How Coronavirus is Impacting Amazon’s Supply Chain (and Its Sellers)

Since the start of the coronavirus (COVID-19) outbreak in China earlier this year, Amazon sellers have anticipated a potentially catastrophic impact on their businesses due to a major supply chain disruption. After all, nearly 70% of Amazon sellers source their products from China, and many Chinese workers have been living in quarantine, unable to manufacture or ship goods to their overseas customers. 

And as of March 17, many Amazon FBA sellers are no longer able to create new shipments for products that are non-essential during the coronavirus pandemic. Those who are still actively selling may or may not be successful based on the types of products they sell and whether they can maintain a supply. 

So, what has the impact of coronavirus on the Amazon supply chain been like? And are Amazon customers in turn being affected?

Jungle Scout recently conducted a survey* among 681 Amazon sellers who source their products from China to understand how their businesses are being affected by coronavirus. 

Key findings include:

• 36% sellers seeing declining sales
• 11% sellers raising prices on products
• 50% sellers looking to source products outside of China

Sellers also shared their projections for how the continued spread of coronavirus would impact their Amazon businesses, and what they plan to do about it. 

Let’s dive in. 

 

1. Amazon sellers seeing declining sales due to coronavirus

Many sellers have already lost sales — 36% said their sales have decreased since the coronavirus outbreak, even before Amazon closed off new FBA shipments.

For those who haven’t lost sales, nearly half (48%) are concerned they will in the future. 

Still, 13% say they are not worried about coronavirus affecting their Amazon business. And depending on the products they sell, a select few could see their sales increase, as 8% have already.

 

2. 11% of Amazon sellers have raised their prices because of COVID-19

Although most survey respondents have not (or not yet) raised prices for the products they sell on Amazon, 11% have already done so.

Amazon sellers can only raise prices so high, however. In fact, Amazon penalizes sellers for price gouging if they sell high-demand products that consumers consider to be “essential” (such as hand sanitizer or toilet paper) at extreme costs.

 

3. Amazon sellers are looking outside of China for suppliers

Many Amazon sellers are struggling due to delays in production in China.

• 49% said their imports have slowed down
• 32% said their supplier is closed
• 31% are having trouble contacting their suppliers

Because of these delays, half of Amazon sellers (50%) are looking to other countries to source their products. 

• 24% are considering suppliers in the U.S.
• 21% are considering suppliers in India
• 17% are considering suppliers in Vietnam
• 10% are considering suppliers in Mexico
• 9% are considering suppliers in Taiwan
• 4% are considering suppliers in the UK

A handful of respondents listed other countries including Pakistan, Canada, Thailand, and Turkey.

Fewer sellers expressed concern about Amazon maintaining operations.

• 14% are worried Amazon will shut down fulfillment centers
• 6% are worried Amazon will shut down their listing

(However, on March 17, Amazon announced they were, in fact, freezing Amazon FBA shipments for all but six product categories.)

What Amazon sellers said about the impact on their supply chain:

• “Following a delay of one month, my supplier’s factory workforce have now returned to work so hopefully there won’t be any further supply chain issues.  If there are, I will look to source from a country less affected by the virus.”
• “Our products are unique which means it is a very long process for us to find a new manufacturing source that is qualified.”
• “My supplier is back to work and working on our next shipment.  My inventory has already come in due to the Chinese New Year. I will not run out of inventory.  If the virus continues, I will be fine as long as my supplier is still working.”
• “I think it’s time I stop sourcing from China regardless of the virus. The quick money isn’t worth it. I want to support my local North American economy.”
• “I think sales will increase online. We just need to work on securing our supply chain.”

 

Overall, Amazon sellers express varied levels of concern about coronavirus

We asked 681 Amazon sellers how they are responding to the coronavirus outbreak and any potential impact to their businesses, and we got 681 unique responses. 

Some are convinced the pandemic will strike a fatal blow to their sales. Others believe the news is over-dramatizing the impact of coronavirus. And many sellers are somewhere in between — choosing to pivot, explore new products and suppliers, fire or hire employees in response to demand, and otherwise roll with the changes. 

Some sellers are concerned coronavirus will shutter their businesses:

• “My product is targeted at employees of an industry that could be significantly disrupted if the virus spreads and causes significant disruption to daily life. I am currently reducing my inventory position and limiting the size of my re-orders to conserve cash in the event that my sales are disrupted.”
• “We will have to cut back on advertising.  Start looking for a different sourcing country.  Pick products that are not affected by the virus.”
• “I need to visit my supplier to discuss some design options. Not being able to go there will potentially delay the introduction of new products. Worried about a recession which could impact sales.”
• “Raise the price before running out of stock, and get a job if my income stops.”
• “I will probably fire some employees due to high fixed costs.”

Many acknowledge the gravity of the situation and are pivoting their business strategies:

• “I’ll start selling masks and digital thermometers.”
• “Order much more inventory ahead of time to insure I don’t go out of stock. Have different suppliers outside of China to diversify the supply chain. Increase price of listings if I’m about to run out of stock.”
• “Look for opportunities… other types of product lines where sales are fueled by the situation like household staples, groceries, supplements, health-related items.”
• “Reduce fixed business costs. Stop ongoing manufacturing. Focus on new product development and preparing marketing materials (e.g product videos). Wait patiently for the crisis to pass.”
• “Look into other fulfillment sources and probably hire more temporary staff to help with increased volume.”
• “Invest more on R&D.”

And some sellers think coronavirus news is overblown media hype and consumer paranoia: 

• “I’ll do nothing, everyone is [panicking] and we need just to calm down and continue living!”
• “Most likely not, as this is truly a ‘play’ from people behind the scene, to buy stock cheap again and earn multiple millions. Media is overplaying the corona virus, making people stay home, be afraid and so on.”
• “Create awareness that the Chinese products won’t affect people because the virus survives for a few hours and it takes days to reach the products to the country via import.”
• “I will just chill and wait. There’s not much to be done. Keep your store open and hope for the best. In fact, this is a temporary matter. In a few weeks, everything will be over.”

 

What can Amazon sellers do?

• Find a new supplier — Jungle Scout’s Supplier Database lets sellers search for verified global suppliers so they can quickly source new or high-demand products consumers are seeking.
• Pivot from FBA to FBM, and sell high-demand products directly to consumers.
• Consider alternatives to private label — try retail or online arbitrage, dropshipping, wholesale, or other business strategies.

 

*Methodology: From March 4-16, 2020, Jungle Scout surveyed 681 Amazon sellers who stated they source their products from China. 

 

Jungle Scout is the leading all-in-one platform for selling on Amazon.

For more information, please contact [email protected].