Good morning and welcome back from Prime Day! Cheers to surviving one of the most hectic sales days of the year. Now we can focus on more calming things, like painting watercolor landscapes, growing a vegetable garden, or, preparing for Black Friday... But, before we get there, in this issue, we'll cover:
Why Import Fees Are Skyrocketing and How Sellers Are Weathering It Out
Sellers are spending more than usual to import their products (as much as 300% more for some), and it's eating up their profits, both risking the lifespan of their businesses and inflating prices of goods and services around the world.
A container arriving from China to the U.S. would have typically cost around $2,000 this time last year. Some are now paying nearly $15,000, and that's all thanks to what people refer to as the perfect storm (think, less George Clooney and more, George Washington on thousands of dollar bills spent on shipping).
The Perfect Storm: When the pandemic started, it disrupted a slew of global production and transport systems. Since then, the combination of limited shipping containers, supply/demand imbalances, and unstable labor conditions have ultimately played its part in skyrocketing import fees.The factory's abrupt halt followed by an influx of demand has resulted in an increased number of backlogs and congestion, and in the end, there aren't even enough containers to meet everyone's needs. In fact, numerous bookings are accepted based on profitability, and as a result, many small and medium-sized businesses are getting the short end of the stick.
The Real Cost of Freight: Major organizations worldwide have felt the pains of these freightening expenses, but many smaller Amazon businesses that are already operating on thin margins are truly struggling. People like Tyler Rodriguez, a 3P seller from Florida, bumped up his prices 10-15%, and that's not even the worst he's seen
Merchants whose operations are heavily threatened by this become faced with the decision to either eat the costs and risk closing or pass the expenses to their customers as Tyler has. At this rate, it's possible there won't be relief til next year as merchants stockpile and prepare for the holiday season.
TLDR: Not enough containers + imbalances in global demand and supply are increasingly stressing the supply chain, driving up costs and slowing down shipments. Note to self: Plan BFCM strategies way ahead of time.
Growing Concerns as Staff Turnover Reaches New Heights
Amazon's warehouse staff is experiencing higher than average turnover. Nearly a 150% churn rate per year, which is about 3% per week, is like replacing everyone every eight months. Most companies would be sweating buckets at the thought of this HR nightmare, and certainly, there are Amazon execs out there getting anxious. Now, keeping operations staffed and running essentially requires 5% of the entire American workforce to apply each year. Indeed this could have been contained or addressed beforehand, right?
Green light or Red Flag? The frequent need to employ new warehouse staff may very well have been by design. In a recent investigation by New York Times, reporter Karen Weise revealed information about the processes that support the likelihood of Amazon anticipating and accommodating frequent hiring, of them the following:
Who's Paying The Price: Whether it's part of the process or not, 150% turnover is high, and a lot of the current staff are feeling the heat and pressure from it. Amazon's plans for growth is evident as they spend $44 billion in capital investments with a chunk of it for logistics and warehouses. The system could fall in on itself with an inconsistent staff, resulting in operational inefficiencies, leaving third-party sellers (many of them already facing fulfillment issues) with unreliable platforms to make their profits.
TLDR: High staff turnover is risking reliable warehouse operations and potentially putting Amazon and the sellers who use the platform at risk.
How to Scale Your Amazon Business Amidst an Evolving Industry
In one way, shape, or form, Amazon is in the news almost daily, whether due to shifting industry practices or Mr. Bezos flying off into space. But, while Amazon continues to evolve before our eyes, one thing for sure is that as sellers, we need to adapt and level up.
How to Scale Your Amazon Business
When strategizing how to scale your Amazon business, it's not one size fits all. Consider your industry, category, and available resources to gauge your organization's capabilities
Why Prime Day 2021 Was Especially Challenging and What Sellers Are Doing Instead
A promotion run by Amazon meant to direct traffic towards independent merchants brought a lot of attention to these 3P sellers during Prime Day, an event that's driven by discounts and promotions. It's a big event for many people in the seller community, but this year not as many are eager to jump on the promo train.
A lot of uncertainties fell around Prime Day this year, and many sellers opted out. With expectations of big deals, it's become difficult for many sellers to keep up. Inconsistent inventory due to strained supply chains and storage limitations doesn't help either. With thinning margins and higher expenses, it's safer for some to skip the event and go for a more predictable route. This way, they're more likely to meet customer demand and better anticipate the rest of the year.
Looking Forward: With challenges in the Prime Day department, sellers are looking ahead at the next significant sale day with holiday season Black Friday/Cyber Monday plans a-brewing. We can only hope that with enough time, supply chain stresses will lighten up, and sellers will be able to run the promos they want for their customers on time!