Amazon Ends FBA Labeling: Seller Adaptation in a Shifting Supply Chain

When Amazon announced on July 28, 2025, that it would completely terminate its FBA prep and labeling services effective January 1, 2026, a noticeable division emerged within the US seller community: one group urgently sought alternatives, while another adopted a wait-and-see approach. This service adjustment, ostensibly driven by "sellers' enhanced self-packaging capabilities," is triggering a deeper transformation in the power structure of the supply chain.The Disappearing Labeling Machines and the Plight of Small and Medium Sellers

At Amazon fulfillment centers in Kentucky, labeling equipment once providing convenience for sellers is gradually being decommissioned. The official explanation states: "The vast majority of sellers now complete packaging and labeling themselves or through third parties." However, for small and medium-sized sellers lacking their own warehouses, this change amounts to a supply chain earthquake. One seller bluntly stated on a forum: "No warehouse of our own, relying entirely on Amazon's prep services – this new policy will crush us!" Real-world data reveals severe challenges:

• Cost Pressure: Third-party labeling costs are $0.1-$0.3 per unit higher than Amazon's original service, adding tens of thousands of dollars annually for multi-million dollar sellers.

• Tight Deadline: Sellers have only five months to rebuild their packaging processes, making human resource configuration a major challenge.

• Escalated Risk: After 2026, non-compliant goods damaged in transit will not be eligible for reimbursement, and violating goods face direct disposal.

Observations from the Los Angeles Cross-Border E-commerce Association indicate that many small and medium sellers have never fully read Amazon's packaging specifications, previously relying on the platform's services to "remedy" packaging defects. This passive compliance model will be unsustainable under the new policy.

Certified Service Providers and the Reshuffle of Logistics Landscape
The alternative solution highlighted in Amazon's policy announcement – third-party certified service providers – is rapidly becoming a market focus. While their quotes are higher than Amazon's original service, demand for these providers, who have passed Amazon's rigorous vetting, is surging. Simultaneously, overseas warehousing services are encountering new opportunities:

• Transit Value Highlighted: Chinese sellers can first ship goods to US third-party overseas warehouses for relabeling and prep before transferring to FBA warehouses.

• Service Diversification: Beyond labeling, overseas warehouses can offer complementary services like long-term storage, product inspection, and inventory liquidation.

Adoption of Amazon Global Logistics (AGL) channels has noticeably increased post-announcement, as the platform's logistics channels offer greater leniency regarding packaging compliance. This synergizes with new services like Box-Level inventory distribution, strengthening Amazon's control over the entire logistics chain.

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Innovative Breakthroughs: From Packaging Design to Collaboration Models
Facing cost pressures, leading sellers are deploying multi-dimensional responses:

1. Product-Packaging Integration: Adopting Amazon's SIPP (Ships in Product Packaging) model reduces prep needs through original factory packaging design. Successful cases show this not only cuts packaging costs by 5% but also qualifies for FBA shipping discounts.

2. Shared Economy Model: Small and medium sellers jointly lease warehouses and share equipment investment, significantly lowering transition costs. One home goods seller reduced equipment investment from $120,000 to $35,000 and personnel costs by 40% using this model.

3. Process Digitization: Utilizing logistics tracking tools to strictly monitor shipment status ensures compliance with Amazon's shortened assessment cycles. Accurately declaring product dimensions and weight avoids account restrictions due to discrepancies.
   

System Restructuring: Amazon's Logistics Combination Punch
The termination of labeling services is not an isolated event but part of Amazon's broader logistics system reform:

• Size Relaxation: Starting June 2025, maximum outer box size increased to 36 inches, facilitating large item shipping.

• Tighter Timelines: A new shipping policy effective July 31st shortened the evaluation cycle from 30 days to 7 days, focusing more on recent performance.

• Split Shipment Optimization: The "Optimize Shipment Splits" model guides sellers towards standardized shipping.
  These policies collectively target one goal: elevating fulfillment efficiency to new heights. As Amazon removes its last labeling machine, it sheds not just equipment, but also the responsibility for non-core operations – shifting these costs and risks upstream in the supply chain.

Finding a New Equilibrium

Faced with rising costs and process changes, sellers of different scales are adopting differentiated strategies. Some mid-sized sellers are investing in building their own or semi-owned prep capabilities to reduce dependence on external services and control long-term costs. Meanwhile, many small and medium sellers are leaning towards utilizing third-party overseas warehousing services or joining vertical category communities to share service provider resources and split costs.

This platform-driven restructuring of the logistics system is altering the industry's competitive rules. The ability to transform compliance pressure into innovation momentum for packaging and processes is becoming a key factor determining seller competitiveness post-2026. As the six-month transition period progresses, the decisions sellers need to make extend beyond the operational level of "how to apply labels correctly" to involve a reassessment of their supply chain control and cost structure.