Supply chain problems could limit what you can buy

A worker assembles a carton for delivery on April 30, 2019 at the Amazon fulfillment center in Baltimore, Maryland, United States.

Clodagh Kilcoyne | Reuters

Amazon sellers who were hoping for an easier Prime Day after the 2020 pandemic chaos are unlikely to take a break this year.

The company’s two-day discount bonanza begins on Monday. It comes as the retail sector is grappling with widespread supply chain problems that make it more difficult to stock stores and distribution centers and keep pace with consumer demand.

Companies face several cascading problems at the same time. The global supply chain is still feeling the effects of the Covid-19 pandemic, which has forced many factories to temporarily close amid worsening outbreaks of the virus. Supply chains were further disrupted by the lack of shipping containers and air freight capacity, as well as materials such as semiconductors and plastics. Labor shortages have created significant backlogs across the system.

A Covid-19 outbreak in southern China’s Guangdong Province has exacerbated the problem. Local officials have put restrictions such as restrictions on ship entry to limit the spread of the virus. This has reduced the available capacity of one of the busiest ports in the world, the Yantian International Container Terminal in Shenzen.

Small and medium-sized Amazon sellers who import their products from China are tense due to global delivery difficulties. Many companies stocked up on as much inventory as possible months before Prime Day.

“I haven’t seen anything like it”

Isaac Larian, the toy maker behind popular Bratz doll brand, said his company MGA Entertainment is in good shape for Prime Day as it started planning many months ago. That planning has likely paid off, as Larian said he is now looking at hundreds of containers of goods tied up in Yantian ports while shipments en route to the U.S. are taking weeks longer than expected.

“I’ve seen a lot of challenges in 42 years in this business, but I’ve never seen anything like it,” said Larian.

These issues are “increasing the time and expense” of the global supply chain, said Jonathan Gold, vice president of supply chain and customs policies for the National Retail Federation, a trade group.

In the over 16,000 NRF Members, more than two-thirds of the membership, said they had been forced to add two to three weeks to their supply chains, the NRF recently wrote in a letter to President Joe Biden calling for action to be taken against port challenges. All NRF members reported to the group that their costs had increased as a result of the disruptions.

“This does not damage just one sector,” said Gold. “Everyone is hurt because of it.”

With consumer demand remaining high and supplies limited, items could run out faster than in previous years. Freightos freight marketplace surveyed 177 small and medium-sized businesses selling on Amazon and found that just over 75% of them continue to have supply chain interruptions. Almost half of those surveyed said they would expect storage bottlenecks on Prime Day due to freight delays.

Reporting on Amazon Prime Day 2021

Read more about Amazon and others scheduled for this year’s sales events:

“People may be planning months in advance for Prime Day, but most sellers … don’t have the money to get inventory three months in advance,” said Zvi Schreiber, CEO of Freightos. “You have to pay for inventory and then for storage and they all operate at low margins. Now, on shipping, they operate at even lower margins. So when you have leaner margins and no cash left, you can’t just three Stock up months in advance. “

Millions of small and medium-sized businesses offer their goods on Amazon’s third-party marketplace. The segment now accounts for more than half of Amazon’s e-commerce sales and has helped it achieve record sales.

An Amazon spokesman told CNBC in a statement that Prime Day 2021 will feature more deals than last year, with more than 1 million deals from small and medium-sized businesses around the world, suggesting seller participation in the event stays high.

In addition, more than 2.5 million consumers took advantage of a Pre-Prime Day promotion to buy goods from small businesses within the first 24 hours of the launch. Amazon did not share how many retailers took part in the promotion.

“We’re evolving Prime Day and evolving it to ensure that our Prime members and distributors find incredible value,” said the spokesman.

Bernie Thompson’s business takes it on all sides. His electronics company Plugable Technologies suffered from the shortage of shipping containers and the persistent chip shortage caused by the increasing demand for electronics.

To make matters worse, Thompson estimates that Plugables goods worth about $ 60,000 are stuck on the Ever Given, a giant container ship that was wedged in the Suez Canal for six days in March, blocking traffic on one of the world’s busiest waterways.

As a result, Plugable had to “severely limit” its participation in this year’s Prime Day, said Thompson. One of its top products, usually selected by Amazon as a Prime Day deal in the UK, is currently hanging on the Ever Given.

“We’re about to have this product sold out on Amazon UK,” said Thompson. “There is no way for us to get a Prime Day deal in the UK. Our goods are on Ever Given.”

Participation in Prime Day

Thompson is confident that Prime Day will continue to attract many brands and sellers, but attendance could have “decreased dramatically” from last year as companies may not be sure they have enough products in stock to close deals.

If you walk by on Prime Day, you may be missing out on a barrage of sales. While the company is not generating any revenue from the event, Amazon raised an estimated $ 10.4 billion worldwide on Prime Day last year in mid-October, according to Digital Commerce 360.

Launched in 2015, Prime Day is designed in part to attract more Prime subscribers, promote Amazon’s products and services, and provide a boost in sales during what is typically a slower shopping time.

It can also give a significant boost to third-party businesses. In 2020, Amazon said third-party sales on Prime Day were $ 3.5 billion, growing faster year over year than its own retail business with first-party retailers.

Rick Watson, CEO of e-commerce consultancy RMW Commerce Consulting, said all of its clients spanning the furniture, fashion, household, and food and beverage categories are experiencing supply chain disruptions but continue to plan to participate in Prime Day.

Watson said larger sellers could benefit more during this year’s Prime Day as they are in a better position to secure top ad placement, such as “Lightning Deals,” which are limited-time offers, which are often highlighted on the Amazon homepage. These ad placements are typically secured months in advance and require sellers to provide Amazon with inventory levels for the advertised product, he added.

“When you get certain advertisements, they want to know what the inventory is,” said Watson. “Larger sellers might benefit this Prime Day as they likely have the financial flexibility to make those commitments this year.”

Some sellers are already getting nervous because they have enough goods in stock for the Christmas shopping season – a crucial selling time of the year. Retailers usually start planning and ordering their inventory in the spring so it arrives in the fall.

Thompson said global chip scarcity has led some of its suppliers to forecast lead times of up to a year, meaning it is a bottleneck that could last for several quarters or into next year.

“Prime Day is only about a week away, but I’m not thinking about Prime Day right now,” Thompson said. “I am thinking of Christmas and I am thinking of the beginning of next year.”

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