The Coronavirus has people scared. The closing of stores has led them to shop online. Amazon is their #1 destination 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 from SimilarWeb.
Because of this, Amazon has had to pivot services and regulations for sellers, brands and retailers who use it’s platform quickly. From prioritization of certain product categories to delayed shipping, the changes that Amazon is making because of the effects of the coronavirus is hitting many Amazon sellers hard. In order to better understand how retailers should approach Amazon in the next few months, we spoke with Brian Beck of Beck E-Commerce.
What are the most important changes happening on Amazon that retailers need to look at?
Amazon is experiencing an unprecedented spike in volume as a result of the coronavirus event. With most of the United States population now homebound, transactions have shifted online in massive volumes, and Amazon is the default place people are going online to order products for delivery.
As a result of the sudden onset of this, Amazon has been forced to make some temporary adjustments to their receiving and fulfillment processes in order to handle this volume, while also prioritizing the items that consumers and B2B buyers need most, which includes household items and health-related supplies.
Until early April, Amazon has put a hold onto receiving some categories into its Fulfilled by Amazon service (where Amazon holds products in its stock as a service to sellers, and ships to customers directly via its Prime shipping service when they place orders), and is holding off on placing new orders from many of its wholesale suppliers. This means that sellers on the Amazon platform may not be able to replenish into stock until Amazon finishes ramping up its capacity.
It DOES NOT mean that companies can't sell on Amazon and fulfill orders themselves (called Fulfilled by Merchant) or that Amazon is not fulfilling orders on stock they already have in inventory.
In some categories, products will take longer than usual to arrive as Amazon adjusts delivery windows to account for increased demand and capacity. Amazon is the best in the world at adjusting and adapting its operation at scale, and I believe these issues will be short-lived.
What does the limitation of shipping goods mean for them?
This means that Amazon sellers should consider shifting to a Fulfilled By Merchant (FBM) model for fulfilling orders, assuming they are able to ship Amazon orders from their own distribution center. As products run out of stock in FBA, sellers can shift these items to FBM and maintain the ability to keep the listings live.
I believe that customers will continue to order at a high rate from Amazon, even when products are not listed as Prime (as they are with FBA). These are unusual times, and homebound customers will be willing to accept less than ideal delivery windows in order just to get products to their homes.
What should brands, sellers and retailers consider when it comes to FBA?
Amazon has changed its shipping rules for FBA. Delivery time commitments for FBA items (and Prime items in general) have gotten longer, and they are not accepting new FBA replenishments until early April. What can you do about it?
First - don't panic. This is a temporary change, and Amazon is in the process of adjusting to support dramatic increases in demand. Amazon is immediately hiring 100,000 people in its logistic operations to enhance throughput and delivery capabilities. If any company is well-positioned to quickly adjust to this crisis, Amazon is. They are best in the world at anticipating, reacting, and adjusting processes to accommodate changes in the market. This is certainly a massive test, but we are confident they will rapidly make the needed changes to restore service to both customers and sellers on the marketplace. I think you will be surprised how quickly this happens.
Second - Consider Fulfilled By Merchant (FBM). FBM allows you to ship products from your own facility. You will lose Prime eligibility for any items sold via FBM, but maintaining availability on items is better than being completely out of stock. Listings can be shifted to FBM as they run out of stock in FBA. Just be sure that your teams are ready to meet Amazon's rigorous requirements for fulfillment accuracy and customer response times. Those who have not used FBM before should be sure to review Amazon's requirements and prep your team.
Third - Prepare for when FBA re-opens. When Amazon is ready to take new inbound shipments, there will be a flood of suppliers looking to replenish. Make sure you have your stock ready to go when FBA is ready again. You might also consider expanding your available product line on Amazon. We believe that many new buyers are going to be using Amazon for purchases - including many on the B2B side that may have never used Amazon for work purchases - and Amazon's penetration on all product categories will have been accelerated by several years as a result of the coronavirus crisis. Be ready for a dramatic increase in demand from this channel!
Fourth - Use this time to line up your resources for this. While you may see some slowness in activity for the next few weeks, take this time to line up internal teams to support the surge in Amazon demand. If you don't have internal teams capable, consider looking outside for help. My firm, Enceiba helps companies get set up, launch, and expand their Amazon programs. We are very busy right now but would be happy to talk with you if you have a need here.
How do retailers that rely heavily on Amazon for sales plan for the impact on their revenues?
I believe that brands and retailers that have a significant percentage of their sales coming from Amazon should expect a dip in their Amazon sales while the company adjusts its fulfillment capacity. What happens once this is finished - probably mid-April.
I think sellers should be ready to get products into Amazon quickly, expand their assortment that is available on the marketplace, and put advertising dollars behind ensuring their products are visible. Customers will continue to order through Amazon as a primary purchasing channel and will continue to do so even after the pandemic begins to recede (as it will).
Is it smart for retailers to look at Amazon as a selling channel right now? What other channels could they also look at?
I believe that this coronavirus event has accelerated Amazon's penetration and adoption amongst B2C and B2B buyers by at least 2-3 years. As a result, I believe brands and retailers should immediately be looking at Amazon as a selling channel right now.
They should also be looking at their own e-commerce channels as well as other marketplaces such as Walmart. Ecommerce will be further entrenched in people's purchase behaviors after this coronavirus event is over, and those investing and getting resources ready for this change now will benefit down the road.
Who should start selling on Amazon (tactical gear, medical supplies, etc)?
Every branded product manufacturer and retailer should be selling on Amazon, regardless of category. The spikes in healthcare and household supplies on Amazon during the coronavirus event is just the immediate result of the current crisis.
All other categories - apparel, industrial supplies, paper products, appliances, home furnishings, medical devices, and more - will also increase in volumes as this crisis passes. It takes time to set up and build visibility in Amazon, and if you aren't there yet, get started, even now.