Executive Summary
On January 1, 2026, Amazon will stop offering all FBA prep and labeling services in the U.S. marketplace. Sellers who relied on Amazon for FNSKU labeling, poly-bagging, bubble wrapping, and compliance preparation will now need to ensure compliance before products arrive at fulfillment centers.
This creates both a challenge and an opportunity.
- Sellers face new risks: rejected shipments, delayed listings, fines, and inventory losses.
- 3PLs are uniquely positioned to step in, expand their Value-Added Services (VAS), and capture new revenue streams.
This white paper explores what the shift means, the size of the opportunity for 3PLs (a $68B+ market segment and growing), the challenges of scaling VAS, and how innovative 3PLs can use compliance to win more business.
1. The Amazon Shift: What’s Changing—and When
- Effective Date & Scope: Amazon publicly confirmed via its SP-API changelog that as of January 1, 2026, all FBA prep and labeling services will be discontinued for U.S. shipments—including those via AWD, AGL, SEND, and Supply Chain Portal.
Here’s what stops on January 1, 2026:
- All FBA prep services
- Item labeling services
- Prep for items going through Amazon Warehousing and Distribution (AWD)
- Prep for Amazon Global Logistics (AGL) shipments
- Prep for SEND program items
- Prep for Supply Chain Portal inventory
Why Now?
Amazon says sellers’ packaging capabilities have improved, and eliminating prep allows Amazon to streamline fulfillment operations, reducing delays and bottlenecks. They’re handing the responsibility back to sellers for good.
Transition Period:
Knowing the exact timeline is key to planning your transition:
Now through December 31, 2025:
Amazon prep services are running as usual. Sellers can still choose Amazon as their prep provider. Current pricing stays the same. This is your transition period, so use it to your advantage.
January 1, 2026 and beyond:
Every new shipment must arrive fully prepared and labeled. Shipments created before January 1 will still be serviced, even if they arrive in early 2026. If products arrive unprepared, they will be rejected or disposed of. Amazon do not reimburse lost or damaged unprepared items.
2. The Opportunity for 3PLs: Market Size & Strategic Timing (2024 Data)
- According to Armstrong & Associates, Inc. (A&A), the U.S. third-party logistics (3PL) market generated $299.5 billion in gross revenue in 2023. Within this, the Value-Added Warehousing and Distribution (VAWD) segment accounted for $68.1 billion, making it one of the strongest-performing areas of the industry. A&A has been tracking and publishing 3PL market estimates since 1994 and is widely regarded as a leading authority on the sector.
- In 2024, A&A reports that the overall U.S. 3PL market showed signs of recovery after a challenging 2023. Net revenues of U.S. 3PLs grew by 1.6% to $131.2 billion, with VAWD continuing to demonstrate resilience as sellers demanded more compliance, packaging, and specialized warehousing services.
- The North American 3PL market as a whole was valued at $419.7 billion in 2024, with forecasts projecting strong growth throughout the decade. Market research also indicates that the VAWD segment is expected to expand at a compound annual growth rate (CAGR) of around 7.9% through 2030 as sellers increasingly rely on 3PLs to provide compliance and prep solutions in addition to storage and distribution.
- With Amazon’s prep services ending in 2026, this growth is highly strategic. Sellers, particularly mid-sized Amazon merchants without in-house compliance capabilities, are actively searching for 3PL partners who can guarantee compliant, “Amazon-ready” inventory. 3PLs that already have dedicated value-added facilities, compliance teams, and labeling solutions are positioned to capture this surge in demand.
3. The Challenges of Offering VAS- And Who’s Most Affected
Operational & Cost-Related Challenges:
- Space planning & facility layout: Prep/labeling operations require dedicated space, clean environments, proper lighting, staging and QC zones.
- Labor & Training: Even though many 3PLs have ramped up staffing post-pandemic, training for Amazon’s exact requirements (label placement, packaging materials, safety labels, etc.) is complex. Misunderstandings cause rejections.
- Technology & Visibility: Manual processes for label checking, carton integrity, compliance verification slow throughput and introduce error. Lack of monitoring systems or automation (scanning, vision, dashboards) increases risk.
