But the news is not all good for online channels, including Amazon. That sales increase cannot be supported with adequate last-mile delivery if demand is concentrated around the traditional five days of Black Friday, and the first couple weeks of December. . December is already extremely busy for Amazon, but by starting sales earlier in November, Amazon aims to get more demand addressed earlier in the month when there is more last-mile delivery capacity available.
Shift to online channels
The consequence of these issues is brands should expect to see a greater proportion of their sales being online sales this fourth quarter, with a larger-than-usual proportion coming from Amazon. For companies selling on Amazon, if their inventory isn’t Prime eligible, we urge them to modify their cut-off dates for last-minute orders to a date earlier in December, so as to ensure that the non-Amazon carriers are able to deliver FBM orders on time. So as not to upset their customers, we encourage firms not selling on Amazon to evaluate carefully how late into December they want to guarantee delivery of their online orders. These retailers are squarely reliant on UPS/FedEx/USPS to handle last-mile delivery for their mountain of fourth quarter online orders.
With Amazon better equipped to ensure on-time delivery through its own massive last-mile network, consumers that otherwise would have purchased off-Amazon are likely disproportionately to flock to Amazon, especially nearer to Christmas when Amazon’s logistics will be better able to support on-time delivery right up to evening of December 24. For most other retailers, they will either have to shorten the last day of shopping to guarantee on-time pre-Christmas delivery, or they will see a sharp increase in shipments unfortunately arriving after December 24.
Amazon inventory storage issues
Since the start of COVID, Amazon has not been able to increase fulfillment space to keep up with consumers’ increased online demand. As a result, Amazon has put significant limits on how much inventory can be stored in its fulfillment warehouses, both for 1P brands and 3P sellers. With its warehouses already at capacity by mid-October, and Amazon experiencing over three-week delays in receiving new inventory, this leaves sellers exposed to the possibilities that (a) their Prime-eligible inventory will run out well before the end of December (b) they will not be able to replenish such inventory in time to avoid costly stockouts pre-Christmas. We urge all brands to look into either a drop-ship option (1P) or a merchant-fulfilled option (3P) to enable Amazon customers to be able buy their products, even if the brand’s/seller’s fulfillment service isn’t as convenient, reliable or cost effective as Amazon Prime/FBA. We also urge 3P sellers to be prepared to replenish FBA stock every two to three days, even if that means small package shipments into Amazon’s fulfillment centers.
While the challenges at Amazon during this fourth quarter are more severe than usual, we expect Amazon will be in better position to thrive than most retailers are today. By already being a dominant online shopping destination, equipped with a significant network of fulfillment centers as well as its own massive last-minute delivery capability, Amazon will fare better than most other retailers that have been thrust by COVID into offering their customers online shopping options. For brands and sellers that still have time to adjust focus towards the Amazon channel, those companies will fare better than most others during this holiday shopping season.
James Thomson is chief strategy officer of Buy Box Experts and former head of Amazon Services. He can be reached at [email protected].