Could the new restrictions impact Amazon Prime Day?
As footfall at high streets and retail parks plummets in response to the government’s pleas for social distancing, many have assumed that online retailers would all be in the perfect position to capitalise. However, Amazon’s decision to prioritise shipments of household products and medical supplies at its warehouses threatens to put third-party sellers ‘on hold’ for at least the next few weeks. Many small retailers rely on Amazon to sell their products online, and the hit to sales has already caused some to furlough or lay off employees to soften the blow.
Third-party merchants can still sell products that fall outside the categories prioritised by Amazon. But they won’t be able to rely on Fulfilled by Amazon (FBA), the service that allows sellers to ship their products to an Amazon warehouse, where the company stores the inventory and ships orders out to customers, in exchange for Amazon taking a commission from each sale.
FBA also enables sellers to take advantage of Amazon’s two-day Prime shipping, making it a useful service for sellers. Of the top 10,000 sellers on Amazon’s marketplace, 87% of them use FBA services, while 13% ship products on their own.
Without FBA, sellers will have to manage new inventory themselves and ship their own orders. However, merchant-fulfilled orders aren’t Prime eligible, so shoppers won’t be able to receive two-day free shipping for those items. Sellers will also have to charge for shipping, which is normally free for Prime members.
One vendor commented: “All of us, we owe people money because of the cost of doing business. We have to pay suppliers, brands, rent, employees. That doesn’t stop.”
Amazon has also advised sellers on how to manage the impact of the coronavirus on their businesses. The company advised sellers to put their businesses in “vacation status” to protect their listings from being demoted in search results. Some vendors have expressed concern that their products will lose valuable ranking placement as inventory fluctuates, which will be hard to recover once the crisis blows over.
The new FBA restrictions and the ongoing coronavirus outbreak also have the potential to impact Prime Day, Amazon’s multiday sale event which takes place in July.
Sellers typically prepare for Prime Day several months in advance by ordering extra inventory. While the FBA restrictions are expected to end in April, they’ve created uncertainty for sellers, who are unsure whether they should stock up, in case they get stuck with extra product.