A worker assembles a box for delivery to the Amazon fulfillment center in Baltimore, Maryland, the United States, April 30, 2019.
Clodagh Kilcoyne | Reuters
Amazon sellers who were hoping for an easier Prime Day after the chaos caused by the 2020 pandemic should not take a break this year.
The company’s two-day discount windfall begins Monday. It comes as the retail industry grapples with pervasive supply chain issues that make it more difficult to stock stores and distribution centers and meet consumer demand.
Several cascading problems hit businesses at once. The global supply chain is still feeling the ripple effects of the Covid-19 pandemic, which has forced many factories to temporarily close amid worsening virus outbreaks. Supply chains have been further disrupted by shortages of shipping containers and air cargo capacity, as well as materials like semiconductors and plastics. Labor shortages have caused significant backlogs throughout the system.
A Covid-19 outbreak in southern China’s Guangdong Province has exacerbated the problem. Local authorities have introduced restrictions, such as limits on the entry of ships, to limit the spread of the virus. This means that one of the busiest ports in the world, the Yantian International Container Terminal in Shenzen, has reduced its available capacity.
Small and medium-sized Amazon sellers who import their products from China are on the alert due to the global shipping problem. Many companies have stocked as much inventory as possible months before Prime Day.
Isaac Larian, the toy maker behind the famous Bratz doll brand, said his company MGA Entertainment is in good shape for Prime Day as it started planning several months ago. This planning has likely paid off, as Larian said he is now examining hundreds of freight containers docked at Yantian shipping ports, while shipments en route to the United States take weeks longer than expected to happen.
“In 42 years in this business, I have seen a lot of challenges, but I haven’t seen anything like it,” Larian said.
These problems add “an increase in time and cost” to the global supply chain, said Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation, a trade group.
Of the 16,000 and more of the NRF members, more than two-thirds of members said they were forced to add two to three weeks to their supply chains, NRF written in a recent letter to President Joe Biden calling for action on port challenges. All NRF members reported to the group that their costs had increased due to the disruption.
“It’s not just an industry that’s affected as a result,” Gold said. “Everyone is hurt because of this.”
As consumer demand remains high and inventory supply is limited, items may run out more quickly than in the past. Freightos Freight Market surveyed 177 small and medium-sized businesses that sell on Amazon and found that just over 75% of them continue to experience supply chain disruptions. Almost half of those polled said they expected stock shortages on premium day due to freight delays.
“People can plan Prime Day months in advance, but most salespeople… don’t have the money to do inventory three months before,” said Freightos CEO Zvi Schreiber. “They have to pay for inventory, then they have to pay for storage and they all work with thin margins. Now with shipping costs, they work with even thinner margins. So if you have margins. thinner and you have no spare cash, you can’t just fill a warehouse three months in advance. “
Millions of small and medium businesses sell their products on Amazon’s third-party marketplace. The segment now accounts for more than half of Amazon’s e-commerce sales and has enabled it to generate record revenue.
An Amazon spokesperson told CNBC in a statement that Prime Day 2021 will have more deals than last year, with more than a million deals from small and medium businesses around the world, indicating that the Vendor participation remains high in the event.
Additionally, over 2.5 million consumers used a pre-Prime Day promotion to purchase products from small businesses within the first 24 hours after the deal went live. Amazon did not share the number of merchants who participated in the promotion.
“We continue to innovate and develop Prime Day to ensure our Prime members and business partners find incredible value,” said the spokesperson.
Bernie Thompson’s affairs take him on all sides. His electronics company, Plugable Technologies, has been hit by the shortage of shipping containers, as well as the continued shortage of chips due to increased demand for electronics.
To make matters worse, Thompson estimates that around $ 60,000 in Plugable’s cargo remains stranded on the Ever Given, a massive container ship that was stuck in the Suez Canal for six days in March, blocking traffic in the one of the busiest waterways in the world.
As a result, Plugable had to “severely limit” its participation in this year’s Prime Day, Thompson said. One of his best products, typically selected by Amazon as a Prime Day deal in the UK, is currently blocked on Ever Given.
“We are about to be out of stock on this product on Amazon UK,” said Thompson. “There is no way for us to have a Prime Day deal in the UK. Our goods are on Ever Given.”
Thompson is confident Prime Day will still attract many brands and sellers, but turnout could be “significantly down” from last year as companies may not be confident they have enough products in stock to close. transactions.
Passing Prime Day can mean missing a wave of sales. While the company does not split revenue from the event, Amazon reportedly grossed $ 10.4 billion globally on last year’s Prime Day in mid-October, according to 360 digital commerce.
Launched in 2015, Prime Day is in part designed to attract more Prime subscribers, to promote Amazon’s products and services, and to drive sales during a normally slower buying period.
It can also give a significant boost to the activities of third-party sellers. In 2020, Amazon said Prime Day sales from third-party sellers were $ 3.5 billion and growing faster year-over-year than its own first-party retail business.
Rick Watson, CEO of e-commerce consulting firm RMW Commerce Consulting, said all of his clients, which span furniture, fashion, home, and food and beverage categories, are experiencing disruption in business. supply chain but still plan to participate in Day One.
Watson said big sellers could benefit more during this year’s Prime Day, as they are better positioned to ensure the best placement of ads, such as “Lightning Deals,” which are limited-time offers that appear often. prominently on the Amazon homepage. These ad placements are usually secured months in advance and require sellers to provide Amazon with inventory levels of the promoted product, he added.
“If you want to get certain ads, they want to know what inventory is behind it,” Watson said. “This could benefit the big sellers this Prime Day, as they are more likely to have the financial flexibility to make these commitments this year.”
Some sellers are already increasingly nervous about having enough merchandise in stock for the holiday shopping season, a crucial selling time of the year. Retailers typically start planning and ordering their inventory in the spring so that it arrives in the fall.
Thompson said the global chip shortage means some of its suppliers expect delivery times of up to a year, which means it’s a bottleneck that could last for several quarters or even next year.
“Prime Day is only about a week away, but I’m not thinking about Prime Day right now,” Thompson said. “I am thinking of Christmas and I am thinking of the beginning of next year.”