On March 17, Amazon announced that it would immediately prioritize household staples and medical products coming into Amazon’s fulfillment centers. In addition, the company said they would halt the intake of other goods until April 5 in response to the Coronavirus pandemic.
This change will apply to orders in the United States and the European Union. The suspension affects most third-party sellers on the platform who make up over half of the sales on Amazon. The impact of this situation is dramatic for sellers using Amazon FBA.
The company also mentioned that it would prioritize products in six broad categories including:
Health and household items
Beauty and personal care
Industrial and scientific
Amazon informed third-party sellers that it was prioritizing these categories to be able to receive, restock, and ship these items quickly to customers. This move was to make extra room for high-demand supplies that are in short supply.
The company suspended seller accounts attempting to cash in on the Coronavirus fears by hiking prices of items like hand sanitizers as well as face masks earlier in the outbreak.
Impact on eCommerce Stores Using Amazon FBA
This announcement is bad news for FBA sellers in America and Europe who don’t sell these high demand products. Products that were already en route to facilities will still be accepted.
The change implies that aside from Amazon’s essential items, other products are more likely to be out of stock in the coming weeks or that sellers will have to ship their goods directly to their customers. This is definitely an unexpected situation and this decision will make many FBA sellers question their allegiance to the company.
Jungle Scout reports that about 53% of Amazon sellers will be affected by the suspension of non-essential products.
Sellers looking to list their products in any one of these essential categories may require Amazon’s approval. This is because Amazon has restricted some of these categories. Furthermore, listing products in an inaccurate category is considered a violation of their listing policies and this may result in account suspension.
Even though some sellers are planning to fulfill orders themselves, a majority of FBA sellers are not set up to accommodate drop-shipping directly to their customers.
In this situation, it’s better to make plans urgently to keep your eCommerce stores going.
How Do You Keep Your eCommerce Store Going?
The big question is, how do you keep your eCommerce store running when Amazon suspends non-essential shipments?
Now let’s look at just how you can do this.
Quickly analyze your current situation
Preparedness is the best offensive for dealing with any kind of crisis. While it’s too early to fully understand the long-term implications of the COVID-19, how you respond today can position your business to thrive in the future.
If you have multiple stores, check and sum up how many shops and products are affected. This ensures you have a true picture of all your supply chain activities. It also helps you to closely monitor the demand for inventory to accommodate production loss in the wake of economic shutdown and factory closures.
The Organisation for Economic Co-operation and Development issued warnings that the Coronavirus would cut the global economic growth in half. Industries across the board would also face a fallout.
Equally important, check all inventory and determine the date when the inventory is sold out. This will help you know when to inform your customers about shortages. Transparency will become very critical to maintaining brand relations with your customers.
Sell products to other countries
This announcement is only aimed at the U.S and Europe. Therefore, countries like Australia, Japan, Singapore, India, and the Middle East are not affected. You can stock your products in these FBA warehouses normally.
You should consider scenario-planning for different demand environments when selling to other countries. This helps you get ready for both optimistic as well as conservative situations. For instance, an optimistic scenario is hoping COVID-19 is contained by April with normalcy returning. A conservative scenario would be getting ready if COVID-19 remains prevalent.
Implement plan B: FBM
Even though 94% of all third-party Amazon sellers sell through FBA, only 29% utilize both FBA and FBM. So far, there’s been no restrictions for Fulfillment by Merchant sellers on their products. Sellers who use FBM only account for just 6% of Amazon’s third-party sellers.
When Amazon suspends non-essential shipments, cooperate with a fulfillment center and use FBA (Fulfillment by Merchant).
A dedicated fulfillment center like NextSmartShip has fulfillment centers all over the world. Each of these centers can provide one-step fulfillment services including the FBA prep service as well as FBM fulfillment.
What are the differences between Amazon FBA and FBM?
Once you register as a seller on Amazon, you can set up your account to sell through FBA or FBM or both. So what’s the key difference between Amazon FBA AND FBM?
Fulfillment by Amazon (FBA) is where the seller sends products to Amazon’s warehouses directly. Amazon takes care of storing the inventory and shipping products to the customers as well as customer support.
On the other hand, Fulfillment by Merchant (FBM) also involves selling on Amazon but with a twist. You list products on Amazon but manage customer support, shipping, and storage on your own or choose a third party fulfillment center.
Why You Should Consider Using FBM
Below are some of the advantages of using FBM.
Comingling is one of the biggest setbacks of FBA. your inventory gets sorted by like items so the product that goes to the customer may not be yours. Selling through FBM ensures that you don’t need to mix up your items with other sellers.
No IPI worries
Do your products have slow stock turn over right now? When you use FBM, this isn’t a problem. You won’t have to get worried about storage or overage fee limits.
The best part about FBM is that you don’t have to follow all FBA rules. Amazon has tons of different specifications, for fragile products, loose products, products sold as sets, and so many other requirements you can barely keep up with.
FBM ensures sellers maintain a sense of control over their business. You’ll also less unavoidable losses due to changes in Amazon policies.
FBM gives sellers the freedom to choose their own fulfillment centers. You won’t become subject to unexpected costs. This means you’ll be able to find cheaper warehousing and handling in 3PL fulfillment centers.
No more “sold out” worries
You no longer have to worry about products in your inventory sold out. When your FBA inventory is sold out (this happens a lot due to the high warehousing fee and inventory turnover requirements in FBA), buyers can but FBM items from the same listing. Therefore, incurring losses due to no stock should become a thing of the past.
As you may have already noticed, FBM is a good choice even when FBA works normally. So, don’t put all your eggs in one basket. Even though crisis events can’t always be predicted, FBM is a good alternative of FBA and you can still use it as a supplement to double your sales opportunities in the face of crisis.