- Cost transparency and pricing: Pricing VAS needs factoring in material costs (labels, packaging, polybags), labor, risk of rework, and operational burden. Underpricing will erode margins; overpricing may push clients away.
- Compliance complexity & regional/legal regs: Some products (alcohol, cosmetics, chemicals, food) have extra labeling laws, warnings, local jurisdiction compliance. This adds complexity.
- Scale & peak season capacity: Demand will spike as the deadline nears. 3PLs without spare capacity or flexible staffing may suffer inability to take on new clients or miss deadlines.
Who Is Most Affected / Most In Need:
- Mid-size Amazon sellers (e.g. $1M-$5M revenue) who lacked in-house prep or packaging operations and depend on Amazon’s previous services.
- Brands shipping direct from overseas or manufacturers that do not prep or label to U.S./Amazon standards at source, thus relying on partners in the U.S.
- High SKU count or fast turnover product lines (small accessories, beauty, electronics, novelty goods) where labeling and packaging variation is high.
- Sellers who launch new SKUs frequently, every new variant must meet compliance on first inbound to avoid delays.
Possible Implications for Full-Pallet 3PL Operations
While Amazon’s official communication about the 2026 policy change focuses on unit- and case-level prep requirements (e.g., labeling, bagging, wrapping), there may be practical implications for 3PLs that usually handle full pallet in/out operations.
We assume that in some cases:
- Pallets arriving from suppliers could need to be broken down if cases or items are not labeled to Amazon standards.
- 3PLs may then need to relabel at the case or unit level, apply required compliance stickers, or repackage items.
- Finally, pallets would have to be rebuilt and staged for outbound shipping to Amazon fulfillment centers.
This workflow is not explicitly outlined in Amazon’s policy or industry articles, but it represents a likely scenario for pallet-based 3PLs serving midsize sellers who previously depended on Amazon’s prep services.
Risk if Unprepared:
- Shipments rejected or put on hold, incurring wait times and storage fees.
- Loss of revenue due to stockouts or listing delays.
- Inventory possibly destroyed if non-compliant and beyond remedy.
- Increased costs from rush services, rework, emergency packaging, or needing to use more expensive “just in time” 3PLs.
Common Value-Added Services (VAS) in 3PL Operations
As Amazon steps away from prep, the demand for Value-Added Services (VAS) will rise sharply. These are the services that go beyond basic storage and transportation, and they often generate higher margins for 3PLs while reducing compliance risks for sellers.
Most Common VAS for FBA and Retail Compliance
- Labeling & Relabeling – Applying FNSKU barcodes, suffocation warnings, fragile labels, or country-specific compliance stickers.
- Kitting & Bundling – Combining multiple SKUs into a single sellable unit (gift packs, multipacks, subscription kits).
- Poly-Bagging, Bubble-Wrapping & Packaging Adjustments– Adding protective wrapping, suffocation warnings, or ensuring fragile items meet Amazon’s packaging standards.
- Sticker Removal / Rework – Removing manufacturer labels, retail stickers, or barcodes that conflict with Amazon requirements. (Though less frequent than labeling or bundling, rework is labor-intensive and often priced as a premium service)
- Pallet Deconstruction & Repacking (emerging demand) –
- While not explicitly mentioned in Amazon’s guidance, pallets shipped from manufacturers may need to be broken down, relabeled, and rebuilt to meet compliance standards.
- For 3PLs handling full pallet in/out workflows, this could evolve into a premium VAS offering—turning what was once a pass-through operation into a new revenue stream.
Why VAS Matters for 3PLs
- Recurring Revenue: Every new inbound shipment creates prep demand.
- High Margins: Unlike transportation, VAS is less commoditized and harder to compare on price.
- Client Stickiness: Sellers who rely on a 3PL for compliance and prep are less likely to switch providers.
Risk Reduction: VAS prevents rejected shipments, delays, or lost inventory—which directly impacts seller trust.
4. Ideas to Elevate VAS into a Competitive Advantage
Here are more refined and expanded ideas, taking into account recent market conditions and the shifts in seller behaviors in 2024:
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- Standardized Compliance Packages: Create predefined service tiers (e.g. Basic, Standard, Premium) that bundle common prep tasks: labeling, poly-bagging, warning labels, packaging QA. Easy for sellers to understand, compare, and budget.
