Tweaking Your Amazon Channels – Distribution in Uncertain Times

As Digital Commerce & Marketplace nerds over here at POTOO HQ we’re impressed at the speed at which many global retailers have tweaked their operating models in this time of increased uncertainty. Whether it’s supermarkets having dedicated shopping times for the elderly and vulnerable or stories from Costco which has created rationing stations for toilet paper — many of our largest shopping institutions are finding shopper-first ways to help reduce stress and anxiety of the community.

This type of store flexibility is relatively easy to accommodate, but from an eCommerce point of view, it can cause massive friction points. For an industry that for the last 10 years has been hyper-focused on efficiency distribution — disruption at one point can cause a huge amount of pain right when the consumers need the channel the most.

Two months ago the marketplace industry was asking “how do I maximize availability and speed to the consumer while minimizing my inventory on hand (or cash tied up in inventory)” and now we’re asking “how do I ensure I remove as many bottlenecks in the value chain as possible to flow as much product through the system as possible.”

When we’re facing shocks to the system – being hyper-efficient usually leads to being hyper inflexible.

This balancing act can be difficult to navigate… so when Amazon announced yesterday that starting immediately it will stop issuing POs until April 5th for replenishable ASINS for anything “non-essential” and extend delivery windows for those that are (to reduce automated deductions) we took this as a massive sign that they’re about to flip their model on its head.

This should not be a surprise given the companion announcement they’re looking to hire 100,000 logistics workers — the FCs are their bottleneck – both for inbound freight (door availability for trucks) as well as for picking and packing. This is also being extended to both 1P and 3P sellers who use FBA given the FC constraints.

This has a number of implications for those brands that leverage Amazon as one of their primary routes to the consumer — especially those in categories that will support families during this difficult time. Our recommendations are below:

Unrestricted Product List – Anything Considered Household Staple, Medical, or Essential

1. 1P Direct -> Operate as normal but with the expectation of significantly increased order sizing from multiple FCs. Delivery windows have been increased to avoid chargebacks.
2. 3P -> Allocate inventory to FBA as soon as possible to ensure faster flow of products to families. Expand assortment/allocation relationship to partners with Seller Fulfilled Prime

Restricted Product List – Everything else

1. 1P Direct -> Move to Fulfillment by Merchant (FBM) or expand the relationship with a distributor who can fulfill out of their warehouses prioritizing 3P with Seller Fulfilled Prime. Expect inventory levels to deplete causing OOSs.
2. 3P FBA -> Adjust to FBM and partner with 3P that has Seller Fulfilled Prime. Expect FBA inventory levels to deplete causing OOSs

We expect the category restrictions will continue to fluctuate over the coming weeks depending on demand and availability. Over the coming weeks, we’ll keep exploring how brands/retailers/suppliers should change tactics during this time of uncertainty — and as always we welcome exploring any questions you have.

As an aside – eBay has been having challenges policing the platform for opportunistic price gougers who are flipping products bought in bulk at retail. We recommend exploring with your distributor partner the ability to provide authorized listings of products on eBay that are in the correct pricing bands from a reliable source.

Fred Dimyan

Co-Founder & Chief Executive Officer, POTOO