How to Beat the Amazon FBA Shipping Restrictions

Less than two weeks ago, Amazon.com's Fulfillment By Amazon (FBA) community was shaken by the online retailer's decision to restrict the kinds of inventory it’s receiving until April 5, 2020. Shipments of inventory turned away, and many FBA sellers left to fend for themselves during the COVID-19 crisis. Many sellers that still have FBA inventory are panicking after seeing delivery dates pushed to April, and some items would even take a month to deliver. Amazon is struggling to fulfill the spike in orders, causing it to hire 100,000 additional workers to bolster its capacity. However, delays and restrictions might be extended as the virus has hit workers in at least 13 of Amazon's U.S. warehouses as of Sat., March 29, potentially crippling its capacity further. Having no access to the FBA program and FBA deliveries taking weeks to arrive, many sellers voiced concerns about losing an entire month of sales.

What Sellers Can Do Right Now

1. Maintain sales velocity for affected items by converting your FBA listings to fulfilled by merchant (FBM). Make sure your items can remain in stock until you can replenish them after restrictions have been lifted. We anticipate further delays, so realistically plan for longer. If any of your FBA items will be out of stock before you can replenish them, you need a FBM listing for those SKUs. Until last week, Amazon was still giving “Buy Box” preference to FBA offers, even if the shipping time was considerably longer and the price was more expensive. In a welcome change, and for the first time known to most in the industry, Amazon’s Buy Box algorithm appears to now give preference to FBM offers from merchants who can fulfill the order faster.
2. Diversify order fulfillment. The situation around COVID-19 is unpredictable, and no one can say for sure when these FBA restrictions will indeed be fully lifted. Relying solely on one party to do all your fulfillment would continue to put your business at risk. Complementing your FBA operations with a combination of your warehouse and outsourced services allows your business to keep running despite disruptions. Sellers should consider firms that connect multiple order fulfillment providers at once and provide agility and flexibility.
3. Diversify your sales channels. These shipment delays and costly shipping bugs would be disastrous for your business if it relies exclusively on Amazon. This would be an opportunity to consider other sales channels, such as Shopify, eBay, or Walmart, especially because these channels have less competition. Amazon has more than 8 million third-party sellers vying for customer attention worldwide, whereas Walmart only has ~33,000 sellers as of January 2020. Large Amazon sellers have a chance to be a bigger fish in a smaller pond on the Walmart marketplace.
4. Improve liquidity through assistance programs. It’s unrealistic to expect sales to jump back to regular levels as soon as the restrictions are lifted. We can’t predict when this disruption in your business will end. It would be good to have extra liquidity to cover your expenses as you weather the storm. The Small Business Administration (SBA) is providing working capital loans to small businesses suffering substantial economic injury as a result of the coronavirus. The SBA website mentions offering low-interest loans of up to $2 million for affected businesses.
5. Maintain your ad campaigns. In these uncertain times, sellers are cutting back spending on ads and pay-per-click campaigns. With less money spent by others, your campaigns may reap bigger returns and increase your sales further. If you’ve set up your “nonessential” SKUs through self-fulfillment or 3PL, it’s time to boost your sales!
6. Diversify your product catalog. “If you can’t fight them, join them.” With nonessential goods being restricted from FBA, it could be the perfect opportunity to bring in essential goods if you have access to them. Furthermore, it might be worthwhile to invest in sourcing them because there's no certainty that this restriction will end as planned.
7. Hold some cash for wholesale/distributor discounts. The current shutdown of brick-and-mortar stores (i.e., non-essential ones) would lead to overstocking of inventory at wholesalers. Thus, it may lead to deeper discounts soon. Be sure to hold extra cash to take advantage of this opportunity.
8. Let this recession be your ladder. In the face of a global pandemic, sellers are confronted with a new reality. Almost overnight, the economic dialogue has changed from measured confidence to murky chaos. The only way to build a lasting business is to do things differently. Survival requires thinking and acting differently. Read more on what sellers should do in this recession to come out on top when the crisis ends — and know this: crises always end!

Agile Fulfillment is the Way Forward

The COVID-19 situation has exposed a fundamental flaw of over-reliance on a single fulfillment channel for many merchants, especially Amazon sellers. Like an investor diversifying their portfolio between multiple asset classes, sellers shouldn't rely exclusively on FBA for fulfillment. The pandemic calls for sellers to rethink their fulfillment strategy. Take this time to see how you can make your fulfillment and operations more agile by incorporating flexibility, resilience, and scalability.

• Flexibility means the ability to shift fulfillment locations (often using outsourced services) when demand patterns change naturally or as a result of new sales channels or marketing campaigns.
• Resilience in fulfillment means operations can continue during disruptions by reducing dependence on any single point of failure.
• Scalability means having multiple fulfillment options and the technologies that tie together so your business can quickly scale up to meet new demand or easily scale down to adjust in slower periods.

Keep these three principles in mind as you consider fulfillment partners to complement your existing capabilities.

Manish Chowdhary is the founder and CEO of Cahoot, a peer-to-peer order fulfillment network where merchants collaborate to increase their sales and margins by offering profitable one-day and two-day free shipping to customers nationwide without spending a penny more than the economical ground shipping.