kindle Fire family of devices include a 30-day Prime trial and we suspect a good up-take from that offering which accelerates the Amazon flywheel, so we'll be listening closely to any new information there.

Amazon Fulfillment Center news

In Q4, we introduced our Amazon Fulfillment Center tracker which we will be updating after earnings.  While we'll be listening for any FC news, we noted the following announcements in the Q:

• Jan 8 - Amazon announced plans to open a FC in Robbinsville, NJ.  This is set to open in early 2014 and cost $200m to build.  They also refer to it as Phase I...
• Jan 22 - Amazon announces third California FC, this one will be in Tracy (outside SFO)
• Feb 1 - IND6 - Jeffersonville, IN Amazon did a ribbon cutting of an already open FC.  
• March 25 - CAE2 - Amazon opens the large item center near Spartanburg, SC  This news site has some great raw footage and outtakes that are a good watch if you are a true Amazon Geek.  This FC employs 400 people and has an interesting mezzanine/multi-levels.  Fun game - see if you can spot a kayak!  This facility ramped much faster than other non-sortables due to the great people of South Carolina (Go Gamecocks!)
• April 5 - SDF8/BNA3- Held an official ribbon cutting for the 1m sq-ft Murfreesboro, TN facility (employs 1100)  This one appears to have a fashion/photography section which is interesting (see pics below for examples - first time I've seen this out in the wild).

As you can see most of these seem to be local news stories geared towards recruiting new associates to work in the FCs and get the word out on the contribution to the local economies.

At the Spartanburg ceremony, Amazon's VP of FC, Mike Roth, hinted they aren't slowing down on FC growth:

"We are constantly looking at our nationwide topology,” Roth said. “I can’t give precise locations of the next couple of buildings we plan to build, but there will be continued expansion in the future.”

Stay tuned

As usual, we'll be posting our analysis of the results shortly after they are posted.

BONUS: Amazon FC Pictures for you while you wait.

Here are some highlights from the above mentioned ribbon cuttings to give you something to ponder while we wait for Amazon to report:

Written by Scot Wingo, CEO, ChannelAdvisor.  eBay is an investor in ChannelAdvisor.

In the summer of 2012 Amazon made significant changes regarding how integrators are allowed to get pricing data for products on Amazon.  Part of these changes involved set limits on how often we are able to retrieve pricing data from Amazon - roughly 30,000 items per hour per Amazon account.

Since Amazon has established that maximum throughput rate, our Frequency Control feature provides you control over how you allocate that throughput amongst your products listed on Amazon. Basically you divide your catalog up into up to three different tiers: Standard, Accelerated and Maximum.  Based on the specification, ChannelAdvisor will govern the throughput rate of the products in each tier. By using the Frequency Control, sellers can effectively:

  1) ensure the maximum allowed total throughput is achieved; and

  2) allow some products to use more of the bandwidth than others

Sound a little confusing?  Let’s put this into numbers.

If you use only Standard and Accelerated frequencies then the items in the Accelerated tier will be repriced roughly twice as frequently as the items in the Standard tier.  

A great way to utilize this functionality would be to reserve the Maximum and Accelerated frequency tiers for your top-selling products, or to use those tiers for items that are the most competitive in price and have high competition from other sellers on the marketplace.  The beauty is that our Frequency Control feature allows you to decide how you want to divvy up your allowance of repricings from Amazon via simple means, after which ChannelAdvisor’s system does the granular work to keep your items repriced based on the frequency that you have indicated.

In using Frequency Control, it’s also important to be wary of several possible pitfalls.  The easiest mistake to make in configuring your frequencies is defining out-of-proportion tiers. The image above depicts the optimal balance between the frequency tiers in which Standard contains the majority of the catalog, Accelerated has a much smaller number of products, and the Maximum tier has even fewer. 

These suggestions are based on the ideology that if you put one item in Maximum, one item in Accelerated, and thousands of items in Standard, the result is imbalance and the outcome is that your overall throughput will be lower than if you had just put everything in Standard. The lesson, then, is to try to balance your items in roughly 2x ratios between each level, meaning that if you use all three tiers then put roughly 15% in Maximum, 30% in Accelerated, and 55% in Standard.  Note that there is no requirement to use all three tiers,or even two. However, if you use two tiers, I suggest, roughly, the following split (tailored to your needs, of course):  35% in Accelerated and 65% in Standard. Maintaining frequency tier balance will ensure that the Frequency Control feature is working for your benefit.

