Supply Chain Challenges Impact on Sellers

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As business owners embark into 2022, the pandemic’s negative effects continue to disrupt the world of commerce. While much recovery has happened, the global supply chain that serves many industries is still not at 100% health. Rising fuel costs and severe winter storms have hindered transportation. And with the new omicron variant of COVID-19, further shutdowns,  restrictions, and work absences are affecting packing, shipping, and manufacturing. 

Amazon has been especially resilient the past two years, but the COVID-related issues, transportation costs, along with weather issues, are putting pressure on all links within the supply chain. Businesses that sell on Amazon may be facing new issues with fulfillment, shipping, and customer satisfaction as the e-commerce giant tackles unprecedented demand. Let’s take a closer look.

 

Inventory Storage and Fulfillment Costs Will Continue to Rise

The pandemic skyrocketed the already rising trend of online shopping. Many people turned to Amazon and other online retailers for the products they needed, while many e-commerce businesses have been launched. Together, this means that Amazon experiences enormous demand for its products. As most customers expect delivery within just 1 to 2 business days, it’s critical to keep sufficient inventory in stock at warehouses close enough to the customers. 

Unfortunately, limited space and increased demand mean higher prices. Businesses that use the “Fulfilled by Amazon” option are experiencing increasing costs for Amazon to store and ship their products.  In some cases, FBA still remains a better economic option, as most other carriers are also increasing their costs. And because shipping costs are also higher, many businesses will feel the squeeze for fulfilling orders — especially if they want to maintain that quick “PRIME-like” delivery timeframe.

 

Customer Satisfaction Must Meet Higher Standards

Today’s consumers have become quite accustomed to instant gratification. They expect to find what they want on Amazon — for cheap — and have it arrive at their home or business ASAP. Unfortunately, the supply chain issues, weather, and high fuel costs will likely make that challenging for businesses.

Delivery times are often delayed due to high fuel costs and a shortage of Amazon and most traditional carrier drivers. Businesses that sell on Amazon may catch the blame for shipping issues that are out of their control. There is no easy answer: longer shipping estimates may ward off potential customers, but late deliveries may trigger refunds, and in many cases get bundled into Amazon seller ratings which then need to be disputed through a long case process.

 

What Amazon Sellers Should Do in 2022

Do not lose hope. Eventually, the supply chain issues will abate. Amazon sellers can continue to earn revenue through Amazon by paying attention to the trends and adjusting their cost structure and business model as the environment continues to evolve. 

By understanding the new levels of inventory needed, product cost variances, and fulfillment methods available, businesses can stay resilient in the face of supply-chain challenges. For example, if inventory storage costs grow too high, it may be better to shift your fulfillment strategy to a hybrid model and by working with other partners who can help ensure your products stay available to help maintain product rankings and not just necessarily always have to increase the price. There are benefits to both FBA and FBM fulfillment methods especially working with Partners that also have the Seller Fulfilled PRIME authorization.

Even in this challenging environment, sellers continue to have a great opportunity to successfully grow on the Amazon platform.  They will need to stay focused and current on the latest methods and best practices for all things Amazon.


 

For help growing your Amazon sales channel and navigating through your eCommerce challenges, Contact Phelps UNITED.