So what to do if your products are (now) in high demand?
With uncertainty and dramatic changes to the platform becoming part of the new normal, the relationship between supply and demand will grow ever more complex.
High demand ≠ increase in sales
Unfortunately, high demand for your product during the coronavirus era won’t necessarily translate into an increase in sales for your brand.
Amazon is making constant changes to marketplace rules to better serve the global community during the pandemic.
So far, this has manifested in some major official changes on Amazon, in an attempt to keep up with the demand and fulfillment of essential items in marketplaces currently grappling with the COVID-19 pandemic.
In the USA & Europe: Limits on FBA for non-essentials, now loosened.
- On March 17th, Amazon announced that they would temporarily stop accepting incoming shipments for FBA for products that are not ‘household staples’, ‘medical supplies’ or in other categories which Amazon has identified as being in ‘high demand’.
- While Amazon stated that they would continue to prioritize essentials beyond the 5th of April, this list was broadened.
- Finally, last week Amazon announced that they would open FBA back up to most sellers. While the details are forthcoming, some sellers have already noticed changes to the fulfillment restrictions.
In Italy: Limits on orders for non-essentials.
On March 21st, Amazon announced that it would temporarily limit orders for non-essential items in countries hardest-hit by the virus in an attempt to keep up with increasing orders for basic necessities.
In France: Amazon suspending operations.
On March 15th, Amazon announced that they would (temporarily) halt operations for Amazon.fr following a French court’s ruling that threatened a fine of one million euros per day should Amazon fail to respond to the order handed down on the Tuesday prior.
Moving forward, it would be prudent to assume that Amazon will continue to enact measures that prioritize ‘essentials’ in marketplaces currently experiencing the spread of COVID-19 when necessary.
Coronavirus Demand Increase: Strategy Recommendations and Guidelines for Sellers & Vendors
Coronavirus Amazon Seller / Vendor Guide: FBA / PO Restrictions
Since Amazon may prioritize fulfillment to products deemed ‘essential’ in marketplaces most affected by the coronavirus pandemic, it is important to be prepared.
Varying degrees of prioritization of ‘essential’ products means that other product categories (‘non-essential’) may experience a loss of PO’s for vendors and restrictions to FBA across the board.
TIP 1: To keep sales steady while FBA is limited, sellers should consider their options for taking back fulfillment on a temporary basis, including:
- Seller Fulfilled Prime
- FBM (Fulfillment By Merchant) using a third party fulfillment partner
Sellers are urged to check back often to see whether your products might qualify again, as this is likely to be based (in part) on demand.
From Seller Central:
For vendors experiencing an increase in demand but who are unable to either replenish their stock (as they are not receiving PO’s), you might consider the following alternative fulfillment options that will allow you to circumvent these limitations:
- Distributing products via your seller distribution network (seller partners)
- Using Seller Central to pivot from 1p to 3p when necessary with FBM
- Implementing the Direct Fulfillment Program
Finally, keep in mind that these Coronavirus-dependent measures are temporary.
TIP 2: If your ability to fulfill orders on Amazon is limited for a short period of time and the suggested alternatives will not work for your business, consider:
- Fine-tuning your listings and be prepared to be back in business when the time comes
- Adding to or promoting in other eCommerce channels
Coronavirus Amazon Seller / Vendor Guide: Order Restrictions
Restrictions on orders are not made lightly by Amazon.
And, in some extreme cases, this may be determined by the law: This week, a French court has ordered that Amazon.fr limit its receiving, preparing, and delivery operations to essentials only (meaning food, hygiene, and medical products). This represents a more strict version of Amazon’s own prioritization measures implemented in March.
In the case that your products can’t be ordered, your ability to respond is limited. Unfortunately, the e-commerce landscape during the coronavirus can be unpredictable. Still, all is not lost. As with any of the implemented restrictions, keep in mind that this measure will be temporary.
TIP 3: In the meantime, you might consider:
- Pausing Amazon PPC
- Implementing ‘vacation status’
- Temporarily increasing your investment on other selling channels
Remember that what is in the customer’s best interest is also Amazon’s, meaning that the order and delivery of your high-demand products is likely to resume as soon as possible.
Coronavirus Amazon Seller / Vendor Guide: Supply Restrictions
Another factor preventing a high demand from translating into high sales is supply.
Limits on stock may occur due to disruptions in the supply chain during the COVID-19 pandemic, such as factory closures, decreased output due to social distancing, and rising unemployment. Fifty percent of respondents to Sellics’ survey reported experiencing an increase in shipping time, while 46% reported a ‘lower supply’.
Alternatively, some brands may have simply not anticipated a surge in sales this spring, leading to unanticipated stock shortages.
TIP 4: To bolster your supply, you might consider:
- Increasing production (if possible) from your current source
- Identifying alternate sources for stock replenishment: Surplus stock from retailers and manufacturers may be an option for your brand.
- Launching new products: Widening your product selection by focusing on alternate products and/or a more diverse range.
Failing that, balancing the desire to sell with the fear of selling out is challenging. Depending on the severity of your stock situation, you may want to consider the following:
- Putting PPC campaigns for sold out products on pause to slow sales (and reallocate your budget).
