NEW YORK—Amazon.com Inc. will only receive vital supplies at its U.S., 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.
Amazon will continue to sell non-essential items like phone cases and toys for now, but 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 on March 17, Amazon stated it is seeing increasing online shopping demand from consumers. As its household staples and medical supplies run 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 products, 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 stated that the new protocol applies to both first-party vendors and third-party sellers. That suggests that the company isn’t protecting its own products.
Delayed Prime Delivery
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. The March 17 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 more than 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. President Donald Trump on March 16 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.
