Sellers on the Amazon.com Inc. marketplace, like all retailers and business owners, are figuring out how to mitigate the impact of the coronavirus, called COVID-19. Given how quickly restrictions on businesses from local governments and marketplace platforms are changing, some sellers have had to switch strategies daily.
22% of retailers say they are making adjustments to their marketplace strategy as a result of the coronavirus pandemic, according to a Digital Commerce 360 survey of 304 retailers during the first week of March. But what those adjustments are may be different for each merchant. Some are sending more products to Amazon, while others may be focused on sales on their own websites where they have a higher profit margin since they don’t have to pay Amazon a commission on each sale or fees for such added benefits as fulfillment.
Amazon suspends shipment of “non-essential” products
Right as some sellers were planning to lean more on Amazon, however, the ecommerce giant announced late Monday that it will temporarily suspend shipments of “non-essential” products to its Fulfillment by Amazon (FBA) warehouses from its third-party marketplace merchants in the U.S. and EU. With FBA, Amazon stores sellers’ products in its warehouses and delivers the products to consumers. When sellers use FBA, their products are a part of Prime, Amazon’s loyalty program that offers 2-day free shipping, free streaming of TV shows and more.
Shipments to Amazon fulfillment centers suspended until April 5
Shipments to Amazon fulfillment centers are currently suspended through April 5. For now, Amazon (No. 1 in the Digital Commerce 360 Top 1000) will only accept new inventory of products that fall into household staples, medical supplies and other high-demand categories like baby products, health, personal care, grocery and pet supplies. According to Amazon, the decision was made in order to fulfill high-demand products and reduce delivery times.
“We’ve never had to continuously make so many drastic business decisions in such a short period of time,” says Andrew Jacobs, CEO of online office supplies retailer Jam Paper & Envelope, which sells on its own website and marketplaces, including Amazon. Jam Paper’s products do not fall into Amazon’s “essential” categories.
The retailer, which has a warehouse in New Jersey, split its warehouse/shipping department into two shifts to spread people out, as has been advised by the government to stop the spread of the coronavirus. However, there has been discussion from New Jersey’s state government about total business shutdowns—which would shut down operations of Jam Paper’s fulfillment center—so the company had a new strategy: ship as much to Amazon as fast as possible, Jacobs says.
“But just in case the news cycle couldn’t get worse, Amazon announced no new shipments to Amazon, which completely took us by surprise,” he says. “Luckily, we keep pretty substantial inventory levels at Amazon, which should last for a little while. But the scary part is, how long will this last? How much is enough inventory there? How long will our warehouse/shipping facilities have to close? No one has answers. That’s the scary part.”
Sellers should be prepared to send inventory as soon as the FBA suspension lifts, whether that’s on April 5 or later, says Fahim Naim, founder and CEO of eShopportunity, a consultancy that helps brands sell on Amazon. He also suggests sellers consider canceling upcoming promotions on Amazon and ad spend so their current inventory doesn’t sell out as fast as it might when there’s a promotion attached to the listing.
Strategies are changing for sellers that fall into the “essential” categories too. “I am literally rewriting the playbook on the business,” says David Rifkin, CEO of MPO Global, which sells items in a number of different categories, including disinfectants, microfiber products and pet odor products. The retailer typically maintains about 30 days of inventory at FBA warehouses, so they are in a good position to continue operations at the moment, Rifkin says.
“We will lose quite a bit of money obviously, but we will still remain profitable through this,” Rifkin says. Amazon sellers may lose money if Amazon’s shipments start getting delayed, consumer spending slows down and if Amazon starts prioritizing the sale of its own product lines above its marketplace sellers. “Additionally, we will be doing lots of shipping from our warehouse until further notice,” he says, so anything that might run out on Amazon Prime, the merchant can fulfill on its own.
Coronavirus quarantine increases Amazon visitors
The coronavirus outbreak has led to many retailers shutting down store operations and pushing consumers to their websites. As a result, even more consumers are flocking to Amazon for essential and non-essential items. Between March 14 and March 17, daily visitors jumped 5.18 million to 73.55 million visitors, according to traffic data source SimilarWeb Inc. Compared with the same time period in 2019, traffic remained steady at roughly 68 million from March 14 through March 17.
EShopportunity’s brands started seeing a lift in Amazon sales since the beginning of March, Naim says. Amazon sales grew about 20% at the beginning of March across all of its brands, Naim says. Jam Paper said its sales were growing 20-25% more than what it had projected during the week of March 9, Jacobs says.
Compared with February, sales in “non-essential” categories, such as toys and supplements, grew about 25% in March, Naim says. In “essential” categories like health/beauty and household products, sales growth ranges between 30-100% in March compared with February for eShopportunity’s clients,” Naim says. The consultancy works with brands such as mattress brand Nectar (No. 217), personal care brand Native and crafts retailer Michael’s Stores (No. 247).
When looking at the top search terms on Amazon.com, the majority of the top 50 fall in the household products/personal care categories, such as toilet paper, hand sanitizer and Clorox wipes, according to data from Marketplace Pulse, a company that tracks data on marketplaces. Toilet paper is the No. 1 search term the week of March 8–14, up from No. 37 the week of Feb. 23-29. “Toilet paper bulk” is No. 4 during the week of March 8 week, up from 2,647 during the week of Feb. 23.