Yes, retail is crazy right now. It seems like every day is Black Friday as consumers stock up due to the fear that things will run out, making supply chains a mess. There are lines out the door at grocery stores and toilet paper, of all things, has become as valuable as gold.
While all of this is happening, Amazon is also making temporary changes. Last week, they announced that only “essential goods” would be allowed to be shipped into their Fulfillment Centers. This is impacting millions of products and product listings. Everyday items like hair and skin care products are not making the cut. Others, like vitamins and pet food, are. As with many things Amazon, there is a vast grey area where certain brands and sellers are getting a roadblock while others are getting preferential treatment. That being said, you can’t blame Amazon. They are trying to do the right thing during these uncertain times, and it is difficult to not overcorrect when you are dealing with millions of product listings and billions in sales. But this is leaving brands and sellers in a difficult position, with fears of losing sales due to out of stocks.
So what should brands be doing? Something they should’ve done a long time ago: create a hybrid retail strategy.
Many brands have put all of their eggs in one basket. Either by selling exclusively to Amazon through Vendor Central, exclusively through their own Seller Central account, or the worst of them all, selling exclusively through only one third-party (3P) seller.
In my experience, a sound Amazon retail model is a hybrid one. Below are my top three recommendations:
2 to 4 3P Sellers: Depending on the size of your brand, you may want to have up to four authorized 3P sellers. Obviously, larger brands should opt for four, and smaller brands can do well with two. Make sure that at least one of these 3P sellers has a strong Fulfilled By Merchant (FBM) program. As with any retail program, every 3P seller must adhere to your brand’s policies. If they don’t, you can show them the door and replace them with another seller that will be a good partner.
Seller Central + 1 or 2 3P Sellers: This is my favorite of my top three. You can hire an agency to manage your own Seller Central account, turn-key, and also find you a strong 3P seller to be your other retailer. This gives you control and provides an insurance policy by having other 3P sellers partners in the mix, reducing out-of-stocks, and preventing any interruptions should any account be temporarily suspended.
Vendor Central + 2 to 3 3P Sellers: This one is the best for brands selling directly to Amazon (first-party, or 1P, as we like to call it). Amazon 1P can be a good partner, but you need someone to fill in the gaps, as there will be many. Amazon 1P usually only carries a brand’s top-selling SKUs, so new product launches or long-tailed items would be left behind. They also don’t list multipacks or FBM offers. Depending on the size of your brand, you should find two to three additional 3P sellers. The 3Ps should agree to carry your entire catalog and list multipacks, and at least one of them should have a strong FBM program.
The retail models listed above reduce the leverage that any one group has on your business. The reduced leverage means reduced risks. Brands no longer have to suffer lost sales when a seller account gets suspended. Out of stocks and Suppressed Buy Boxes rates substantially decline. Listings “magically” find themselves covered by both Prime aka Fulfilled by Amazon (FBA) and Fulfilled by Merchant (FBM) offers.
Which brings me to my next point: FBM.
During this time of FBA uncertainty, having a strong FBM strategy is important for any brand on Amazon. Ensuring that you have a 3P partner with adequate FBM capabilities is key. FBM offers reduce your reliance on FBA in two ways: 1.) They act as a stop-gap for regular (non-COVID-19 times) out of stocks, 2.) they allow listings to stay in stock during these crazy times, as Amazon puts restrictions on what is allowed in their Fulfillment Centers.
It is not too late to act. Expanding your retail strategy to include FBM offers is easier than the inverse. Brands should reach out to their agencies or consultants and ask them to help them find the right partner(s). This will help brands now and in the future, giving them more control of their destiny in this increasingly more important retail channel. And as the Chinese proverb says “The best time to plant a tree was 20 years ago. The second best time is now.”