Considering that most people around the world are currently quarantined, at least to an extent that it is natural for an eCommerce giant to have a booming business. Panic buying, stocking up, and the inability to leave the house should be reason enough to make Amazon the shining star supplier in these sensitive times.
Surprisingly, Amazon survey data shows that sales have decreased amidst many Amazon categories.
Traffic and sales decrease is going to be very temporary but the strain on the economy has created a critical situation for sellers on Amazon. Third-party sellers are suffering the most from this sales fall, as people are buying necessities, and they are buying them in bulk.
In the last couple of days, the visits and activity on Amazon have remained virtually the same, with its regular ups and downs, while other companies such as Target, Costco, and Walmart are experiencing a significant surge in popularity.
Categories that Suffered the Most
Third-party sellers are affected the most from this drop in sales and activity, as most of the sales are from entertainment and household staples/essentials related categories. Other categories have experienced a variable loss in traffic. The huge decline is seen to be originating from Amazon's business decision to prioritize essential items temporarily.
That means longer shipping times and a much smaller selection of items to choose from. While people are opting to purchase the essentials over entertainment and discretionary items in the sensitive economic times, studies show that consumers favor other retailers as compared to Amazon. As stated above, retailers such as Walmart, Costco, and Target are selling an increased number of products, with added variety.
The damage control that Amazon has done to curb this issue boils down to hiring about 100.000 people to fuel fulfillment centers, warehouses, and delivery services, to get their system back up. Their trademark two-day shipping has suffered from the changes and might be one of the reasons why their sales are suffering.
Unlike Walmart, Costco, and Target, Amazon's shipping has degraded significantly amidst the economic uncertainty. Amazon placing priority on essentials has already resulted in a catastrophic sales loss, as other retailers are offering more variety, at a lower price, with faster delivery.
Delivery Has Affected Amazon Significantly
As stated above, one of the essential pieces of Amazon's sales tactics is its signature one or two-day delivery. That allows consumers to quickly acquire their desired product, without having to worry about stock.
Combining the fact that the one and two-day delivery systems have been obstructed in the past couple of days, the delayed shipping time makes consumers wary of purchasing products on Amazon. Panic buying and impulse shopping dictate getting the desired product as fast as possible, even at the price of a markup.
That is only amplified as certain Amazon Prime items have completely lost their quick shipping advantages, as some items which used to ship within a day can now take over a month. This is putting third party businesses in a very nasty position, and their business is suffering as a result.
However, Amazon has announced that they are extending return windows because of the pandemic. The official company statement goes as follows:
"We're temporarily extending return windows in light of the ongoing global health crisis. Most items ordered through Amazon or seller partners in the U.S. and Canada between March 1, 2020, and April 30, 2020, can now be returned until May 31, 2020. Items ordered through Amazon or seller partners in Italy, Spain, France, Turkey, and the Netherlands between February 15, 2020, and April 30, 2020, can now be returned until May 31, 2020."
Amazon has been keeping a very detailed blog on its effort to mitigate the effect of the coronavirus.
Direct to Consumer Brands Move to Amazon
DTC brands have suffered the most in recent times, as direct to customer services are mostly centered around nonessential items. That makes DTC sellers lose a significant amount of profit, making them move to an eCommerce platform like Amazon.
Amazon has become a refuge for these services, as they're looking for additional traffic through Amazon. That is doing wonders for Amazon's business arsenal, but is, yet again, resulting poorly in sales.
In the future, this is going to significantly increase Amazon's business arsenal, making more and more brands compliant on their platform. Quite a lot of DTC sellers find that Amazon is a fierce competition market, making them opt to join Amazon instead of ceasing to exist.
This new adaptation to the Amazon platform is going to make most DTC sellers make a complete switch, actively cutting down on the competition Amazon faces. While other DTC sellers opt to join other commerce giants, joining Amazon is still easiest out of the bunch.
When it comes to the consumer perspective, the delayed shipping times and shipping issues make returns a hard thing to handle, especially for DTC sellers who are already struggling. Amazon is known for its simple returns and relatively swift shipping, which makes consumers opt for it rather than DTC sellers.
Even with the influx of DTC sellers, Amazon's business seems to be flatlining at the moment. The future of this cooperation is going to be lucrative for both Amazon and the DTC sellers themselves.
Fred Killingsworth, the CEO of Amazon-specialized agency Hinge has had this to say on the matter:
"We've been talking to major brands about this for years, and they've turned a blind eye to it, but I think a situation like this certainly shows there's a responsibility to protect both the brand equity and the consumer experience. We're working with companies right now to prevent people from being able to create their listings and make some claims that aren't factual."