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2021 Holiday Season: How to Manage Your Amazon Inventory
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As the COVID-19 pandemic continues to be unwavering and unpredictable, supply chain issues are affecting businesses large and small. With workers falling ill, manufacturing facilities shutting down, and shipping containers becoming harder to come by, the results are unprecedented inventory delays, shortages, and sky-rocketing shipping costs.
Let’s take a deeper look at what factors are contributing to the current supply chain challenges, how it’s anticipated to affect the 2021 holiday sales season, and tips for Amazon sellers to manage their sales strategies in the midst of these problems.
Major Factors Contributing to Amazon Supply Chain Issues
First, there are the rising shipping costs from China due to the U.S. tariffs on imports. According to CNBC, American companies are absorbing more than 90% of additional costs related to the 20% tariff on Chinese goods, which has led some businesses to cut back on which products they import from the country.
Then, there’s the pandemic-related worldwide shortage of shipping containers. The cost to ship a 40-foot container from Shanghai to Los Angeles has nearly doubled since June 2020. And considering that containers transport 60% of global goods, and China generates 96% of global production, suppliers are finding it increasingly difficult to secure containers.
In addition to the container shortage and disrupted supply chains, the pandemic has also delayed container turnaround times, congested ports, and led to equipment shortages worldwide.
The price of raw materials is also rising as supply chain challenges persist. The factors contributing to the rise in costs are strong global market demand, shortages of many raw materials, a 58% oil price increase since November 2020, the international shipping container shortage, and more.
Many major U.S. companies that are reeling from the impact of higher-priced raw materials, increased labor expenses, and supply-chain woes are raising prices as product demand rebounds with the reopening of the economy.
For instance, Mattel announced it would raise prices in the second half of the year to cover higher commodity and transportation costs. Likewise, Starbucks reported price increases helped offset sizable wages investments and higher supply chain costs in the third quarter. Kimberly-Clark Corp. also said it increased prices to offset higher raw material costs.
Holiday 2021 Amazon Inventory Preparation Tips
With the 2021 holiday shopping season coming up quickly, now is the time for Amazon brands and sellers to ramp up their strategies in anticipation of the challenges due to China’s rising shipping costs, supply chain issues, and the ongoing effects of the pandemic. Here are some tips for how Amazon merchants can plan for the holiday sales season accordingly.
First, understand your expected holiday demand based on prior years’ Q4 sales, and/or if you sell non-seasonal items, add a 20% projected sales increase, and plan your inventory based on those figures.
Next, ensure your inventory arrives in time for Amazon’s 2021 holiday calendar and FBA warehouse arrival deadlines. November 1 is Amazon’s FBA inventory cut-off date for U.S. sellers to ensure your products are available for sale when Black Friday, Cyber Monday, and the Christmas selling season roll around. And be prepared to mitigate delays caused by rising shipping container costs and ongoing Amazon supply chain issues.
Another strategy to minimize risks and costs is to prioritize importing only your best-selling products. With fewer products to manage during the supply chain crisis, you can ensure that those you invest in are more likely to be worthwhile. Just make sure that your holiday inventory arrives well in advance and heavily promote those top-selling products.
Lastly, having a contingency plan for the 2021 holiday shopping season is crucial. If the supply chain for your inventory is backlogged, what can you do?
One option is to work with a 3PL (third-party logistics), which refers to fulfillment companies, couriers, or freight forwarders who act as liaisons between shippers and manufacturers.
Another consideration is to have a Fulfillment by Merchant (FBM) “plan B” ready to go. In the unfortunate event that your inventory cannot arrive at FBA warehouses before Amazon’s cut-off date, have a plan in place for how your business can handle the capacity to store inventory and fulfill holiday orders.
Amazon brands and sellers must face the current supply chain challenges head on. The 2021 holiday sales season is almost here, so start preparing now and anticipate issues with inbound tariffs, the global shipping container shortage, and rising costs of raw goods.
Additionally, investing in technology such as inventory management or advertising and pricing optimization can help maximize profits and stabilize inventory as well, if or when they hit low or critical levels. Overall, by following these Amazon holiday inventory tips and investing in the right optimization tools, you can plan your strategies in advance for a successful holiday season.