Amazon sellers Coronavirus impact and what we are doing

written by GORILLA ROI

It’s disheartening to see this play out in real life.

My friend’s bread and butter business are tradeshows.

He also runs his business “paycheck to paycheck” and didn’t consider that the coronavirus could be a business risk. He was part of the “it’s just the flu” crowd.

Every show is canceled for at least the next 2 months.

He has until the end of March before all the cash is gone and he is done.

10 years of business for him going up in flames just like that.

As Amazon sellers, you and I are lucky (for the most part) that we can continue selling through Amazon while retail and customer-facing businesses are hammered.

Today, I’ll share how we are navigating this and what we are doing.

The short version.

  • Come up with plans for different coronavirus situations
  • Be proactive
  • Monitor your pending orders and PPC
  • Ship boxes via UPS more often
  • Track your inventory and stay on top of it
  • Prepare to switch to FBM
  • Fix your broken processes
  • Use data to make objective and better decisions

Coronavirus impact to Amazon sellers

I mentioned in January that we were preparing for the worst. My thoughts at the time on Coronavirus was limited to supply chains. Here’s what I said in Jan which is still relevant today.

I’ve found it helpful to be realistic and prepare for bad case scenarios versus being optimistic and being caught flat footed. That’s how businesses went out of business.

You don’t have to go into full emergency mode, but factoring in 1-2 months of delays and rehearsing scenarios on how your team should handle and make decisions in these situations is a helpful and preventative measure. It’s also great training.

I would rather have an extra 1-2 months worth of inventory (overstock) of best sellers than be out 1-2 months of best sellers.

The coronovirus is going to impact:

  • delays from raw material suppliers as they can’t make enough
  • delays from manufacturers not being able to produce at full capacity
  • delays because bigger companies may have placed massive orders and takes priority over yours
  • delays as quality goes down because manufacturers are scrambling to manufacture and QA is a distant second
  • delays because you have to find new or more inspectors
  • delays as more paperwork from China is required for exporting and backlog of outgoing shipments at the port
  • delays as manufacturers will play the force majeure hand and demanding an adjustment of the costs

Dismissing the impact of coronavirus means you are saying that none of the above are big risks and your supply chain is perfect.

Even if you source 100% from USA or another country, you will have all your eggs in one basket. If a black swan event happens in America, the same issues apply. Having backup manufacturers to existing manufacturers is something we try to do in order to diversify the risk and once it is set up, it isn’t as hard to shift manufacturing from one place to another.

The two big news so far is that

  • Amazon is overwhelmed and needs to hire 100k workers
  • Amazon is prioritizing shipments for medical supplies and other staples

The next obvious step is a total shutdown in the US (or major cities) that will take place and private businesses will be forced to sit and wait.

As Amazon sellers, we are not considered “essential” businesses. That’s something to acknowledge. If you disagree, you’ve got your head in the sand.

The reality is that Amazon can get whatever you are selling, or something similar, from a major manufacturer like Proctor&Gamble, 3M, Johnson&Johnson etc.

It’s not a matter of if, but when, and being proactive as I share below.

Expect more delays at Amazon

As the virus continues spreading quicker, more Amazon employees are not showing up or using their UPT (Unpaid Time Off).

Amazon employees get 20 hours of UPT per quarter and 80 per year, but it’s being used by lots of people.

If you check your pending orders, it’s been growing as Amazon hasn’t been able to ship out on time.

Amazon sellers Coronavirus impact and what we are doing 1

Within Amazon’s FC, the normal metric is around 0.3 days of backlogged orders.

Over the past couple of weeks, the backlog has grown to over 1.0 days. It may not sound like much, but it’s a massive increase. A delay of 1.0 means the delay to the end consumer can be anywhere from 3-7 days.

Employees are also moved around to help with Amazon Fresh which operates at a different FC, system, and procedure.

No wonder they are trying to hire 100,000 more people and giving a $2 raise to lower-tiered employees.