There were several other features released for our Amazon Repricer last fall in tandem with Frequency Control--you may want to have a look at those in the  Autumn Release eBook and Repricer One-Pager.   

Blog post by Wes Williams, ChannelAdvisor Engineering Team

We sometimes hear from retailers that they are debating between handing their marketplaces integrations in-house and using a platform solution. With our 10 years of experience integrating with marketplaces, we’ve come up with the main questions that retailers should ask themselves before embarking upon building and maintaining an integration with eBay and Amazon.  We’ve delved into detail about these integration considerations in a free white paper available for download, but below are some of the highlights. 

Do you have the IT resources in-house to support marketplaces?

Charging an in-house technical support team with all the responsibilities of managing a direct integration can be taxing and time inefficient, especially if the team is not dedicated to e-commerce and is a shared resource with other departments. Retailers should push for dedicated technical support to manage their e-commerce presence, or should consider the benefits of outsourcing technical support.

Are you equipped to handle uploading and maintaining thousands of product listings?

Product details such as price, quantity and condition must be mapped into the data feed in order to go live on eBay, which can be a confusing and time-consuming process for many retailers. A third-party software provider can make a retailer’s processes more efficient by eliminating manual mapping, managing the quantity and advertised duration of each listing and more.

Is your data in the correct format?

Instead of requiring a developer to build new code to match the fields, or worse, make a wholesale database change, you can use a third-party technology to map existing information automatically to accommodate for situations such as these. If requirements on the marketplace change, a simple update within ChannelAdvisor’s system can quickly adjust your listings.

How quickly can you update your product list?

For online retailers, one of the most demanding aspects of running an integration directly with a marketplace is maintaining it. As a channel partner on eBay, ChannelAdvisor can automatically manage relist and withdraw capabilities and ensure accurate information at all times.

Are you prepared to prioritize updates and operations?

Many retailers’ integrations are deterred by the eBay system’s complexity, with restrictions on adding new products, relisting products and revising products. As a preferred partner on eBay, ChannelAdvisor does not have these restrictions, allowing retailers to add, relist, or view inventory in real time.

Does your integration meet eBay’s compliance requirements?

Retailers must develop an integration that is robust enough to meet eBay’s certification standards if they want to exceed operational limitations—a tough and time-consuming assignment to spring on IT staff. Many retailers rely on an e-commerce solution to take care of their marketplaces integrations and keep up to speed with all changes to the program, whether they might be API additions or deletions or changes in requirements.

Do you have the 8 required Amazon feeds?

Generating the eight feeds required to list items on Amazon is not a small task for any retailer. With a technology that effectively reduces these eight feeds into three or four, retailers will see that fewer moving parts eliminates many failure points between their data and Amazon’s system, which translates to faster selling progress.

Is your data properly optimized to avoid listing errors?

With so many different tags and item-type classifications to choose from, associating a product with the exact item listed on Amazon is consistently one of the biggest challenges retailers face. ChannelAdvisor’s technology has been proven to list retailers’ products effectively by offering templates that cleanly outline the data and present the exact format suitable for Amazon,.

Are your products matching with the correct Amazon listings?

Listing items on Amazon requires more detail than listing on eBay and on other marketplaces, as evidenced by the attribute data requirements. Software that provides tangible performance metrics, displays errors and highlights where adjustments are necessary can separate the accomplished online retailers from the ones who have yet to reach their potential.

Are you doing everything you can to maintain your best DSR?

Along with listing completeness and quality, a positive Detailed Seller Rating (DSR) on eBay is a factor in determining Best Match, the default order for search results. In order to achieve this, a retailer must pay close attention to details such as submitting shipping updates, issuing refunds, and escalating Unpaid Items (UPIs) to Disputes.

Do you know what it takes to attain Featured Merchant Status on Amazon?

A sure way for a retailer to improve ROI and win the Buy Box more often is to achieve Featured Merchant Status, which is contingent upon a retailer’s selling history, Order Defect Rate (ODR), and excellent customer experience. More than 90% of ChannelAdvisor’s third-party retailers on Amazon have gained Featured Merchant Status and are eligible to win the Buy Box² using this feature.

