In the era of coronavirus, we’re seeing drastic changes to both supply and demand for products on Amazon, and we’re seeing Amazon respond to both. These changes are affecting both consumers AND Amazon’s third-party sellers in unprecedented ways.
People around the world are self-isolating and working from home, a “quarantine economy” has emerged, and businesses big and small will have to pivot in order to survive the coming year.
What do all these changes mean for Amazon’s third-party sellers?
This article explains the changes Amazon sellers will likely face in the coming months and the critical steps they’ll need to take to adapt.
4 Ways coronavirus is affecting Amazon sellers
1. Amazon is prioritizing essential goods over non-essentials for deliveries
Since the outbreak of coronavirus, or COVID-19, the demand for essential products has skyrocketed, leaving store shelves empty of basic necessities such as food, medical supplies, and household goods like toilet paper and paper towels.
Meanwhile, a disruption in the global supply chain has led to shortages in supply. Amazon responded by shifting gears from its role as an “Everything Store” to becoming an invaluable supply chain to help get America through this time of crisis.
March 17, 2020
Amazon announced it would freeze non-essential FBA shipments from its third-party sellers. In addition, it has started to prioritize essential goods over non-essentials.
Amazon considers the following product categories essential:
- Health & Household
- Beauty & Personal Care (including personal care appliances)
- Industrial & Scientific
- Pet Supplies
If a seller’s products are outside of those categories, they will not be able to send shipments to Amazon’s fulfillment centers nor create an inventory replenishment order.
However, these changes are temporary.
Amazon stated that the freeze on receiving non-essential goods will only last until April 5. And sellers whose products are already in Amazon’s fulfillment centers — or are on the way to the fulfillment centers — will still have their products enter the supply chain.
Currently, there are no restrictions for merchants who fulfill their own products (FBM). Therefore, it is still possible for sellers who currently sell via FBA to make sales and ship their goods to customers themselves.
March 21, 2020
Amazon announced that the Italian and French marketplaces would only ship essential goods to consumers. However, as of this writing, there is no word when this restriction will lift. (Not only could this move affect the seller’s business, but may leave them without a stream of income during these trying times; 22% of active sellers in the French marketplace and 23% of active sellers in the Italian have no other income than their Amazon business.)
March 24, 2020
Amazon further announced that Amazon India (amazon.in) would only ship essential goods to consumers following Prime Minister Narendra Modi’s announcement that India would enter a 21-day lockdown.
In addition, TameBay reports that non-essential goods in the Amazon UK (amazon.co.uk) marketplace are taking as long as 3-4 weeks to ship. And in the US marketplace, the sellers’ ability to create coupons is temporarily suspended until April 5.
March 31, 2020
we received word that Amazon would offer the following benefits to help sellers during the COVID-19 outbreak:
It states that “In light of the evolving COVID-19 crisis, we will waive two weeks of your inventory storage fees for products stored in the United States, Canada, United Kingdom, Germany, France, Italy, Spain, Poland, and the Czech Republic.”
This is in addition to the previously announced updates including:
- Waiving the April 15 long-term storage fees for inventory stored in the U.S. and Europe.
- Pausing repayments and interest until April 30 for sellers with direct loans from Amazon Lending.
- Waiving April fees for those using Seller Account Management or the Launchpad program.”
Furthermore, Amazon said it would be taking measures to mitigate the impact of the crisis on sellers’ account health.
We’ve also heard through some of our contacts in China that Amazon is already prepping sellers for the 2020 Prime Day season which should happen in mid-to-late July.
Finally, some sellers have noticed that Amazon has changed their Buy Box algorithm to award the Buy Box to FBM sellers. However, Amazon has not offered an official statement regarding this change.
April 1, 2020
Amazon informed sellers that it would be prioritizing the supply of key medical supplies to hospitals and government organizations.
In a message to sellers on their forums, Amazon had this to say:
“You may have offers on one or more products (ASINs) that will now be available exclusively to hospitals and government organizations, which are in urgent need of high-demand medical products like N95 masks, surgical masks, facial shields, surgical gowns, surgical gloves, and large-volume sanitizers. Select ASINs of these product types will no longer be available to the broader public on Amazon.com and AmazonBusiness.com.
“For ASINs subject to this change, we have eliminated our standard referral fees through June 30, 2020, to encourage our selling partners to make additional inventory of these products available at competitive prices to these customers with the greatest need.