Another important piece of information is that inside the fulfillment centers, they have what is called AFE (Amazon Fulfillment Engine).

AFE is an order packing system that consists of three general operations–sort, re-bin, and pack. Packers pack multiple items in each box.

Amazon Fulfillment Engine. Rates are high and you work elbow to elbow with up to 3 other people packing boxes and jiffies. Normally it’s multiple items but they also do singles as well.
(source)

How can you use this info?

  1. Monitor orders and PPC. If customers get sick of waiting, they will cancel. Your ACoS goes up, conversions go down.
  2. Employees are avoiding AFE. From forums, the sentiment is many people prefer picking, rather than packing. The FC’s have fans running and if it’s an elbow to elbow situation and someone with the virus sneezes near a fan… you get the picture.
  3. Expect certain fulfillment centers to shut down. Plan for it. It could be the FC you ship to.
  4. Send out smaller quantities quickly to keep your levels topped up rather than large pallets.
  5. Track inventory levels multiple times a day to quickly switch gears as needed.

FBM shipments or international marketplaces

EU sellers have it harder because all the borders are shutting down. You should update your settings to disable accepting orders from different countries if you are unable to fulfill or the delivery will be too late.

Amazon sellers Coronavirus impact and what we are doing 2

Amazon has extended the transit delivery window, but for certain areas like the red zone, don’t expect to meet the delivery date.

Check your shipping zones and adjust your policies as needed.

If you are a seller in EU and selling in the US, read the next section as your future shipments could be in jeopardy.

For USA sellers that sell in Canada, and vice versa, borders are getting stricter. Personal travel is now blocked. Shipments will take longer to pass the border and arrive at the destination.

Strategy to move past Amazon’s prioritization of inbound products

Amazon unexpectedly blocked shipments of products outside of 6 categories.

  1. Baby Products
  2. Health & Household
  3. Beauty & Personal Care (including personal care appliances)
  4. Grocery
  5. Industrial & Scientific
  6. Pet Supplies

Even within these categories, sub-categories not deemed essential are blocked.

If your product is correctly classified and you are not able to create a shipment, then the product in question is not prioritized at this time.

Most of our products are within Health and Household, Home, Personal care and we’ve experienced the 35-50% surge in sales over the past couple of weeks.

But the new blockage means that 8 out of our top 10 sellers cannot be sent in. The irony is that our bad sellers can be shipped.

amazon prioritizing shipments
Lots of our products temporarily blocked

Thankfully, our number 1 seller is whitelisted and we are in a good position with inventory for the other best sellers too.

As soon as we received our shipment from China and Korea last month, we were all hands on deck to get everything stocked up to at least 40 days of inventory.

The recent surge has drawn that inventory level down, but we’ve been topping up products as much as possible during this period.

Pallet shipments are slow to get checked in, so we send in a mix via UPS and pallets. For non-urgent shipment, send via pallets where you can afford at least 14 days for it to get checked in.

Otherwise, send it as box shipments.

If our FBA products go out of stock, we are ready to flip the switch to FBM.

To anticipate this happening, we need to reconfigure our packing stations for better efficiency. We aren’t set up well for FBM so if there are suddenly 100 orders that need to be fulfilled, it’s a lot of work.

Getting it figured out beforehand will be the smart move. You can never go wrong investing in processes and setting up systems. A good thread is up on the seller forum regarding this.

Another option is to transition to a 3PL that has the capability to offer SFP (Seller Fulfilled Prime).

The challenge will be trying to get this done in 2 weeks. 3 weeks max. It also only makes sense for products with enough margin.

Prepare for the worst. Hope for the best.

I have two cliche philosophies for running our business.

1. Prepare for the worst. Hope for the best.
2. Build a business for the long term.

As much as I like growth, I do err on the conservative side. Growth is like a drug. If you get addicted, it gets very dangerous because you end up throwing caution to the wind.

I also understand that as a small business, we don’t have the flexibility and options that big companies attract. I’d love to borrow a billion dollars at 0% like Warren Buffett. But knowing this isn’t the case, I’ve focused on the mantra that cash is king.

