Amazon will only receive vital supplies at its U.S. and UK and other
European warehouses until April 5, its latest move to free up inventory
space for medical and household goods in high demand as a result of the
coronavirus outbreak.
The change does not mean that Amazon will stop selling non-essential items
like phone cases and toys for now, only that products may be more likely to
run out of stock in the next few weeks or sellers have to ship the products
directly to consumers themselves.
In a note sent to sellers today, Amazon said it is seeing increasing online
shopping demand from consumers. As its household staples and medical
supplies are running out of stock, it will prioritize certain categories in
order to "quickly receive, restock, and ship these products to customers."
Amazon defined several categories as essential products that can continue
shipping, including baby products; health and household items; beauty and
personal care; grocery; industrial and scientific; and pet supplies. Books
are included as well.
"We understand this is a change for our selling partners and appreciate
their understanding as we temporarily prioritize these products for
customers," Amazon said in a statement.
The company said the new protocol applies to both first-party vendors and
third-party sellers. That suggests that the company is not protecting its
own products.
The move follows Amazon's announcement it will hire 100,000 workers for its
warehouses on Monday, as the Seattle-based giant is trying to meet growing
online shopping need from people who stay home amid the coronavirus
outbreak.
The months-long outbreak is posing challenges to the e-commerce giant's
operations, from supply chain to deliveries, as the virus spreads from China
to the rest of the world.
"Our factories just resumed production, but now we can't ship to warehouses
until April," said Zengxie Pang, a China-based seller, "We are already
seeing a rising demand for kitchen supplies and they will likely run out of
stock, as well as other products people use when they're stuck at home."
Amazon's two-day shipping guarantee has also in some cases slowed to up to
seven-day delivery, Baird Equity Research analyst Colin Sebastian said in a
note.
Tuesday's announcement aims to speed up the operation, at the risk of
limiting the availability of non-essential items like electronics that
typically are a big part of Amazon's business.
"This change will likely force some third-party sellers currently dependent
on Amazon to shift sales to other marketplaces (eBay, Wish, Walmart,
Facebook Marketplace, etc.), or onto their own websites," Sebastian said.
Third-party sellers account for over half of the sales on Amazon. Amazon has
been courting sellers to use its own fulfillment system, enabling many of
them with faster delivery without the risks of sitting on inventories.
It is especially popular for sellers who use a drop shipping method, meaning
sellers import products from manufacturers in countries including China and
directly send them to an Amazon warehouse. Amazon earns fees from managing
the storage and delivery process.
Sellers supplying products that are deemed non-essential could see their
products run out of stock and they will be unable to restock as a result of
the measure. Still, they can use other fulfillment methods to directly mail
products to customers.
One consultant said the announcement landed as third-party sellers were
grappling with economic uncertainty amid the outbreak. Workers at bars,
gyms, theaters and other non-essential businesses are furloughed to help
contain the spread of the deadly virus and President Donald Trump on Monday
said the U.S. economy may be sliding into recession.
"Sellers are rethinking their entire strategies for selling in 2020, not
just Q1 and Prime Day," said Chris McCabe, founder of Amazon seller
consultancy ecommerceChris.com.
Prime Day, scheduled for July every year, is Amazon's annual marketing blitz
when sellers offer exclusive deals and discounts that contribute more sales
than Black Friday. Sellers usually stock up on inventory ahead of the
shopping holiday, while this decision adds uncertainty to when they could
ship products in.
"Just posting this announcement has a big impact on Prime Day," McCabe said.
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