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- The coronavirus has created a lot of uncertainties for Amazon marketplace sellers, including disruptions in the supply chain, changing policies, and a surge in traffic.
- We spoke to 11 Amazon marketplace experts to ask for their advice on how sellers could get through the current market environment.
- They said sellers should look for other fulfillment options, control ad budgets, and centralize the inventory tracking process, while holding more cash than usual.
- Visit Business Insider’s homepage for more stories.
It’s a tough time to be an Amazon marketplace seller.
The spread of coronavirus has completely changed the game, as sellers grapple with a slew of uncertainties, including a surge in demand, slowdown in supply chains, and constant policy changes.
“It’s the Wild West now,” said Denny Smolinski, cofounder of ADEN Branding, an Amazon marketplace consultancy.
The latest change came on Tuesday when Amazon announced it would stop accepting non-essential products at its warehouses in the US and EU for three weeks to make room for more medical supplies, household staples, and other high-demand products. Amazon sellers looking to restock products that don’t fall under one of those categories are forced to look for other fulfillment options.
These sellers are particularly important for Amazon as they account for almost 60% of the sales volume on Amazon’s marketplace.
But in times of chaos like this, it’s up to each individual seller to figure out a survival plan.
“This is a time of extreme volatility marked by massive shifts in buying behaviour that can require a seller to adjust on the fly,” said John Ghiorso, CEO of Orca Pacific, an agency that helps merchants sell on Amazon’s marketplace.
We spoke to 11 e-commerce experts who help Amazon merchants to hear their advice on selling in the current environment:
Following Tuesday’s change, sellers who use Amazon’s warehouses to store and ship non-essential products can no longer send inventory there until early April.
That means sellers who haven’t stocked up their inventory at Amazon warehouses need to find an alternative fulfillment option, according to James Thomson, CEO of Buy Box Experts. Those options include third-party logistics services, like Deliverr or Flexe, or they can ship products out of their own warehouses.
“Not only do sellers have to find alternative providers, but now they have to move inventory to these providers,” Thomson said. “And given how many already have inventory shortages, splitting inventory is not ideal.”
Sellers buy ads on Amazon to drive more buyers to their products. But the huge spike in traffic on Amazon is causing sellers of certain products, like medical supplies and household staples, to run out of stock more quickly if they’re not careful with their ad spend.
Sellers now have to be smarter about their ad budget and spread it out based on demand and inventory levels, according to Ideoclick’s director of marketing David Quesenberry. For example, if they’re running low or out of stock on certain products, it’s better to reallocate ad spend to products that will be in stock.
And running out of stock is never a good option for Amazon sellers because they could lose the all-important “buy box” and prime listing spots in the future.
“Keep in mind that you probably did not account for this increased traffic in your planning and budgets so you must ensure you will remain in stock on the items you market,” Quesenberry said. “It’s not beneficial to spend marketing dollars on products about to go out of stock.”
Amazon is now banning new listings of certain coronavirus-related products, like face masks and hand sanitizers.
Smolinski of ADEN Branding said sellers should refrain from getting into those high-risk categories as any suspicious activity could get your account suspended. Amazon is closely monitoring sales of those products, as demand is skyrocketing amid the coronavirus outbreak, and it’s not worth the risk for sellers to chase short-term gains, he said.
Amazon is also cracking down on price-gouging of certain products. While it’s not entirely clear what constitutes price-gouging on Amazon, sellers should be careful not to get their account suspended.
“This might seem like an opportunity, but it is an easy way to be taken down by Amazon,” said Kunal Chopra, CEO of eTailz.
The coronavirus has caused work stoppages and supply chain lockdowns for many sellers, especially because a lot of their suppliers are in China.
Sellers are now working even more closely with their Chinese suppliers to make sure they understand staff issues and production schedules, according to Andy Shields, CEO of Inner Gravity. Some of them are now ordering larger quantities from their Chinese factories because it could take 9 to 12 months for shipments to arrive in the US, he said.
Some sellers are looking for alternative suppliers outside of China, as they want to diversify their sourcing strategies, Shields said. Suppliers in India and Vietnam are popular these days, he said.
Uncertainties around the supply chain are driving a need to take better control of inventory data, according to Zentail CEO Dan Sugarman.
He said sellers in certain categories, like health and home goods, are seeing demand increases of up to 20 times following the coronavirus outbreak. That’s a problem for many sellers who still rely on manual spreadsheets to track inventory. Now, a growing number of sellers are centralizing and automating inventory tracking through more sophisticated software, getting a real-time look into how their business is doing, Sugarman said.
“Now more than ever their purchase and other business decisions need to be extremely thoughtful as everything has changed, and one poorly informed purchase decision can lead to insolvency,” Sugarman said.
Fred Killingsworth, CEO of Hinge Consulting, said hiring an e-commerce agency can help in the current environment. There’s a sprawling network of Amazon agencies, as they offer services ranging from demand planning and forecasting to marketing and brand protection, he said.
“Know your business by the numbers,” Killingsworth said.
As Amazon is closely monitoring its marketplace for any malicious activity, it’s more important than ever to be compliant with its rules, according to Will Tjernlund, CMO of Goat Consulting.
He said every seller should audit product listings to ensure there’s no false information or wrong search terms around coronavirus. Having such information could lead to immediate removal of your products and will require extended correspondence with Amazon to get reinstated, he said. Amazon, for example, recently said it took down 1 million products over false claims around the coronavirus disease.
“Take swift and immediate action to address compliance concerns with Amazon,” Tjernlund said.
Sellers who have been hit by some of the recent policy changes at Amazon may want to consider moving to other marketplaces, like Walmart or eBay, according to Sugarman.
While Amazon is the largest e-commerce marketplace, accounting for almost 40% of US market share, it may not be the most profitable place to sell, when you include all the associated fees, like shipping and advertising. Also, with the right strategy, sellers could find more exposure on non-Amazon marketplaces, simply because there’s so much competition for eyeballs on Amazon.
“This is the latest wake up call for sellers to reduce their reliance on Amazon as their only sales channel and fulfillment partner,” Sugarman said. “In general, you don’t want your business to be entirely reliant on the whims of one company.”
The coronavirus is driving more people to shop online. And with the right content, merchants can better engage with their customers and further grow sales, said Min Yang, CEO of Hello Commerce.
Yang said sellers should create authentic content not just for their product descriptions, but for other channels, like live videos on Amazon. That will help build a community for your brand and potentially expand your customer base. For example, a workout equipment brand can have a personal trainer live stream a workout session and do an online Q&A on Amazon.
“People will be consuming a lot more online and mobile content,” Yang said. “It’s time to invest in authentic content.”
Because of the uncertainty, sellers have to manage their cash flow tighter than ever, said Thomson at Buy Box Experts. Whether the seller is seeing more demand than usual or running out of stock, it’s critical to have cash on hand to run the business, he said.
Killingsworth at Hinge Consulting said competition is only going to increase and marketing is likely going to get more expensive — meaning those with access to cash will have a huge advantage. He said sellers running out of cash should make sure they have access to other financing options, through banks or Amazon’s lending service, to “alleviate the stress and pressure of potential challenges” in the rapidly changing marketplace.
Chad Rubin, CEO of Skubana, said sellers should be extra vigilant with the internal projects they’re working on in the current environment. For sellers with slowing cash flow, it means cancelling certain projects, like redesigning their websites.
At the same time, Rubin said that sellers with enough cash should look for acquisition opportunities. Due to the coronavirus, spending on discretionary items have dropped and it could lead to certain sellers becoming available at a much lower price than usual, he said.
“I do think there’s going to be more Amazon sellers for sale because of this,” he said.
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