“For more information about these changes, including a list of impacted ASINs, visit COVID-19 Supplies 28. To request approval to sell these products, visit: http://www.amazon.com/COVID-19-Supplies”
2. The global supply chain has been disrupted
China, the primary supplier for many Amazon sellers’ goods, was ground zero for the coronavirus outbreak. And China’s normally thriving import industry has felt the strain of COVID-19 already.
Even before the crisis hit the U.S., a recent Jungle Scout survey of 681 of Amazon sellers who sourced their products from China revealed:
- 36% sellers seeing declining sales
- 11% sellers raising prices on products
- 50% sellers looking to source products outside of China
Some sellers are looking to the U.S., India, Vietnam, and Mexico, among other countries, to source their products, though it’s unclear how suppliers will be able to respond as coronavirus continues to spread throughout those countries, too.
Analyst Edward J. Kelly of Wells Fargo Securities explained that many popular items will sell out as early as mid-April. Big-box retailers like Walmart and Target who turn inventory faster will be the “first to experience out-of-stock issues.” (LA Times)
Likely, private label and wholesale Amazon sellers will face similar issues.
3. Consumer spending is declining
According to a survey by Moody’s Analytics, nearly 80 million U.S. jobs could be lost during the coronavirus outbreak, primarily in the travel, tourism, leisure and hospitality sectors.
With reduced consumer spending, dollars will be put towards more essential goods such as food, medical supplies, and childcare, and away from luxury items.
Already, we’ve noticed an uptick in searches for essential items, including:
- Rice: 1181%
- Bottled water: 238%
- Toilet paper: 75%
Meanwhile, non-essential goods are down.
- Office supplies: -28%
- Party: -10%
- Furniture: -8%
April 3, 2020
In addition, though Amazon did not confirm, Reuters reported that Prime Day 2020 is being postponed.
Despite the fact that Prime Day is often the biggest sales day for most sellers, this year’s deal day will likely happen sometime in August (though it could be pushed again), rather than the usual July.
4. Working from home is becoming the norm
Fortunately, many employees have the option of working from home. That means, in addition to essential items, certain work-from-home products and keywords have increased searches on Amazon.
- Work from home: 85%
- Webcam: 32%
- Computer monitor: 14%
Other items such as comfortable chairs, home gym equipment, home entertainment, and learning resources for children who are out of school, have also shown an increase in searches and sales on Amazon.
5 ways to pivot your Amazon business for the quarantine economy
In the meantime, to ensure the survival of their businesses, Amazon sellers will need to make some drastic changes.
1. Temporarily reduce or pause advertising spending on Amazon
Following the FBA freeze on March 17, one of our customers informed us that Amazon’s sales agents are currently contacting Amazon sellers and encouraging them to reduce advertising spending during the crisis.
If you have experienced a reduction in sales during the crisis, especially if you are selling non-essential goods, we recommend reducing or suspending your ads until further notice.
2. Consider Fulfillment by Merchant
If you have inventory available that isn’t currently in an Amazon fulfillment center and you’re unable to create a shipment, you can fulfill the products yourself.
Fulfillment by Merchant (FBM) works a little differently than Amazon FBA.
- When a sale is made, you are notified in Seller Central as well as on your Amazon Seller mobile app.
- You have 24 hours to mark the order as ‘Shipped.’ Failure to ship orders within 24 hours may affect your seller account health.
- Amazon offers shipping carrier services from which you can purchase directly through Amazon and print.
- You will need to pick, pack, and ship the goods and ensure that the product arrives in a timely manner without any damage or issue.
There are, however, a few more risks involved with FBM shipping:
- Unless you already have a large fulfillment operation in place, the costs for FBM orders can be higher than those for FBA orders.
- Shoppers can leave negative seller feedback based on the speed and quality of your shipment.
- You must handle your own customer service issues.
Read more about FBA vs. FBM fulfillment methods here.
3. Switch business models
Because of the difficulties you may have securing products from China or other overseas providers, business models such as private label, wholesale, and dropshipping will become difficult during the outbreak.
Furthermore, retail arbitrage may also suffer due to self-isolation and lockdown practices. Many retail stores will close.
However, there are other business models you can introduce to your Amazon selling business during the outbreak:
- Handmade: With handmade, you can create your own products such as seasonal gifts (Easter, Mother’s Day), clothing & accessories, and toys & games and ship them to the consumer. You can apply for Handmade on Amazon’s website.
- Online arbitrage: While retail arbitrage may not be possible during the outbreak, online arbitrage might be a viable alternative. Similar to retail arbitrage, online arbitrage involves purchasing a product from one retail site such as Ebay.com or Walmart.com and listing it on Amazon at a higher price.
