Adjusting Your Amazon Strategy During the Coronavirus Outbreak
Earlier this month, we highlighted a few ways the coronavirus had impacted Amazon in its early stages. But, as we all know, much has transpired since and new challenges have arisen for brands and retailers. Continue reading for insight into recent developments and how to adjust your Amazon strategy during the coronavirus outbreak.
Amazon’s Changes to Issuing Purchase Orders
This week, vendors woke up to a coronavirus-related notification from Amazon Retail. It informed brands of a temporary reduction or pause of purchase orders for non-essential items. Products not considered household staples, medical supplies, or other high-demand products are directly affected.
Although Amazon didn’t specify categories, MPS has clients within the following categories that are still receiving POs:
- Baby Products
- Health & Household
- Beauty & Personal Care
- Pet Supplies
Sellers received a similar communication regarding disabled shipment creation for products that didn’t fall within these categories. Amazon cites these changes will be effect until April 5, but, we anticipate PO reductions could extend beyond April and recommend brands prepare for that possibility.
Changes to the PO process are necessary for Amazon to keep up with demand for essential products. Pauses and reductions will help to free up warehouse space and allow fulfillment centers to cater to what’s most important.
Regardless of your situation, we suggest being realistic and setting expectations internally.
Shifts in Traffic and Conversion and the Impact on Supply Chains
Over the last week, we have noticed a significant increase in traffic and conversion within many categories. Above, you can see keywords and corresponding search rank fluctuations. Household essentials such as toilet paper, sanitizers, and facemasks have seen major spikes. Also, shelf-stable grocery items and crafts and toys have seen notable jumps.
These spikes and dips in traffic and conversion have a direct impact on brands’ supply chains. Brands that are able to support increased demand can capitalize on the opportunity. But brands with supply chain constraints can expect stock-outs if they haven’t already happened.
How Will the Coronavirus Impact Media Spend and Advertising on Amazon?
In addition to its influence on supply chains, COVID-19 will likely result in changes to media spend and consumption. Brands that sell essential products and have a strong supply chain can increase their media budgets to take advantage of the additional opportunity and decreased competition. The inverse is true for non-essentials or brands with supply chain challenges. Those brands will likely have to decrease media spend in the short-term.
At MPS, many of our clients that sell essential products and have healthy supply chains have seen advertising efficiency drastically improve over the last few weeks. Average cost-per-click has decreased, and click-through-rates and conversions have increased, both of which have led to a lower ACoS.
On the consumer side, media consumption will increase as people are home and watching more TV or using their computers. As a result, DSP and OTT audiences will become much larger and subsequently less competitive.
Larger brands stocking out will also drive a decrease in competition in this space. Therefore, brands can expect a significant decrease in cost to advertise through DSP and OTT. On the flip side, Sponsored Ads could become more competitive. Again, this will depend on the brand’s category and supply chain.
How Your Brand Can Adjust its Amazon Strategy During the Coronavirus Outbreak
While the coronavirus will create unique obstacles for different categories, there are steps to take now to protect your brand and potentially take advantage of increased traffic:
- Monitor POs on a weekly basis to make sure all top tier SKUs are being purchased.
- Analyze on-hand inventory and sell-through rates to create a game plan to avoid stock-outs.
- Adjust advertising and marketing spend to focus on top sellers with ample supply.
- Reduce advertising and marketing spend on items that are in lower demand or supply.
- Assess other fulfillment options, such as drop shipping, in order to stay in stock.
- Vendors should consider leveraging Direct Fulfillment.
- If it makes sense, sellers can try to move to Fulfilled by Merchant.
- If your brand has authorized third-party partners with inventory, now is the time to lean on them for support.
- Spend this downtime improving ‘retail readiness’ and other blocking and tackling on the Amazon landscape. This will help your brand be in an improved place once things go back to normal.
The Short and Long-Term Effects of the Coronavirus on Amazon’s E-Commerce
One of the most noticeable effects of Amazon’s increased demand is the slowdown of Prime shipping times. If Amazon’s focus on shipping essentials continues, we could see another surge of online shopping take place as consumers avoid in-store shopping. And ultimately, Prime shipping times will continue to be delayed. In this case, only time will tell.
Overall, we expect the consumer response to the coronavirus outbreak to have long-term effects on e-commerce beyond delayed Prime shipping. Suddenly, consumers are buying products online they might usually buy in-store. As a result, their future shopping habits could change faster than they would have without this pandemic.
Selling on Amazon requires the willingness to adjust in real-time. This has reached a new level because of the coronavirus. While most variables are out of your control, there are answers and solutions that can position your brand to succeed and overcome.