Amazon’s New ‘Essential Items’ Policy Is Devastating Sellers
Bernie Thompson is exactly the kind of entrepreneur Amazon likes to celebrate. In 2009 the former Microsoft developer started his own electronics company, Plugable Technologies. He now employs 35 people in Redmond, Washington, and primarily sells his signature laptop docking stations through Amazon. In 2016, CEO Jeff Bezos highlighted Plugable in a letter to shareholders, noting how Amazon helps small businesses like Thompson’s grow. Plugable’s success story was so emblematic that Amazon featured it in a video advertisement designed to lure new business owners to its platform.
Then the coronavirus hit. Facing overwhelming demand for household essentials like toilet paper and groceries, Amazon announced last week that it would hire an additional 100,000 workers in the US, and would give employees in the US, UK, and Canada a temporary raise of at least $2 through the end of April. It also decided to stop accepting all other items at its warehouses, including those from Plugable, until April 5. In Italy and France, Amazon will deliver only essential items, regardless of what it has in stock.
The change sent Amazon sellers—many already facing other disruptions caused by Covid-19—scrambling to find new ways to get their products to customers. Shipping times have begun lengthening, from as little as 24 hours to weeks or more, contributing to a precipitous decline in sales. “People are not going to want to order items when they won’t ship for a month,” says Thompson.
“We understand the impact that Covid-19 has had on many of our selling partners, and appreciate their understanding as we temporarily prioritize high-priority products so we can more quickly receive, restock, and ship these products to people who need them during this time, particularly the elderly and those who are most vulnerable to being out in public,” an Amazon spokesperson said in a statement. The company says it is also relaxing some policies for sellers, including performance metrics based on shipping times.
Small businesses around the world have been forced to close and lay off employees as a result of the coronavirus pandemic. But Amazon sellers are unique in that they rely heavily on the retail giant, whose massive logistics network has been considerably strained by the public health crisis.
For years, Amazon has encouraged millions of third-party merchants to enroll in its Fulfilled by Amazon service, allowing them to offload tasks like storing, packaging, and shipping to the company in exchange for a fee. (An spokesperson says Amazon waived long-term storage fees in April for sellers using FBA.) Around 94 percent of Amazon merchants use FBA for at least some orders, while 64 percent exclusively rely on the service, according to the analytics firm Jungle Scout, which tracks data for Amazon sellers. Now that the program is only open to essential goods, sellers have been forced to seek out alternative means of distribution.
“The consequences to our business from that announcement were tremendous,” says Mendel Jacobson, the CEO of Afula Enterprises, a company that sells over $10 million worth of different products on Amazon annually. “Half our catalog—we can’t send to Amazon, we’re already running into a lot of inventory problems.” Afula has been unable to send even items like garbage bags to Amazon, which it assumed would have qualified as essential.
To cope, Afula has begun trying to fulfill orders on its own, but the company is struggling to find trucks available to pick them from its New York City warehouse, where residents have been ordered to shelter in place to stop the spread of the coronavirus. Mendel has considered putting up flyers in the area, resorting to selling goods to people who live nearby. He worries he might need to lay off some of the 35 people he employs in Brooklyn. “Every hour it’s changing, I don’t think anyone knows what’s coming,” says Mendel. “The unknown is very freaky.”