- Kindle Direct Publishing: If you have a knack for writing and creating content, you might consider writing books and publishing them on Amazon. Kindle Direct Publishing (KDP) allows authors to create both digital and print formats on Amazon. Like dropshipping or Amazon Merch, there is no cost to get started; you simply need to create the material.
- Manufacture your own products: 3D printers are becoming less and less expensive. And there are some sellers on Amazon who design, print, and sell their own 3D-printed goods.
Read more about the pros and cons of different Amazon sales models here.
4. Focus on your brand
We all hope and believe commerce will return to normal eventually. So, while your sales may drop for a few months, this is a good time to focus on your brand and your overall message.
Take advantage of the free resources and product trials (Jungle Scout’s free trial offers the best of both worlds, with Jungle Scout Academy) available on the internet to anyone interested in selling on Amazon.
Learn how to optimize your listing. Master the ins and outs of pay-per-click. Become an expert in all-things Amazon so that you and your product are ready when things return to normal.
And make sure to communicate frequently with your customers, both on and off Amazon. Take to social media to assuage fears or even offer levity. Create promotions to get your brand’s name out there.
5. Stay informed
Over the next few months, there will be lots of changes, both on and off Amazon. The best thing to do is to stay on top of those changes and act accordingly.
Make sure to read news from reputable sources and stay involved with those close to Amazon, like Jungle Scout. You can also join our Facebook group, Amazon Competitive Edge.
Frequently Asked Questions
Many of the questions below are related to Amazon’s freeze on non-essential inventory entering their fulfillment centers.
What products are being accepted?
Currently, Amazon is only accepting products from the following categories:
- Health & Household
- Beauty & Personal Care (including personal care appliances)
- Industrial & Scientific
- Pet Supplies
What if I already had a shipment on the way?
If you created a shipment before March 17, Amazon will still accept your inventory and put it into its supply chain as normal.
What happens to inventory still at port?
As long as any inventory that is currently in transit to Amazon has an inventory replenishment order placed before March 17, Amazon will accept the inventory into its fulfillment network.
Will Amazon freeze/suspend fees and loan payments, too?
As of this writing, there is no word on whether or not Amazon will freeze or suspend its fees for all of its Amazon sellers. However, Amazon had made mention that it may temporarily disable its Inventory Performance Index (IPI).
The IPI is part of the seller’s account health metrics. It is the score that Amazon uses to determine the amount of inventory sellers are allowed to send Amazon.
In addition, Amazon sent out a notification that they are going to waive April’s long-term storage fee for sellers in the US, the UK, France, Italy, Germany, Spain, Poland, and the Czech Republic. The email did not mention whether or not that waiver will be extended past April.
Most recently, on March 25, multiple sellers received a notification from Amazon Lending. It said that — effective March 26 through April 30th — Amazon Lending would be pausing repayments on outstanding loans, and that loans would not accrue interest during that period.
The notification also stated that payments will resume on May 1st, 2020, with sellers retaining their previous monthly payment date and the same number of payments as before.
Can I get my inventory out of Amazon’s fulfillment centers?
The short answer is yes — but it may take a while.
FBA sellers who hoped to have inventory stored at Amazon’s fulfillment centers returned to them right away (in order to sell it FBM) are — for the time being — out of luck. Amazon recently sent out an email stating that removal operations are being paused temporarily in some of their fulfillment centers.
But, that doesn’t mean sellers can’t still submit removal orders. It just means that fulfilling those requests will take longer than usual.
Auto-removals are also going to be held up due to this interim stoppage.
What types of products should I sell on Amazon during the crisis?
If you have the ability, sell essentials. Focus, too, on products for people who are self-isolating during the crisis.
Consider that not only will people have to work from home, but children will have to stay home from school as well.
Can the virus be transmitted through packages?
The New England Journal of Medicine published a report stating that the SAR-CoV-2 coronavirus can survive on cardboard for up to 24 hours and plastic and stainless steel for up to 72 hours.
Having said that, U.S. carriers are taking extra precautions:
- The U.S. Postal Service citing the World Health Organization stated that there is very low risk for transmission of the coronavirus through packages. In addition, they are constantly monitoring the situation.
- UPS has increased monitoring of its employees for sickness and complying with all government mandates.
- FedEx is also taking extra precautions to ensure that their deliveries are safe during the crisis.
- DHL also released a 2-page press release explaining the measures they were taking to ensure safe deliveries.
*Disclaimer: This article was updated on April 3, 2020 to reflect Amazon’s notification regarding Prime Day’s postponement.
Have other questions? Ask us in the comments section.