Can your in-house solution reprice products and juggle inventory across multiple marketplaces?

As online retailers running direct integrations spread their e-commerce reach to more marketplaces and more buyers, they must pay close attention to the status of all inventory. ChannelAdvisor’s tools allow retailers to advertise any quantity on each marketplace and use a Repricer to keep them competitive within pre-set price margins.

Download the full white paper to capture all the details, or give us a call and we’ll be happy to walk you through integrating and how ChannelAdvisor can help automate, integrate and optimize your listings.

What’s New?

• Product Title Names should follow a standard format [Brand]+[Gender/Age Group]+[Product Line]+[Colour]+[Material*]+[Shoe Type]+[Size] (e.g. Kenneth Cole Reaction Women’s Work Space Blank Leather Heel 6 UK”)
• The new product feed template now requires sellers to use a single Item Type Keyword (ITK) for browse tree classification instead of a combination of multiple style keywords.
• New attributes and refinements have been added, including heel height, shoe style, toe style, strap type and frame material to help customers narrow their search results. Replacing the “Department” refinement with actual browse nodes for Men’s/Woman’s/Boys/Girls/Baby

More Information

Please visit your Amazon Seller Central page Shoe, Handbag and Shoe Accessories FAQ.

Do I have to reload my entire inventory?

Although not required, it is recommended that you move existing product listings over to the new template in order to take advantage of the enhanced browse and search refinements.

How can I test my upgraded feed?

We recommend beginning transition as soon as possible to allow time for testing and refinements. Begin by uploading only a few items as you familiarise yourself with the new feed. To begin, create a copy of your current feeds and templates. Using the ChannelAdvisor feed template and the new template available on Amazon Seller Central, begin updating the new fields. Create a label with a subset of your products and test for errors. Once you’re happy, assign the new template to your active feed.

Your template will not automatically transition to new format, so make sure you are aware of the changes required. Begin transitioning as soon as possible to allow time for testing and refinement of your listings. Visit Amazon Seller Central to download the updated inventory file template. 

When this transition occurred in the US last year, we hosted a webinar to guide retailers through the process. You can download the slides and recording here: http://ow.ly/ijh5t 

The new Shoe template will be available in ChannelAdvisor with the 12th March release.

If you are a retailer with products appealing to those who have a penchant for technology, Newegg should be high on your growth plan. The technology savvy-- whether they be guys or gals—frequently start their searches on Newegg.com.  What’s more, these shoppers tend to be incredibly loyal.

There are plenty of other successful categories on Newegg outside of Consumer Electronics and IT.  At ChannelAdvisor, we’ve seen sellers with products in Sporting Goods, Home/Car Audio and Office supplies do incredibly well on this thriving marketplace.  In addition, Newegg offers a wide variety of promotional opportunities for retailers.  

In short, if you have products for techies whether they be girl geeks or gadget heads, you don’t want to miss this opportunity to reach them.  If you're interested in finding out more about selling Consumer Electronics on Newegg, you can sign up for more information.

Blog post by Sheridan Orr, ChannelAdvisor Director of Product Marketing

• Part I: High level overview of Amazon's Q4 (Available here)
• Part II: Deep dive into Amazon's Q4 3P performance  (Available here)
• Part III: Under the hood of Amazon's FC network (FC = Fulfillment Center) (You are here)

Important Note on this blog post before we get started:

All of the information in this article is from publicly available sources including, Amazon public reports, CBS, NBC, Fox news, Foursquare, google maps, The MWVPL International Supply Chain Experience, Amazon FBA documentation, wikipedia, Amazon's job listings and Amazon's fulfillment recruitment site. 

Amazon's FC network is a living breathing 'entity' with new facilities opening and closing all the time.  We will work to keep the data up to date on a quarterly basis. Please let us know in comments if you find an omission or have any FC news we should add to our db.

