The Amazon Effect   /   March 30, 2020

‘In the dark’: Non-essential third-party Amazon sellers try to navigate a new reality

For one Amazon seller, it’s a pretty confusing time. They haven’t been able to ship products into the platform’s Fulfilled By Amazon warehouses for the last two weeks. This was expected, because of new rules Amazon implemented. But what wasn’t expected was that existing inventory in the warehouses isn’t being shipped out in a timely fashion either. Some products say delivery times now exceed a month. Before, they were only a few days.

“The amount of damage [Amazon is] doing to goodwill of sellers is enormous right now,” the head of this brand said.

This third-party seller isn’t alone. Amazon brands that rely on Amazon’s fulfillment services and are now deemed non-essential find themselves in a tough place. They have few options left to stay afloat and fewer clear communication pathways to anyone at Amazon who has decision making power. They are either making big changes to their business or trying to figure out a way to pivot their products to be deemed essential by the e-commerce juggernaut.

Earlier this month, Amazon made the decision to pause shipments from so-called non-essential sellers into its Prime warehouses, in an attempt to prioritize products seeing heightened demand in light of the coronavirus’s spread in the U.S. Prime sellers, as a result, have seen sales dwindle and received little communication from the platform on which they rely. Meanwhile, sellers have heard nothing from Amazon about the rapid changes.”There’s no communication,” said the brand owner.

Third-party sellers make up nearly 60% of Amazon’s sales. Many of them have now been deemed non-essential, and are trying to figure out the best way forward. Some are trying to reclassify their goods so that Amazon lets them back into the warehouses. Others are seeking out external services to deal with the current blockage. All of the options, however, carry big risks — and many sellers fear their businesses will stumble over the next few months. For these small businesses, the future is unclear, and support from Amazon is nowhere to be found.

Unclear communication
The biggest issue is that these third-party sellers are given new edicts at a moment’s notice. The rules are changing and merchants feel that Amazon isn’t making inroads to allay any fears. Amazon first said the shipments would be halted until April 5. Now, a new letter from Amazon to third-party sellers says it will go beyond that — adding that the list of prioritized items is expanding.

What is deemed essential, however, is still unclear. One Amazon agency account manager spoke with the platform’s support team and was told that a product’s sales history informs whether or not it’s essential. So while Amazon may consider a category kosher, products within that category that don’t have high enough conversion rates may not be prioritized.

Third-party sellers feel left in a bind. If they relied on Amazon for most of their sales, revenue has now plummeted. Any big change a brand makes carries big risks and unknowns. All the while, Amazon is making quick changes that could further hinder strategic decisions brands have made. Most of the non-essential seller have seen sales dip dramatically over the last two weeks — and don’t expect things to get any better come April.

An Amazon spokesperson said Amazon is trying to help sellers in a multitude of ways, “including waiving certain fees, pausing loan repayments, providing regular updates and guidance via direct communication channels, and relaxing our policies around shipping-related performance metrics to mitigate impact on their account health.” The company is updating brands via the Seller Central support page, and said it’s launching new tools to keep partners abreast of updates. The spokesperson also highlighted that the company is hiring over 100,000 positions across the U.S. to deal with growing demand strain at fulfillment centers.

Seeking out re-classification
Colin Darretta, founder of the supplement brand Wellpath, says one potential solution is for brands to turn to Amazon’s seller support channel to see if they can appeal a non-essential ruling. Sellers can also try and lobby the company through their account manager. Neither option, however, is likely to succeed. “I don’t think it’s easy,” he said, but for certain products, “there’s been an inconsistent application of the new rule.” For example, he’s noticed competitors offering similar items to his that can be shipped promptly via Prime. Some of his products, however, are seeing shipment delays of a month. (Modern Retail cross-checked Wellpath’s products with others and found this to be true.) It’s unclear if this is due to certain products being prioritized or because the competitors’ products are in a facility with less heightened demand. All the same, the quick changes has an impact on the bottom line.

Others are finding themselves in a similar situation, but completely unsure what to do. They can try to spin their products as essential — but in many categories, that’s both difficult and risky. Mark Power, CEO of the consultancy Podean, isn’t recommending clients try to pivot their product lines. “It could place your entire portfolio or account at risk if Amazon finds out and determine that you are removed from the marketplace,” he wrote in an email to Modern Retail.

“Some agencies are likely helping some products get recategorized as they were not categorized correctly in the first place,” he added, “but they’ll be dependent on Amazon support to help which is tough right now as support is under quite a lot of stress from panicked sellers and brands.”

Circumventing Prime altogether
Another option is bringing on a third party fulfillment provider to get around Amazon’s new Prime restrictions. This means the brand simply wouldn’t rely on Amazon’s FBA program and, for the time being, would lose Prime status, even if shipment times were significantly reduced.

This, however, carries its own risks. For one, as Recode noted, Amazon was hiding faster ship times on product search results that weren’t associated with Prime. Amazon told the publication it was working to fix the problem, but it highlights the risks of being dependent on such a powerful player.

Beyond all this, implementing new fulfillment takes time. Wellpath is currently working with a 3PL to get its product ship time down. It will be ready within the week, said Darretta, but “just getting the inventory to them is substantial.” Not only that, but the move could hinder the brand’s Amazon search optics. “Not having the Prime shipping badge hurts,” Darretta said, “even though Prime shipping is now taking a month.” Which is to say that Amazon items that don’t have the Prime demarcation on their search results may lead to lower product conversions.

Wellpath had a prior relationship with the third party fulfillment provider, but other Amazon brands likely don’t. For them, the delay is even longer, said Kiri Masters, CEO of Bobsled Marketing. “We’re talking about two to three weeks — at a minimum — to get [a new 3PL] set up,” she said. Not only do the brands have to find the right fulfillment partner and make brand new accounts, but they then have to ship the inventory. One received, the items need to be organized accordingly alongside other brands likely facing a similar crunch.

Completely uncharted territory
There are a multitude of other unknown issues too. For one: how these knee-jerk changes will impact a product’s Amazon ranks. Items that are categorically non-essential — like sporting goods — likely won’t be dinged too badly because all competitors are in the same boat. But brands like Wellpath — where some competitors offer vastly quicker ship times — will likely see a big change in rankings. A product’s visibility on search relies on sales velocity, and fewer people are going to buy a product if it takes a month to ship out. Brands in this hazy space will likely witness a dynamic shift. Said Masters, “some are going to win and some are going to lose.”

This loss of ranking would have a huge longterm impact. “That’s what’s worrisome to us,” said Darretta. “It’s the implications of what Amazon’s algorithm looks like after a month of lower sales. Do we lose our rank compared to other competitors?”

The only certainty for many brands is that the next few months are going be touch. “With outbound shipments stopped many businesses are now down to zero revenue from Amazon,” the brand owner said. “If we can’t get reclassified,” said Darretta, “the reality might be that this is how it is for the next month.”

The biggest issues are the lack of communication — sellers on private groups and public forums like Reddit have posted their exasperation. There’s little to no word from the inside. “I am reaching out to just about everyone I know on the Amazon ecosystem,” said Darretta. “They are finding that even internally this is the most in the dark people at Amazon have ever been.”

Modern Retail+ Talks: How to Maintain Brand Loyalty During a Time of Tumult
Jun 4, 2020

Exclusively for Modern Retail+ members: Hear from Connie Matisse, Co-founder and CMO and Alex Matisse, Co-founder and CEO at East Fork Ceramics, on how to maintain brand loyalty during a time of tumult.

Subscribe