Amazon – a bright spot in an otherwise gloomy world
Right now, Amazon is the single most central economic force in the country, after the UK Government. At a time when tens of millions of people around the world are isolated in their homes, Amazon has become a critical lifeline in delivering food and supplies. And, honestly, they are doing an amazing job of dealing with the triple pressures of massive demand spikes, supply side constraints and staffing/wellbeing challenges in the supply chain.
With many offline channels temporarily unavailable, more and more brands are increasing their focus online and Amazon is capturing a disproportionate share of this shift. However, communication with sellers and vendors has never been Amazon’s main strength and, right now, the platform might seem more opaque, demanding and complex than ever before.
We want to help cut through the noise and have summarised the key changes we’ve seen, along with some tips to manage, grow and thrive on Amazon in spite of all the uncertainty.
Adapting to the new critical category restrictions
First off, let’s start with the biggest change. Until at least 5th April, Amazon has prioritised stocking and delivering items in categories that are highest priority for customers. These are Baby products; Health and Household (including personal care appliances); Beauty and Personal Care; grocery; Business, Industrial and Scientific; and Pet Supplies.
However, even for sellers in these categories there are restrictions in place. The only way to see how Amazon has categorised your product is to go through the process of creating a shipment. If you see an alert under “Information / Action Required” explaining Amazon is prioritising ‘crucial’ categories, you won’t be able to proceed. Amazon seems to have done a good job so far on categorising correctly, but you should check that 100% of your eligible products are able to be shipped into FCs.
If you are unrestricted at the moment, we’re advising customers to send more stock. Although the demand increase is undoubtedly putting pressure on your supply chain, it is likely that Amazon will apply further restrictions and fulfilment lead times will increase before they get better. Also, Amazon is waiving any long-term storage fees due on 15th April for inventory stored in the United States, United Kingdom, Germany, France, Italy, Spain, Poland, and the Czech Republic. Obviously it depends on what you are able to tolerate as a business, but we’re recommending customers aim for 90 days inventory cover.
What about non-critical categories?
Vendors are also affected and many have seen POs cut or disappear entirely. For these brands and FBA sellers in the ‘non-critical’ product categories, the choice is stark: suspend all sales on the platform or look at direct fulfilment alternatives (which Amazon calls merchant fulfilled, or MFN). For direct fulfilment, the prerequisites are: 1) a Seller Account and 2) the ability to fulfil D2C orders directly in line with Amazon’s quality metrics (Acceptance Rate, Order Defect Rate, Cancellation Rate and Late Shipment Rate). While this is a seemingly attractive alternative if you’re unable to access Amazon customers via normal channels, we’re advising customers to proceed with caution. Those using their own facility face the challenge of keeping warehouse staff safe and healthy in a role where remote working is impossible. Those without direct fulfilment channels will need to identify a partner, agree terms / contracts and ship products into their network ready for sale. And remember, these 3rd parties will also face health and safety challenges.
This is unlikely to be the last time we see Amazon impose restrictions on certain products or quantities, as anyone selling Toys or Games in Q4 can attest. So it is wise to periodically review your set-up with a view to removing single points of failure and building general resilience.
Changes to the Amazon Algorithm
Historically, A9 – Amazon’s sales algorithm – has preferred inventory fulfilled through the Amazon network (ie Vendor, FBA or Seller Fulfilled Prime offers). To be clear – Amazon has not communicated changes to their algorithm (they rarely, if ever, do), but we expect to see things change in favour of MFN offers very soon. This week we saw communication that the 1-2 day Prime shipping promise has been suspended for certain products. Restrictions on FBA and Vendor POs, plus the general stocking issues most merchants are facing, mean that Amazon must do something to maintain the level of selection. Customers understand that lightening fast fulfilment is unrealistic right now. And it’s more important that the selection is available at a fair price, even if the delivery promise is the standard 3-5 days (or longer). On this point – Amazon’s new price protection algorithm that shields customers from price gouging is in full force and appears to be working well. Last week, a seller in Kentucky with nearly 18k bottles of hand sanitiser, was forced off the platform by Amazon after setting a sale price of $70 per bottle.
There are also changes for advertisers. At the moment, keywords related to COVID, face masks, respirators, hand sanitiser, and surgical gloves are unavailable for advertising and these products themselves can also not be advertised. This also includes any products that specially mentions Coronavirus, COVID-19 or variants. In addition, top slots on search pages in certain COVID-19 related categories, usually reserved for Sponsored Brand Ads, are now allocated to UK Government or NHS Health Advice.
As always, volatility creates opportunity. The breakneck rate of change means you’ll need to be sharp and agile as well as bold, but the opportunities to grow are there for those able to step up and take them. Stay tuned for our next post on advertising, where we’ll be doing a deep dive into the impact on Amazon PPC and tips to optimise your ad strategy.
David Jennison, CEO
ExpertEdge was founded by leaders in e-Commerce and is staffed by Amazon specialist employees. We offer a blend of tactical execution support and strategic consulting services to grow your revenues on Amazon. Get in touch if you would like to discuss any of the topics raised in this article or to find out more about what we do.