- Pre-Shipment Label & Packaging QA Service: Offer a “QC check” before shipment leaves client’s site or before client ships to you. Use technology (vision systems, photos, checklists) to catch non-compliance early.
- Turnkey Manufacturer/Source Agreements: For sellers manufacturing abroad, offer agreements to have product prepped at source (if feasible) or have 3PL oversee labeling/packaging spec compliance at origin. This reduces cost, freight weight, and late fixes.
Technology as Differentiator:
- Computer vision to check label placement, packaging defects.
- Real-time dashboards showing % compliance, error rates, and throughput.
- Automated label printing/sorting/insertion.
- Integration with seller’s systems for prep instructions, compliance specs.
Material & Packaging Optimization:
- Use cheaper but compliant packaging materials; create reusable pack designs; optimize packaging to reduce waste, volume weight, and cost.
Flexible Pricing & Capacity Offers:
- Early-bird discounts for sellers who commit now.
- Seasonal surge capacity offers (Q1/Q2 2026) locked in.
- Tiered pricing for different SKU complexity.
Marketing & Positioning Strategies:
- “100% FBA Compliance Guarantee” messaging.
- Case studies showing time/money saved, fewer returns or rejections.
- ROI calculators: show sellers how much they save (or avoid losing) by using your compliant VAS vs trying in-house or being unprepared.
Education & Thought Leadership:
- Webinars/workshops now (2025) to help clients understand Amazon’s updated guidelines.
- Cheatsheets / checklists for Amazon’s prep requirement.
- Content marketing: blog posts, LinkedIn posts, podcasts targeting Amazon sellers who may be scrambling to adapt.
Scaling Operation & Processes:
- Build redundancy in prep staff / train backup staff.
- Cross-training operations so labeling, packing, QC can shift with demand.
- Invest in flexible equipment that can handle different sizes, warning labels, polybags, and fragile items.
Conclusion
Amazon’s decision to end FBA prep services in 2026 is now part of seller supply chain planning.
With Amazon stepping back from prep, 3PLs will need to take on more complex pallet workflows—sometimes breaking pallets down, relabeling cases, and rebuilding outbound loads that are “Amazon-ready.” This adds touches, risk, and cost.
That’s where Zimark’s Smart Pallet Tracking comes in.
By combining computer vision at the dock door with real-time shipping control, Zimark ensures:
- Every pallet is validated before it leaves the warehouse
- Compliance labeling is checked and confirmed automatically
- Movements are logged seamlessly into existing WMS for full visibility. Instead of relying on manual scanning and human memory, 3PLs can build compliance and accuracy into the pallet itself.
For operators, this isn’t just a way to reduce errors—it’s a chance to offer a new class of value-added services: pallet rework, relabeling, compliance-proof prep, all backed by 100% digital traceability.
In a market where margins are thin and Amazon is pushing responsibility outward, 3PLs using Smart Pallet Tracking will not only avoid mistakes—they’ll be able to market compliance as a differentiator, win new business, and grow revenues.
Disclaimer
This article is based on information gathered from publicly available online sources, including:
- Armstrong & Associates, Inc. – “U.S. 3PL Market Size Estimates” (updated March 2025)
- Supply Chain Dive – “Amazon to end FBA prep, item labeling services in 2026” (2024)
Amazon Seller Central Help – “FBA Product Barcode Requirements” (2024)
MyFBAPrep – “Amazon Ends FBA Prep Services: What Sellers Need to Know” (2024) - PBD Worldwide – “Amazon’s FBA Prep Shutdown in 2026: Readiness Plan” (2024)
All data, projections, and references to market size or growth rates are the property of their respective publishers. Zimark does not claim ownership or authority over this information.
The insights and recommendations provided in this paper are intended solely for informational and educational purposes. They do not constitute financial, legal, or operational advice, and should not be relied upon as a substitute for professional consultation. While every effort has been made to ensure accuracy, Zimark assumes no responsibility for errors, omissions, or outcomes resulting from the use of this content.
