This is the Amazon explanation of commingling:
If you participate in the FBA Commingling programme, items in your inventory may be swapped with identical items owned by Amazon Retail or other FBA Sellers who have also elected to participate in the programme. When an order is fulfilled with a commingled item, an (additional) VAT transaction must be reported, depending upon whether you have sold or bought to or from another merchant:
“Commingling_Sell”: Payable VAT related to the disposal of a product to another FBA seller (or Amazon Retail), participating in the Commingling Programme.
“Commingling_Buy”: Input VAT related to the acquisition of a product from another FBA seller (or Amazon Retail), participating in the Commingling Programme.”
This has obvious advantages in that you can potentially fulfil a sale even though your stock is run down, and it improves the efficiency of the fulfilment process. It will also save you time in that you don’t have to put the FBA label on all of your products. But there are pitfalls. One issue is the potential for counterfeit or mislabelled products to be sold in your name. Whilst Amazon will do its best to eliminate such products they can go unnoticed. The consequences for the seller are poor reviews, unnecessary returns and the reality of any Amazon seller’s worst nightmare: removal from Amazon. We know from our own client’s experience that Amazon are inclined to act and ask questions later.
As Amazon themselves say “When you choose to commingle inventory, your products become interchangeable with the same products from other sellers for both order fulfilment and removals.” Proving that a counterfeit, damaged, or poorly packaged product was not supplied by you is well nigh impossible.
Having said that it is impossible to distinguish your own supplied product if inventory is commingled, there is nothing to stop you still applying FBA labelling which will identify your product. That does of course remove one of the advantages of the programme. Another stated advantage of speedier delivery doesn’t necessarily mean that non-commingled product will be slower.
Recent research conducted by YouGov for parcel locker provider InPost looked at the reasons for needing items quickly, and almost a quarter (24%) cited the convenience of having items delivered rather than going to the shops.
However, the second most popular answer saw almost a fifth (17%) say they had never needed an item quickly, suggesting the pursuit of speed may not be as important as many would have us believe.
You can also chose which products are commingled. Some products may carry less risk than others in terms of the likelihood of counterfeit or damaged product and the savings of efficiency of labelling will vary from product to product relative to the ticket price and margins on that product. A carefully thought out strategy, selecting product for commingling that maximise efficiency and minimise risk is the way forward.
As specialist eCommerce accountants you would expect us to comment on the VAT issues. As mentioned at the beginning there are two additional transactions created as a result of commingling. You should absolutely ensure your accountant is aware that products are commingled if you take this option.