In mid-March, Amazon announced temporary shipping restrictions to contend with the increased order volume brought on by the COVID-19 pandemic. Priority is given to products classified as essential in categories such as household & health, baby products, and grocery.
“We are seeing increased online shopping and as a result some products such as household staples and medical supplies are out of stock,” according to Amazon. “With this in mind, we are temporarily prioritizing household staples, medical supplies and other high-demand products coming into our fulfillment centers so that we can more quickly receive, restock, and ship these products to customers.”
For years, millions of third-party merchants have relied on the Amazon supply chain to fulfill orders. Inventory storage, packaging, and shipping can be outsourced to Amazon through their Fulfillment by Amazon service, and around 94 percent of Amazon merchants rely on FBA for orders.
What does COVID-19 mean for FBA?
Amazon says FBA retailers who operate outside of the “essential” designation can continue fulfilling orders, but may experience delays. In some cases these delays can be significant. Even products given Prime Shipping designation can take up to a month to reach consumers.
For many merchants — from major manufacturers to small-scale operations — this breeds further commercial uncertainty in an already uncertain time. From an operational standpoint, backlogged products and shipping restrictions will have a negative effect on consumer reach.
This isn’t the only FBA issue to come out of Amazon’s temporary restrictions. For example, FBA performance metrics also hang in the balance. Inventory Performance Index is a weekly measurement of inventory management — product stock, inventory levels, and how fast listing issues are resolved factor into IPI. Amazon calls it a “credit score for FBA businesses.” And, much like a struggling credit score, dips in IPI can have lasting consequences on key operations such as inventory restrictions.
“We are working diligently to account for this change in your IPI score and in storage limits for the following quarter,” according to Amazon.
While this response might seem vague, Amazon’s response may ease tensions for those concerned about plummeting performance metrics. But, while IPIs may or may not be negatively affected during the pandemic, it’s clear no significant improvements to performance metrics can be made for the foreseeable future. 2020 will not be the year to work on FBA “credit repair.”
Amazon has the largest commerce distribution network in the world, so any deviation from the status quo has a significant ripple effect. Whether products are not reaching your customer base or you’re struggling to remain relevant in the shifting market, FBA shipping delays and performance metric stagnation may be the final straw for merchants to consider new distribution channels.
The (temporary) new normal
It’s worth noting: Amazon is doing the right thing. Of course, prioritizing life essentials in a time of social distancing and supply shortages helps individuals contend with the hardships of this unprecedented situation and maintain some semblance of normal life.
But normal life will be hard to come by for many of the 2.5 million active sellers on Amazon in the coming months. This goes for retailers nationwide — brick and mortars, restaurants, DIY retailers, and others will inevitably experience business fluctuations as we see further stay-at-home orders and skittish consumer spending.
With so much uncertainty surrounding the future of distribution, what can merchants do in the short and long term to take control of their future? What can merchants do to stay afloat both during and in the aftermath of a global pandemic?
Connecting with consumers in quarantine
As of March 30, 27 states have implemented a stay-at-home order which effectively limits more than half of the country from shopping in person. Only businesses deemed “essential” by the government such as grocery stores, pharmacies, and take out restaurants are permitted to operate for the foreseeable future. Most retailers can’t reach their audience in person and can’t reach them through Amazon, so what’s next for the brands left in pandemic limbo?
It’s simple in concept but difficult in practice: own your ecommerce experience. It has long been a blue-sky prospect for leading manufacturers, CPG, and retailers, but despite the standards of the times, many merchants still lack a dedicated, digital storefront.
Recently, ecommerce sites have seen fluctuations in traffic as everyone adjusts to the wavering market, but data shows that online retailers are overall experiencing increased conversions. This means that window shopping might be down, but committed leads are strong as ever in most sectors (especially for those operating in certain B2C sectors).
If this sounds like a realistic solution, here are a few ecommerce best practices to consider as your brand ramps up:
- Stress test: Increased traffic can be a blessing and a curse. Undergo sufficient QA to ensure your new or revamped ecommerce experience can handle the traffic you hope to attract.
- Transparency: Ecommerce success is built on trust, so offer transparency into inventory, shipment timeline, and the ability to fulfill orders.
- Customer experience: Customer experience is the secret sauce to ecommerce success and an essential element of the buyer’s journey. Not to be taken lightly, site copy, design, and functionality needs to be a primary concern.
- Revisit digital roadmaps: Continuously identify shortcomings in experience and gaps in capabilities. Regularly optimize, prioritize resolutions, and move forward with the next, best iteration of your digital experience.
- Create new fulfillment channels: Find reliable 3PL partners and build internal processes to enable direct shipments and click-and-collect capabilities (where applicable) to get your products in your customer’s hands.
The key to any successful commerce relationship is to meet consumers where they already are. Since consumers are at home these days your brand has to be too. Owning a digital commerce experience is not a sales aid station in these trying times, but rather a long term business course correction. The digital infrastructure you establish today will pay back future dividends for years to come as you continue to open direct-to-consumer channels.
The COVID-19 situation evolves daily. The ultimate effect it will have on commerce will not be clear until the dust settles. We know one thing for sure: Amazon will prioritize essential items at least until April 5. One way to exert business control is to invest in a dedicated, owned ecommerce experience and try to drive the future of your customer channels on your own terms.