Amazon and COVID-19: What Sellers and Vendors Need to Know

Amazon Restricts Inventory Shipments to FBA Warehouses

Amazon on March 17 suspended shipments of nonessential products to its FBA fulfillment centers for its U.S. and EU markets in response to the substantial spike in orders related to the COVID-19 crisis. The company is now only accepting shipments of inventory in the following categories:

• Baby Products
• Health and Household
• Grocery
• Beauty and Personal Care (including personal care appliances)
• Industrial and Scientific
• Pet Supplies

The suspension was initially slated through April 5, 2020 — but was recently extended — and shipment creation for products outside the above categories has been temporarily disabled. According to the company, Amazon determines whether a product is deemed an essential item based on the product’s listing.

As such, the company has also suspended the reclassification of listings to avoid an influx of merchants submitting requests to work around the restriction. However, inventory that has already been received at FBA warehouses will continue to be sold and all shipments created before March 17, 2020, will still be received. 

The decision to suspend FBA shipments of nonessential inventory will allow Amazon to better serve consumers in need of items that have been difficult to find on physical shelves, like toilet paper and disinfectant wipes. Yet, the move will certainly be devastating to a vast segment of Amazon merchants — 50% of Amazon sellers utilize FBA as their primary fulfillment method.

If your business has been impacted by the FBA restriction, now is the time to reassess your fulfillment strategy and ramp up your capabilities for FBM or SFP, the latter of which will allow you to sustain your item’s Prime eligibility. If you do not have the capacity to fulfill orders on your own, consider leveraging a third-party logistics (3PL) partnership to avoid a dip in your revenue and sales velocity. 

In addition, Amazon offered sellers a series of steps they can take to mitigate the impact of the FBA restriction on their businesses. These include the following:

• Consider updating your listing status for vacation, holidays, or other absences to protect the health of your seller account.
• If you cannot fulfill an order that was already placed, use Buyer-Seller Messaging to communicate this information to the buyer, explain the reason why, and request that the buyer submit an official cancellation request. If the buyer does not submit an official cancellation request, you must cancel the order yourself and notify the buyer. This could impact your performance metrics, but Amazon said if you can confirm that you notified the buyer using Buyer-Seller Messaging, the company will consider this as an unforeseen event when evaluating your account’s performance.
• To prevent other orders from impacting your seller metrics, Amazon recommends reviewing the item’s delivery time and making updates as needed.
• Lastly, if the buyer requests that you cancel a shipped or unshipped order, use Buyer-Seller Messaging to ask the buyer to submit an official cancellation request. Once the buyer has submitted the request, you must follow Amazon’s standard cancellation process to ensure that the cancellation does not count against your metrics.

Inventory Shortages Result in Price Gouging

Capitalizing on the surge in demand, Amazon merchants have been found tripling or even quadrupling their prices of essential items. For example, CNBC reported that, before Amazon ran out of stock, N95 face masks were priced at $13.28, but later found examples of face masks being sold for as much as $195.

Amazon said it is working with state attorneys general to identify and prosecute sellers who are capitalizing on consumers’ health concerns by engaging in price-gouging on the marketplace, according to Reuters. The company has since restricted the type of merchants who can sell health and sanitation items on its platform. 

Amazon has also started asking its customers to cooperate with a Department of Justice criminal investigation of third-party sellers, informing those that may have purchased products from sellers who engaged in price-gouging, according to the New York Post.

As of Monday, Amazon has suspended more than 3,900 U.S. seller accounts and has removed more than 530,000 products from its platform over price-gouging. In addition, Amazon says it has taken down “millions” of items that made unsupported claims about their ability to protect and fight against COVID-19. 

Amazon in early March deployed a dedicated team that is working 24/7 to detect price gouging on items like protective masks and hand sanitizers and to prevent sellers from evading its automated systems. Typically, the company uses machine-learning technology to compare sellers’ prices to current and historical levels both on and off Amazon.

However, with the slowdown of factory production in China, inventory shortages are rampant across Amazon’s marketplace and some sellers are raising product prices not out of greed but in an effort to conserve their remaining inventory and sustain their search position. 

Stockouts can stifle sales velocity and revenue as well as demote your products in search, as Amazon’s A9 ranking algorithm heavily considers each of these factors in determining your product’s search position. However, with higher prices, your sales volume and conversion rate will decrease, which can, in turn, damage your ranking position. Additionally, you can only increase your prices for so long until either the product completely goes out of stock or sales come to a complete halt. 

If Amazon deems the price of your product to be egregiously high, you are at risk of not only having your listing removed but also of having your seller account suspended. To avoid these instances, be prepared with documentation of your product’s pricing history and ensure your current prices are aligned with those historical prices.