It’s a pivotal moment for Amazon sellers. The world is undergoing massive changes in the wake of the coronavirus, and many sellers are reeling from the impacts of strained supply chains, sudden policy changes and shifts in customer demand.
What was already a tumultuous marketplace is now even more unpredictable—yet, there are some things that experts are still banking on when it comes to the future of Amazon.
Here are their opinions for how the marketplace will look in a few years’ time. Read on for their advice on how you can best prepare for the new age of Amazon and succeed in a post-coronavirus world.
Amazon Will Reign
Despite logistics being thrown off-kilter, Amazon is only growing in dominance. As brick-and-mortar stores face a devastating hit to their sales, Amazon touts an exponential growth in sales—with sales in some categories skyrocketing 500% in the first several months of 2020.
“Google searches for ‘Amazon’ are almost as high as they are during Prime Day and Black Friday,” observes Michael Begg, co-founder of Amazon marketing agency AMZ Advisers. (Recall how Amazon surpassed Google for product searches for the first time in 2018.) “Whether shoppers are going to Amazon out of boredom, purchasing essentials that they cannot find at local stores or playing it safe by shopping from home—Amazon is the go-to platform right now.”
Other experts agree that this may be the biggest boon to Amazon ever. As buyers are being forced to shop online for everything from groceries to personal care items, the chances of them returning to pre-coronavirus habits are looking less likely with each passing week.
Amazon’s lead is thereby widening as physical retailers remain closed and disadvantaged. Aside from being the “everything” store, Amazon reminds us that it’s the store that never closes even when the country faces a national crisis.
Other Marketplaces Will Simultaneously Rise Up
Amazon’s gains are Walmart’s gains to an extent. Buyers aren’t simply flocking to Amazon for their quarantine needs.
In April, Walmart became the number one downloaded shopping app in the U.S., according to AppAnnie, surpassing Amazon by 20%. Much of this was driven by groceries. As the country’s largest grocer, Walmart wields the staff and logistics to deliver groceries quickly at low prices.
“In the future, we’ll continue to see channels like Walmart take a larger piece of the marketplace revenue growth as they continue to innovate and provide options where Amazon falls short,” predicts Ryan Berg, founder of Talenta Commerce, a managed service provider for multichannel sellers. “Buyers, too, may consider more sites when making a purchase and rely less on Prime.”
Already, buyers are expressing their frustrations with Prime delivery delays, even after Amazon reopened FBA to nonessentials, increased staff and took the unprecedented step of letting FBM merchants win the buy box above FBA.
Prime orders are seeing sales drop nearly 30% amid delays. Meanwhile, Walmart and eBay are seeing upticks in sales, which started peaking in early April. As these channels launch initiatives to retain their buyers and sellers (think: Walmart two-hour delivery, WFS and the rumored Walmart+, and eBay’s “Up & Running” marketing campaign), the gap between them and Amazon is narrowing.
FBM Will Become More Popular
Over the years, FBA has become a necessity to compete on Amazon. A whopping 73% of U.S. sellers use the service for at least part of their fulfillment, if only because FBA offers the biggest advantage in search results and buy box win rates.
Yet, recent months have gone to show that it’s dangerous to rely on FBA alone. Thousands of sellers became inactive overnight after Amazon temporarily froze FBA for nonessential items. That translated to over a third of previously active sellers, according to a recent report.
“There was little communication of value, direction or even updates directly to the seller,” says Berg. “Many were left scrambling to come up with solutions to maintain sales revenue. Sellers envisioned themselves going bankrupt, laying off workers, closing the doors, and all of this came without warning...while this situation was an extraordinary event, it did reveal a weakness in the system.”
Berg adds that Amazon’s own perspective may be changing. “I believe that we will see Amazon reopen more FBM options for sellers...Amazon may realize that while they’ve achieved incredible growth on the fulfillment side, they still need other partners to truly deliver great buying experiences. If not, they risk permanently losing customers to their competitors.”
Just last year, Amazon stopped accepting new applicants for Seller-Fulfilled Prime. Many suspect this had to do with lack of control, or an exhaustion of resources, in making sure FBM sellers lived up to Prime standard. Recent events now beg the question, will this program be revived?
Amazon May Lose the Support of Conscientious Shoppers
“Headlines around underpaid, overworked employees certainly aren’t working in Amazon’s favor and will affect a more conscientious shopper,” says Begg. “With so many people struggling economically during this pandemic and Bezos gaining billions in value, the optics don’t look good unless Amazon finds new ways to contribute to the general public.”
Amazon has most recently fallen under the scrutiny of nine democratic senators, who are asking for details about the firing of four employees that raised concerns over warehouse conditions. This follows several walkouts and protests by Amazon workers in recent months.
Public scrutiny could be enough for some shoppers to stop buying from Amazon, according to Begg. We see buyers do this in normal times; 60% actively avoid purchasing from brands that stands for causes they don’t agree with.
In this high-pressure, high-profile situation, Amazon may gain some detractors who will ultimately turn to other marketplaces both now and in the future. That being said, it’s worth noting that Amazon expects to invest $4 billion in coronavirus initiatives. They’ve doubled regular hourly base pay and made over 150 process updates to improve safety at their warehouses. Bezos has also donated $100 million to help food banks during the pandemic in addition to $25 million to a new Amazon Relief Fund.