- Making price adjustments to pace sales, but be aware: Amazon will not tolerate price gouging.
- Always maintain your account health. Amazon has no interest in punishing its sellers or vendors for factors beyond their control negatively affecting their accounts.
Explain the situation in response to your performance notification, and Amazon will take this into account.
Coronavirus Amazon Seller / Vendor Guide: No Restrictions
If stock is plentiful, demand is high, and there are no restrictions in your current marketplace, this could be a boom time for your business. In this case, to keep up with unprecedentedly high demand, plan ahead by considering the following measures to keep your supply and fulfillment flowing:
- Increasing ad spend to make the most of the traffic to your product category
- Anticipating switching to FBM fulfillment when needed – so that you avoid being slowed by Amazon running out of stock
- Diverting more stock to online channels, including Amazon, to avoid selling out
- Planning ahead by increasing production
- Accelerating the launch schedule for new (would-be high-demand) products
And, be especially diligent about your account health, by:
- Constantly monitoring listings to quickly identify hijackers and respond to faulty reviews accordingly
TIP 5: Finally, just as during the regular selling season, it is always good practice to consider:
- Continuing to audit your PPC and SEO strategies for areas that can be improved
- Investing in rich product content to stand out (including Brand Store, A+ Content, Amazon Posts).
Coronavirus Trend Prediction Strategy: What Will Happen Next?
As the circumstances in terms of demand, shipping, supply, etc. can change very quickly you should think strategically and generally plan ahead carefully. Have contingency plans and strategies ready so that you may adapt quickly when necessary.
To help you to do so, let’s put the consumer shopping trends we have observed so far into context to see how they are likely to evolve in the future.
Once in ‘lockdown’ or otherwise largely confined to the home, we can expect the same shopping trends to strengthen but also evolve: as work-from-home is mandated, consumers will engage in Home Office shopping.
As outings are restricted for the foreseeable future, consumers might start mid-to-long term DIY projects. Intuitively, consumers are making the kinds of purchases that you would expect based on their understanding that they will be confined to the indoors – for a while.
But does an increase now mean a steady climb as the pandemic continues? Certainly not, as you can already see that many of the most significant growth categories have peaked and are now already seeing a relative decline.
To understand, it’s important to ask the following question: Where is the increase coming from – is it genuinely new or simply borrowed?
Amazon Seller / Vendor Guidelines: 3 Possible Demand Sources Amid Coronavirus Crisis
1. The future: stocking up now might mean purchasing less later.
Home basics and non-perishable food items are a prime example. From sensible stockpiling to panic buying and hoarding, reports on consumer behavior suggest that consumers are buying much more than they need.
While this, of course, means a short term spike, it stands to reason that consumers are at some point likely to consume these items, whether they do so weeks or months in the future.
And, when they do, we should see a decrease in spend for these same categories.
2. From offline: in other words, ‘replacement’ shopping. Whether this is good or bad news for your brand will depend on your reliance on the in-store market.
Online shopping and e-commerce cannibalizing offline sales could have different consequences for different brands.
For instance, smaller vendors or sellers that primarily sell online may be, for the first time, on a more equal footing with larger brands despite not occupying the same in-store real estate. Meaning, this situation could represent an opportunity to capture more of the market, and to foster brand awareness leading to loyalty.
For bigger brands, this shift could be a taste of the new normal. Once consumers become comfortable purchasing your products online, why should they return to the store? How that affects a brand’s selling and marketing strategy will vary depending on the nature of the product. But one thing’s for certain: an investment in richer content that will improve prospective customers experience virtual shopping experience is key.
3. Genuine new demand: items that would not have been otherwise purchased.
Some springtime buying trends are simply being amplified due to current market conditions. Namely, it would not be so unusual for ‘Backyard Betterment’ shopping to experience an increase in March. On the other hand, many product categories are experiencing growth at a time when they would normally face decline. Such as ‘Toys & Games’ and ‘Video Games’.
Under normal circumstances, shoppers would be preparing to get outside or go on vacation, but now they are now hunkering down in their homes.
‘Genuine new demand’ shopping trends can be expected to continue as long as calls to distance socially do, with a small caveat: Are the nature of the purchases one-and-done or ongoing?
Office furniture represents a genuine new demand, but once at-home offices are set up there will be little need to keep shopping. And while game consoles like the Nintendo Switch are currently soaring in sales, you only need to purchase it once.
That being said, consumable products – like paper for your home office, games for your console, and arts and craft supplies – are more likely to stay stable but of course, offer less revenue in general.
Summary Guidelines and Key Takeaways for Amazon Sellers & Vendors
While market conditions around supply and demand are largely outside of a brand’s control, we have (above) outlined concrete guidelines that can be used to survive, even thrive, in the current climate.
In the case of an increase in demand, brands ought to carefully consider:
- The demand source
- Supply chain efficiency
- Amazon platform changes and restrictions
- Fulfillment challenges and opportunities
In order to informed demand predictions and be able to move forward by adapting operations accordingly.
Speaking of strategy, for answers, educational resources, and meaningful conversations around the Amazon and eCommerce space, check in at our COVID-19 resource center where we will be posting new content regularly.
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