When I say prepare for the worst and hope for the best, it is based on the idea that:

  1. the business should be able to run without me
  2. the business should be able to survive at least 6 months with zero revenue

It sounds unnecessary and too much trouble until it is too late.

The important things are never urgent.
The urgent things are usually never important.

But when you define goals clearly and work backward, you’d be surprised how easy everything becomes.

When I realized I needed to diversify the business risk away from me, I took the plunge and promoted an employee to be my right hand, then shared all the knowledge I had.

Didn’t hold back and haven’t looked back.

Took over 1 year to get through everything and learn all the tools and systems we have in place. But I know that if something happens to me, the business will continue.

Next was building up cash balance.

It took us 4 years before we became profitable. A lot of stupid mistakes were made until I admitted we were going nowhere.

Then everything flipped.

Amazon sellers Coronavirus impact and what we are doing 3

Look at the net income line between 2015 and 2016.

We went from $-35k to $77k.

Amazon sellers Coronavirus impact and what we are doing 4

Why the drastic difference?

The biggest factor was going back to basics and calculating my numbers from scratch.

This single task changed the trajectory of our business.

Until 2015, I thought I was making money on products, but my calculations were wrong.

I completely mispriced products and had to raise them. We killed non-performing products, let go of emotional biases for certain products, reduced stupid mistakes and the rest is history.

Every couple of weeks, we transfer a small percentage of cash into an account for paying taxes, and another account for a rainy day or profit-sharing.

Check out the book Profit First. It’s easy to follow and no accounting experience is required.

Just common sense to creating a healthy business and protecting yourself.

Amazon sellers Coronavirus impact and what we are doing 5

Even with the pandemic going on, our focus is put our efforts towards long term and sustainable growth. Not short-term profit seeking efforts like the hand sanitizer guy everyone hates.

Amazon sellers Coronavirus impact and what we are doing 6

Or flipping the same BBQ gloves off Alibaba and trying to do the least amount of work.

Amazon sellers Coronavirus impact and what we are doing 7

Build your internal tools to adapt and move quickly

Anytime something happens – like a delayed order, missing shipment, Coronavirus – we look at it and ask ourselves how we can prevent it or not be caught by surprise.

This helps us continue to focus on a commitment of continual improvement and building internal tools using Gorilla ROI within Google Suite to improve the way we work, save more money and increase speed.

Online spreadsheets have become so powerful now that you don’t even need to pay developers to build custom software for you. Nearly everything can be done within Sheets – with some thought and effort in creating the spreadsheet.

The latest example is our Amazon warehouse dashboard below.

There was too much communication and daily standup meetings required to figure out what had to be done.

This dashboard now does all the talking and is displayed in the warehouse on a large TV for everyone to see.

It clearly shows the KPI (Key Performance Indicators) and everyone is empowered to make the right decisions based on the data from the dashboard.

It’s not hard for our packers to figure out what the priorities are and eliminates hand-holding, useless meetings and micromanaging.

amazon warehouse dashboard
Our Amazon warehouse dashboard

We’ve beefed up our inventory monitoring, projecting and ordering models.

With data from sales of each SKU, refunds, inventory status, our custom solution helps us stay ahead and not have to rely on Amazon seller central or inflexible Amazon seller software.

If you need to improve your data needs or supercharge your own internal tools, check out Gorilla ROI.

Recap of what Amazon sellers can do during this uncertain period

  • Come up with plans for different coronavirus situations
  • Be proactive
  • Monitor your pending orders and PPC
  • Ship boxes via UPS more often
  • Track your inventory and stay on top of it
  • Prepare to switch to FBM
  • Fix your broken processes and build up your tools
  • Use data to make objective and better decisions

What is Gorilla ROI?

Gorilla ROI automatically pulls Amazon data into Google sheets for you to make sense of the data without the inconvenience of manually downloading, sorting and updating spreadsheets.

Learn how you can centralize your data and use it to increase your ROI.

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