Backgrounder on Amazon+Fulfillment

 If you look at the growth of Amazon compared to e-commerce (as measured by ComScore), you noticed that before 2006, Amazon grew in-line with e-commerce and then after that time, Amazon grew significantly faster.  I attribute boost in growth rate to two things:

• 3P - Amazon's Third party marketplace is a huge win - it stocks the shelves (selection), creates price competition (value) and frees amazon's cash to be invested elsewhere
• Free shipping programs - Industry lore goes that Amazon did research and decided that instead of marketing, if they put every dime into lowering shipping costs to consumers it would drive more sales.  They started with super saver and then introduced Prime (free all-you-can-eat 2 day shipping for ~$80)

Most readers know this, but just in case: these two programs 'intersect' with a program that Amazon calls FBA - Fulfillment By Amazon.  In this program, Amazon allows 3P sellers to use their FCs for a fee.   The beauty of this program is that it allows 3P sellers access to the Amazon Prime program which we estimate is 10% of Amazon's customer base (approx 20m), but they spend 4X the average - so Prime represents about 40% of the Amazon wallet.

In the past two posts, we covered the important 3P results from Q4, and in this post we want to dig deeper into fulfillment because it is the heart of the Prime experience and strategically very important to Amazon's success.

Why does fulfillment matter?

Amazon has been building fulfillment centers (FCs from here out) at a rapid pace and following a pattern where they enter a state/country/region and build out 2-5 FCs around population centers.  During the Q4 conference call there was an interesting Q+A exchange between Morgan Stanley's internet analysts, Scott Devitt and Amazon's CFO, Tom Szkutak that I have snippet-ed from the transcript (here if you want to read the whole thing):

"Devitt:  ...it looks to us that you have successfully begun to transition your logistics cost in the direction of being more of a fixed fulfillment cost, with lower unit based shipping costs...."

Szkutak: "In terms of fulfillment, you're right. Over the past few years, we have expanded our FCs pretty extensively to the point where we are closer to customers; and you are seeing that reflected in our transportation costs...."

This makes logical sense.  Let's say that before it built a FC near SFO, the closest FC was Las Vegas which is 550 miles away.  That's a lot of ground for packages to cross and thus high transportation cost.  Now let's say that the product moves to within 10 miles. You have taken essentially 550 miles out of the trip that package travels (assuming you can be smart about getting the right products and limiting the movement intra-FC, etc.)

In this post, we'll look under the hood of Amazon's FC network and get a good feel for:

• How large is Amazon's FC footprint both domestically and abroad?

• How many of the top US cities does Amazon cover with their FC network?

• How many FCs has Amazon already announced for 2013?
• What is it like inside Amazon's FCs?
• Finally if you stick around and you are an FC geek like me, I have a collection of interesting videos and pictures of Amazon's FC network that I've found over the years.

This is very timely because as more and more retailers, manufacturers and sellers are leveraging FBA and programs like FBA export, we are getting a lot of questions about Amazon's fulfillment network. The top question is....

How large is Amazon's FC footprint?

Amazon gives every FC a designator or name that we call it's "Amazon Code" - these are usually three letters and a number and tend to use airport codes as a base and then a number for the sequential order they were opened.  For example, the FCs in Northern Kentucky use the CVG designator (CVG1, CVG2, CVG3), because they are near the CVB Cincinnati airport.  CVG1 was opened before 2, etc.  Sometimes Amazon closes an FC and you'll see the first FC in an area starts with a 3,4,5.  That indicates that 1, 2, etc. are no longer operational.  In a couple of cases, the FCs code share. For example, in Seattle, SEA7/SEA8 appear to be the same facility, but SEA7 is the part of the FC that is for normal goods and SEA8 is for refrigerated groceries.  In this example, Amazon gives them two codes to avoid confusion.

Also, Each FC can have a bunch of other features such as:

• Is the FC open for FBA or 1P only?
• What's the size of the FC (we standardize on sq-ft)
• Is the FC designated for small items, large, or all types?
• Is the FC used for returns?
• Is the FC used for cross-shipping or replenishment (for cross shipping to other FCs in the network)
• Does it have product specific features such as refrigeration or a fashion area (irons and hanger type setup)?
• Amazon acquired Kiva last year and some of the facilities (particularly the 2013 build-outs) appear to be using those systems vs. miles of conveyors and hundreds of runners.

In this post we only go into the big picture items such as city/state/code/fba?/sq-ft, there is a site that tracks more detail available here.  Also, we do not include most Zappos or Quidsi FCs in these details.  It's not clear if Amazon has 100% assimilated them (meaning they ship non Zappos/Quidsi items) or not.  One of the ones we list in KY has a Zappos name, but appears to have been converted to a multi-purpose Amazon FC.

Here is the summary data of Amazon's FC US network: (A map and complete list are provided in Appendix A.)