(The latter received backlash after the company asked for public donations.)
TBD if Amazon can do enough to keep widespread criticism at bay.
Sellers Who Succeed Won’t Be Wholly Reliant on Amazon
Just a few years ago, 47% of sellers reported that Amazon accounted for 81% to 100% of their revenue. That number hasn’t moved much today and represents sellers who face the biggest devastation during the pandemic.
“Sellers got hit multiple times [in recent months] and they have lots of reason to complain,” says James Thomson, partner at Buy Box Experts, “but I do want to remind sellers that you made the choice to source everything out of one country. You made the choice to sell everything on one channel. You made the choice to have only one company do fulfillment. So, if there’s variance in any of those systems, it creates a big problem.”
Recent upheavals in demand and marketplace policies have underscored the need for sellers to move away from strategies that put Amazon in the forefront, whether it comes to how catalog decisions get made, fulfillment is handled or sales are landed. While Amazon offers a good launchpad for ecommerce teams, it doesn’t substitute for a permanent foundation.
“Quite frankly, we should've been [having] the diversification discussion six months ago, twelve months ago,” says Thomson, who acknowledges that many sellers are now in an awkward position of having to test new revenue channels without the cash to invest in new inventory. “I would rather build the pipes into these different marketplaces and know that even if I’m selling just a small amount of volume...the pipes are connected. For most companies, those pipes don’t even exist.”
Watch the Full Interview: “[Video] Getting Real About Amazon FBA”
Surely in the months to come, seller perspectives will evolve. It’ll become evermore apparent that a business rooted entirely on Amazon is playing with fire.
Did You Know: Several sellers have reported massive spikes in webstore sales, as Amazon sales have dropped below normal levels. One seller even saw webstore sales hit a record high and outperform Amazon by three to four times more sales.
5 Survival Tips for Amazon Sellers
Amid all the changes on the horizon, the experts give their two cents on how to best prepare your business for future growth.
1. Find a 3PL or Other Alternative to FBA
Develop a hybrid approach that leaves at least a small supply (such as 20% of your best-selling products) with a secondary provider, recommends Berg. This limits the amount of control you give to Amazon and the chances of you losing access to your own inventory.
“Use a software like Zentail to manage and forecast inventory across multiple providers,” Berg adds. “You should always have listings set up with FBA and FBM options, and establish protocols that allow you to switch inventory between locations and channels at will.”
2. Go Multichannel
Get the ball rolling on Walmart Marketplace, eBay, Google Shopping and other channels that make sense for your business. Remember that between listing and pricing, fulfillment and advertising, each channel has its quirks. Getting organized will require new workflows, tools and resources. That’s why getting ahead is important.
“It’s kind of like saying, ‘I want to be able to do emergency open heart surgery whenever the time comes along,’ jokes Thomson about sellers who push off expansion. “If you want to do that, you have to have started the training to get to the point that when you have to do open-heart surgery, you’re ready to go.”
3. Don’t Neglect Your Branding
It’s easy to de-prioritize branding, especially on Amazon where 78% of searches are unbranded and incentivizing repurchases is strictly prohibited. However, there are still many opportunities for your business to seize.
Through creative means like enhanced brand content (EBC), Amazon Live and social media, you can build awareness around your brand. While you can’t ask for reviews or offer coupons in things like package inserts, you can direct buyers to “how to” instructional videos on YouTube. The ultimate goal is to grab the attention of buyers who may repurchase from your brand on Amazon or elsewhere in the future.
4. Leverage Advertising
It’s been said many times that advertising is a “must” for sellers these days. Ads are prevalent on Amazon search results and product detail pages, and are instrumental in increasing both sales and review counts on listings.
Now may also be an especially good time to test campaigns, according to Begg.
“This is a great time to be advertising,” he says. “Advertising costs are extremely low due to reduced competition, and it presents a lot of opportunities to compete on keywords that are usually too expensive.”
By kicking ads (and sales) into motion, you can keep cash coming in and put your ASINs in a better position to rank higher organically.
5. Stay Disciplined
As you look to grow business, establish short-term habits that will get you closer to long-term goals. Sellers often forget small, but critical tasks because they’re busy trying to stay competitive, according to Thomson. For example, some sellers may be overpaying in FBA storage fees but find out too late because they’re not regularly checking their inventory statuses. Other important tasks include tracking competitor movements, making sure listings are in tip-top shape and ensuring that ads are optimized.
“I’m not a stats hound, but I am a process hound,” says Thomson. “My whole team has a checklist of stuff that need to be done daily, that need to be done weekly, that need to be done monthly, that need to be done monthly...figure out what are those things you need to do as a company and hold yourself to them.”
“If you yourself are not disciplined, hire somebody who will do those tasks because it’s very mechanical. So much of selling on Amazon is very mechanical,” he adds.
How Is Your Business Preparing?
What are you doing to future-proof your ecommerce strategy? Let us know by tweeting @ZentailCommerce or reaching out to firstname.lastname@example.org.
Need Help with Multichannel?
Schedule time with a Zentail expert to see how we can transform your Ecommerce business.