July 1, 2014, 1:16 PM

The pros and cons of commingling for Amazon merchants

When Amazon handles fulfillment, it mixes together products it deems identical. While that can cause grief for Amazon merchants, the program also offers some important benefits.

Apple earbuds aren’t cheap. At Target, they can cost up to $17. But on Amazon you can find a version that looks identical and pay under five bucks.

The cheaper earbuds may look the same, but consumers are usually aware a less-expensive knockoff is cheaper for a reason—in this case, the earbuds most likely don’t have the same sound quality or product lifespan. When you’re buying cheap, that’s generally what you want: fast and disposable.

But suppose you purchase the name brand Apple earbuds, more expensive and purportedly better quality, and then receive a pair that is clearly a knockoff? If you’re an Amazon shopper, returns are easy, especially with Amazon’s A-Z guarantee. And if you’re really annoyed, you can vent your frustration about the Amazon seller via Customer Reviews.

For Shoppers, Amazon is a win-win, even if they don’t get what they were expecting.  On the seller side of this scenario however, the horizon is significantly more grim.

The earbud seller in this situation faces severe consequences from negative account reviews, including suspension, or—in the worst case scenario—removal from Amazon. But here’s the kicker: Those earbuds may not even have come from the seller who’s responsible for the return and gets the harmful review.

How does this happen? An Amazon fulfillment option called Commingling.

The Dangers of Commingling for Amazon Sellers

Counterfeit or mislabeled products are a common pitfall of Amazon’s commingling service—a fulfillment option available to Amazon sellers that compiles products from different sellers for processing and shipment by Amazon.

The Amazon commingling fulfillment option mixes products with the same manufacturer ID from various third-party merchants selling on Amazon, along with those that Amazon sells, and from brands directly supplying Amazon.

Commingling as a fulfillment option is designed to increase fulfillment efficiency for Amazon by increasing purchase volume and sales while decreasing shipping time, for sellers using Fulfillment by Amazon. Amazon was operating 56 distribution centers in North America in June, and 107  across thirteen countries, according to supply chain consulting firmMWPVL(MWPVL and Amazon warehouses http://www.mwpvl.com/html/amazon_com.html ). With so many warehouses—and the number keeps growing all the time—Amazon pitches commingling as a fulfillment option that saves time and money for merchants that choose to use Fulfillment by Amazon (FBA).

So it sounds like a great idea. But cautionary tales of commingling have started percolating to the surface from experienced Amazon sellers. In our earbud knockoff scenario, and with similar commingling issues, Amazon sellers face the prospect of poor reviews, unnecessary returns and the reality of any Amazon seller’s worst nightmare: removal from Amazon.

Which Amazon sellers does commingling impact, and what can suppliers do about it?

In order to understand how commingling impacts Amazon sellers, and what sellers should look out for, we’ll need to first take a couple steps back and look at which sellers use Amazon fulfillment for orders; supply and demand in an age of near-instantaneous gratification; and why Amazon sellers choose this fulfillment option to begin with.

Fulfillment by Amazon (FBA) Labeling

Online retailers who wish to sell on the Amazon Marketplace have a variety of selling options to choose from based on their goals, fulfillment capabilities and other seller attributes.  One Amazon selling option for third-party sellers, Fulfillment by Amazon (FBA), utilizes Amazon’s fulfillment centers for product packaging and shipping.

In order to be received, stored at, and shipped from an Amazon fulfillment center, Amazon requires FBA sellers label their products for shipping. Commingling is a feature of FBA which saves sellers time and energy in labeling products for fulfillment.

To sell through FBA, retailers are required to label every product based on its unique product identifiers, including:

  • Product ID- The Manufacturer’s product identifier or bar code. These can include UPC , JAN , ISBN, GTIN or EAN bar code (UPC is most commonly used in North America)
  • FBA label – Label highlighting the product information for Amazon to identify (this can be printed from a merchant’s Seller Central Account)

Amazon's default FBA label setting is “Labeled Inventory.” Labeled Inventory requires an FBA label for each product you send to Amazon (printed at Seller Central) and identifies products you send as attributed to your seller account.

For FBA sellers, this means every product sent to Amazon for fulfillment needs to have an FBA label. That’s generally a daunting manual task for smaller merchants, and also an issue for sellers with a large numbers of products.

Amazon outlines more about labeling and label requirements on its Labeled Inventory page, which highlights this helpful video:

For sellers who can’t print labels or handle label volume, Amazon offers an FBA Label Service through which Amazon labels products for a price (per-unit fee).

What Is Commingled Inventory?

FBA Labeled Inventory requires that each product you send as a seller has its own FBA label. Commingling is the other label option for FBA and it saves sellers time and energy.

The commingled inventory option provides the option for retailers to skip labeling using the stickerless, commingled inventory option.

Commingled inventory does not require individual labels, but instead uses a bar code, such as UPC, to group products. Unlike individual labels however, commingling groups the same products from different sellers together.

Commingling inventory is essentially pooling your inventory with the inventory of other sellers at Amazon's fulfillment center, all of which are grouped by Amazon based on their product ID. Amazon packs, ships, and provides customer service for those products just as it does with all FBA orders.

Here is an macro idea of how commingling works for an FBA widget sold by a third-party Amazon seller:

Par for the course in Europe

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