• In the US, Amazon has 46 FCs representing 36.6 million sq-ft.
• In 2013/14, Amazon has announced 8 more FCs for a total of 8.3 million sq-ft
• This will bring the US total to 54 FCs, representing 45 million sq-ft

For non-domestic: (note it is harder to find reliable FC size information outside the US so these are quite conservative) A map and list are provided in Appendix B.

• Non-domestically, Amazon has 43 FCs representing 20 million sq-ft.
• In 2013/14, Amazon has announced 5 more FCs for a total of 4 million sq-ft
• This will bring the non-domestic total to 48 FCs, representing 24 million sq-ft

Putting those together we get a global FC network that has:

• 89 total FCs operational representing 56.6m sq-ft
• 13 FCs coming in 2013/14 for an additional 12.3m sq-ft
• Total FC announced network of 102 FCs, ~70m sq-ft

Numbers like these are hard to put in perspective.  One comparison is Wal-mart, who has one of the World's largest logistics systems.  Walmart has 158 distribution centers in the US alone.  So Amazon's US footprint is 1/3 Walmart's US footprint.  It's a bit apples and oranges because Walmart is shipping pallets around and to stores, whereas Amazon is storing singles and shipping to consumers, but you get the general idea.

Interactive map of Amazon's US FC Network

Here is a map that shows the US Amazon FC network (a table is provided in Appendix A ):

View Amazon US FC Map - Amazon Strategies in a full screen map

Interactive map of Amazon's Non-Domestic FC Network

Here is an interactive map that shows the non-domestic Amazon FC network:

View Amazon non-domestic Fulfillment Center Footprint in a full screen map

One thing you notice when you look at the maps is that Amazon has 'clusters' of FCs around certain areas.  For example, Kentucky has a lot of facilities, but you don't see any in Florida.  That distribution got me thinking about how Amazon's FC footprint maps against the top population centers.  In this table, I list the top 15 metros according to the 2011 US Census to see if Amazon has them 'covered' (a FC basically in their back yard) or not:

Interestingly, within the top 15 metros, there are only three metros that Amazon doesn't have covered already or in process - especially with the California and NJ buildouts currently under way.  The three are Miami, Atlanta and Detroit.

Conclusions

Amazon's massive network of 102 global FCs providing over 70m sq-ft of scale.  They cover 12/15 top US metros.  Of the 102 FCs, 13 are set to open in 2013/2014.  We'll be watching this on a quarterly basis as we get a lot of questions about the FC network.

While it is hard to find any definitive lists of online and offline retailers and the sizes of their logistics capabilities, 

Scot's favorite Amazon FC videos and photos from around the web

As recently as 18 months ago it used to be near impossible to find any pictures or video of the inside of an Amazon FC.  As Amazon has increased the US buildout and worked with local governments on incentives, more video has found it's way out.  Before we get to video though, here is a slide show of my favorite FC images.  I find that these really help give context to what a 1,000,000 sq-ft building looks like.

• 1m sq-ft is the same as about 22 acres
• 1m sq-ft is the same size as 18 football fields

This interactive slideshow has ~20 of my favorite images from flickr and other image sites of Amazon's FCs.

Videos:

I'm from South Carolina and went to school in Columbia, so this one hits close to home.  This video is from when Amazon formally opened the FC in Cayce/West Columbia (not embeddable). 

VIDEO: Amazon's new SC FC

This one is very old - from 2008, and is interesting because a) it stars a monkey and b) the FC isn't near the scale and complexity you saw in the pictures above.

Here's a good one, CNN did a 2010 feature called 'Inside one of Amazon's busiest days'.  My favorite part is when the talent grabs a product and the Amazon guy kind of freaks out. Favorite quote: "so it's all about software!"

OMG it's 1D in a FC!

FBA promo video

This is a really good current one from Q4 12 from a NY local news station.  It has some nice shots of one of the giant 1.2m+ sq-ft FCs in Phoenix (PHX5/PHX6/PHX7).

If you are interested in the KIVA robot system, here's Mick giving a really good walk-through of a day in the life of a Kiva robot here:

VIDEO: KIVA ROBOT TALK THROUGH

Appendix A*: Amazon's US FC network:

Appendix B*: Amazon's non-domestic FC network:

*Source: MWPVL International Supply Chain Experience