Brands are already beginning to see the impact a major world event can have on their business. Consumers who cannot locate items in-store or are avoiding in-store shopping will be looking online. There are several actions brands can take now to mitigate their impact on Amazon.
1. Items that can be filled, should be filled in the short-term.
Inventory positions will likely get worse before they get better. Once demand begins to slow or the health event takes a turn for the positive, clients may want to consider shorting orders as it will take the ordering algorithm longer to identify the shift and this will allow the client to protect against forward buying (i.e. a year’s supply sold in March) and appropriately allocate inventory across retailers for OOS recovery.
2. Use a hard reject code to protect from PO Rejection Rate chargebacks.
If you cannot fill an item that is surging, use a hard reject code to protect from PO Rejection Rate chargebacks; however, we recommend monitoring those ASINs to ensure they remain available to order. The alternative is to soft-reject and track fill rates by ASIN since this is a metric tracked over time (trailing 13-week confirmation rate >80% will avoid chargeback).
*Note: Effective February 6, 2020, until May 31, 2020, Amazon will be pausing Rejected PO Rate chargebacks in the baby, beauty, luxury beauty, grocery, and health and personal care categories.
3. If you’re on Seller Central, consider temporarily raising your prices (slightly) to curb demand.
Important note: This is not a recommendation for price gouging – we are referring to reasonable shifts in price that would normally occur with OOS issues.
Inventory positions should be analyzed for the foreseeable future. Sellers can consider raising the retail price to curb demand temporarily. You will need to consider any negative implications for doing this such as brand health issues in the account, consumer perception, etc. However, in times like these consumers are spending emotionally. This could result in more inelasticity of demand, so the impact could be less than expected.
Regardless of how you proceed, inventory position analysis will be critical to avoid increased holding fees when the surge begins to decline.
This will not be the last time we experience a world event of this nature. We recommend brands implement these long-term best practices so they are prepared for these situations in the future.
4. Cash is king, but you cannot sell what you do not have.
Companies typically diversify their suppliers to protect inventory levels, however, this event reinforces the need to diversify geographically, in sourcing, production, and warehousing.
5. Supply Chain mapping/monitoring is essential.
Most companies think they have mapped their supply chain, but if the map does not include and consider sub-tier dependencies (their supplier’s supplier and so on), they are at risk for disruption.
6. Develop & Test Contingency Plans.
Remain diligent in risk assessment of your supply chains. Identifying and addressing weak points now may reduce short term gains but secure a more stable and sustainably profitable future.
Sandy Russo is the Supply Chain Director for Beekeeper Marketing, an Amazon General Management Agency, which is part of the Digital Technology group of Advantage Solutions. She leads the Beekeeper supply chain team in support of all full-service clients and manages all stand-alone supply chain consulting projects. Sandy has worked in eCommerce for 5 years and in supply chain and distribution for over 10 years mainly in consumer packaged goods categories. She has an MBA from Miami University (Oxford, OH), and a BA in International Studies and World Economics from The Ohio State University. Sandy lives with her significant other, their daughter, and two step-daughters in Augusta, Georgia.