Amazon officially shuts down its Small and Light program today

Today (August 29), Amazon's Small and Light Program in the US officially exited the stage of history. The European site will also be closed at the end of next month.

Less than a year after Temu entered the market, Amazon has already "taken action" on the Small and Light Plan twice. The first time: in November last year, it notified that the price cap of the Small and Light Plan would be increased from US$10 to US$12 at the beginning of this year. At that time, many industry insiders interpreted it as "a counterattack against Temu, which focuses on low prices." Now it seems that this strategy has not worked. Less than half a year after the policy came into effect, Amazon directly cut off the Small and Light Plan, trying to compete with Temu again with faster delivery efficiency and lower prices.

The Amazon Small and Light Commodity Program is officially closed today

What is Amazon FBA Small and Light Program?

The Small and Light program allows sellers to offer smaller, lighter, and cheaper products at lower fulfillment fees. Normal Amazon FBA fees often make selling low-priced items unprofitable, but the Small and Light program reduces the cost of fulfillment for items that meet certain criteria, including weight, size, and price. However, the cost reduction comes at the expense of slower shipping speeds than standard Amazon logistics.

Today, Amazon’s Small and Light Program in the US came to an end, and the Amazon logistics rates for low-priced products officially took effect. In fact, as early as July 17, the Amazon Small and Light Program had stopped accepting new product registrations.

The closure of the program will bring about the following changes :

First, for products with a selling price of less than $10 and not registered for the Small and Light Program, the logistics fee will be $0.77 lower per item on average; second, for products that have registered for the Small and Light Program and are priced less than $10, the delivery fee per item will be $0.30 more than the Small and Light Program, and products priced between $10 and $12 will be charged according to the standard Amazon logistics rate; third, products priced less than $10 will enjoy standard FBA delivery time, and delivery time will be improved; fourth, products will no longer require volume and size. Fifth, products priced less than $10 will not be affected by the 2023 holiday peak season delivery fees.

It should be noted that most of the products priced below $10 have participated in the Small and Light Program. Therefore, it is not difficult to guess that Amazon’s move is mainly to achieve two goals: one is to increase delivery fees; the other is to force products priced between $10 and $12 to reduce their prices.

Not only the Amazon.com, but also the European Small and Light Program will be closed on September 26. At that time, Amazon's logistics rates for low-priced goods will officially take effect in the eight major European sites. Before that, the products registered for the "Small and Light Program" will continue to be subject to the "Small and Light Program" rates. New product registration for the program will end after September 14.

Here are the price thresholds for each European site:

The UK is 10 pounds, Germany is 11 euros, France, Italy, Spain is 12 euros, the Netherlands, Sweden is 140 Swedish kronor, Poland is 55 zloty. All prices equal to or below this threshold (including VAT) will be subject to the new low-cost logistics rate.

Competition in the mid- to high-priced market will intensify

After the policy was released, many sellers said that their profits had decreased a lot. They had originally wanted to use low prices to dominate the market, but they did not expect Amazon to make a sudden change of attitude. Many sellers whose prices were between US$10 and US$12 were banging their heads on the table.

Even though sellers are in pain, Amazon is still making drastic reforms. Judging from the current market competition, the ultimate purpose of its actions is nothing more than to deal with the impact of Temu. Since it is difficult to compete with it in terms of price, it will try to find opportunities in terms of timeliness.

Because if they compete directly on price, Amazon will find it difficult to withstand the pressure from Temu. Earlier, foreign media reported that the same retro polka dress was priced at $43.99 on Amazon, but only $13.58 on Temu, a full $30.41 cheaper. However, although Amazon lost on price, it won on time. Because for the same delivery address in New York City, it can achieve one-day delivery, while Temu needs a week.

This is a positive impact from the platform's perspective, but it is different for sellers. From the seller's perspective, in addition to the impact of increased delivery fees, competition for mid- and high-priced products will also be indirectly affected.

At present, Amazon has put pressure on sellers whose products are priced between $10 and $12. If they reduce their prices, competition in the market for products priced below $10 will intensify. As we all know, competition in the low-value market has always been fierce, with thin profits. If more people share the pie, competition will undoubtedly intensify.

So much so that after the policy was released, some sellers said that they did not want to be involved in low-value products anymore and would consider selling products with higher average order value. From this point of view, the cancellation of the light and small plan will indirectly intensify competition in the medium and high average order value market.

In general, on the surface, Temu's direct impact is on Amazon's low-priced products, but in the long run, medium and high-priced products cannot be completely left out.

This year, Amazon sellers have had a hard time due to the double impact of the economic downturn and Temu. Fortunately, the global e-commerce market, which had been shrouded in dark clouds, now has a trend of clearing up.

The global e-commerce market is expected to pick up

Market research firm Insider Intelligence recently predicted that global e-commerce sales will grow 8.9% this year and 9.4% next year. After three years of uncertainty, the global e-commerce market has returned to stability and predictability.

According to its forecast, the retail market will see the following changes:

1. E-commerce will accelerate in two years. In 2022, global e-commerce sales grew by 6.5%, which was the weakest year for e-commerce and has now bottomed out. It is expected that the growth rate of the global e-commerce market will reach a high single digit in the next few years. Although it pales in comparison with the growth rate of 20% or more in the past decade, it is still a good sign.

Second, global retail sales will exceed 30 trillion US dollars next year. In 2011, global retail sales reached 15 trillion US dollars. In 12 years, this figure will double. In this process, Chinese and American sellers contribute about half of the growth.

3. Revenge consumption of physical stores fades. In 2022, the growth rate of total retail sales was higher than that of e-commerce, which means that physical stores outperformed e-commerce globally. However, this situation will no longer exist in the future.

4. E-commerce will once again capture market share. After the relaxation of epidemic prevention policies, consumers' enthusiasm for physical stores led to a decline in e-commerce penetration last year. However, e-commerce is expected to continue to seize market share in the future, as the growth rate of e-commerce will continue to exceed total retail sales by at least several percentage points each year.

5. The overall retail industry is currently in good condition, but a slowdown in growth is inevitable. The outlook for global retail sales is slightly better than expected, so the growth forecast for 2023 has been adjusted from 3.9% to 5.5%. The growth rate in the next two years will be similar to that in the decade before the epidemic.

Insider Intelligence said that by historical standards, the outlook for global retail sales is good. Even if the growth rate of e-commerce cannot be compared with that of a decade ago, it is much better than in 2022, and the growth in the next few years will be stronger. However, it also reminds retailers to readjust their expectations and accept the new normal of "good but not great" annual growth.

Amazon Small and Light Program