Supply Chain Crisis Overwhelms Amazon Prime Sellers
A Black Friday event for Amazon Prime subscribers only, Amazon Prime Day this year is beset by global shipping shortages and delays. Sellers boast US$300 off Roomba vacuum cleaners, US$260 off Casper mattresses, and US$60 off AirPods Pro—if they’re in stock. Smaller shippers have struggled to keep up with consumer demand. As Isaac Larian, CEO of MGA Entertainment, said: ‘In 42 years in this business, I’ve seen a lot of challenges, but I’ve not seen anything like this’.
For KeaBabies, an Amazon seller that offers infant products, Prime Day usually results in US$500,000 worth of revenue. Not this year. The company can no longer afford to offer steep discounts to customers on its bibs and baby slings as manufacturing and supply chain costs spikes. In fact, KeaBabies is paying double the amount to import items from China that it paid a year ago. Said Ivan Ong, the company’s co-founder: ‘I don’t have enough profit margins to [offer price cuts]’.
What’s the Root of the Crisis?
Most of the chaos has been caused by shipping delays. Ever since one of the world’s largest ports, Yantian International Container Terminal, was closed weeks ago due to new coronavirus outbreaks, global shipping has slowed, container prices have skyrocketed, and companies have struggled to fulfill international orders.
What’s more, the Suez Canal fiasco isn’t over yet. Impounded by Egyptian authorities, the Ever Given contains loads of cargo meant for Amazon Prime Day. Bernie Thompson, founder of Plugable Technologies, told reporters that he had US$60,000 worth of stock on that ship—in addition to one of his top-selling goods.
Overall, small Amazon traders might lose out because large organisations could afford to stockpile goods. Multinational corporations, for the most part, can afford to play a little fast and loose with their supply chains. ‘[But] most third-party sellers don’t have the cash to bring in the inventory’, said Freightos CEO Zvi Schreiber. ‘They’re all working with slim margins...You can’t just fill a warehouse three months in advance’.
How Will It Play Out?
According to Freightos, over 75% of small- and medium-sized Amazon businesses are expecting shortages and price hikes. This is no small number. As reported by CNBC, SMEs make up over half of Amazon’s US$236bn in annual sales. Over the next two days, they’ll drive more than 1 million Prime Day deals. And if they’re in trouble, consumers will take note.
Right now, businesses are still participating because, quite frankly, they can’t afford not to. But since big companies will be better placed to fill orders, commit to premium Amazon Ads, and assure delivery, small businesses will take a major profit hit. Many have resigned themselves to Prime Day shortages and started preparing for the future. Vendors now forecast lead times as long as a year in advance, and small Prime businesses are thinking about Christmas, New Year’s and the start of 2022.
But as Prime Day draws to a close, shoppers may be disappointed by factors far beyond their control. Though the pandemic may be drawing to a close in some parts of the industrialised world, its effects are clearly apparent today. ‘This Prime Day will be more curated by what products are in stock and available’, said Mike Black, Chief Marketing Officer at Profitero. ‘Running deals and promotions on top of this dynamic is like pouring fuel on the fire’.