With the UK going into a second lockdown for at least the next four weeks, we wanted to take the time to share our key learnings and guidance from the first lockdown to help you through this next challenging phase in UK retail and to ensure you benefit from the challenges, and equally the opportunity, this presents.
Whilst no one is excited by another lockdown, demand is only going to move back to online and Amazon in particular, and armed with our tips and guidance below, we want to help you make the most of it.
What happened on Amazon in Lockdown V1?
Looking at the positives first. Over Q2 2020, Amazon saw 40% sales growth and a doubling of its profits, whilst Q3 saw 37% growth and net profit tripling. The rise of Amazon continues, driven by lockdowns, local restrictions and dropping consumer desire to visit the high street.
Although sales were strong for Amazon and its sellers over this period, that came with huge challenges.
In early lockdown, Amazon blocked new sellers signing up and restricted inbound FBA orders to essential goods only. Restrictions were lifted over time but, with heavily restricted stock levels that allowed Amazon to focus on products deemed essential, this massively restricted sales for brands outside of this criteria.
For brands heavily dependent on the FBA model of distribution (most brands!), this posed challenges and throttled sales at a point where demand was at its highest.
Lockdown also saw the introduction of the furlough scheme, which we saw well used by all of our clients. However, in some instances, those furloughed employees were critical to the success of the Amazon business and their furloughing led to missed SLAs on the Amazon account and risked long-term impact on the sales, profitability and operational abilities of those brands.
What’s likely to happen in Lockdown V2?
There’s no crystal ball, but with peak trading ahead and a new national lockdown for at least four out of seven of the highest sales weeks of the year, we think the following are highly likely to happen:
- Sales demand will rapidly shift to online.
- Amazon will continue to dominate and benefit significantly from this, meaning more sales through this channel and an opportunity to grab sales for sellers.
- Black Friday will become a bigger feature than ever before online as retailers race to grab market share, acquire new customers and shift stock they can no longer shift through stores. Discounts and deals will become more prominent.
- Due to increased volume, Amazon will continue to restrict the amount of stock it can take on any item from any seller, which makes achieving the sales opportunity a bit more challenging. Amazon is already placing a 200 stock limit on many items and this is likely to continue.
- Amazon is unlikely to focus on just ‘essential items’ but will instead focus on ‘seasonal items’ – i.e. toys and gifts, rather than just toilet roll, food and batteries – meaning that sellers of items outside of this will need to pay more attention to getting their stock in ahead of time
How can you succeed through Lockdown V2?
Here are our top 10 tips for maximising your opportunities through Lockdown V2:
- Move your stock to Amazon now and place the maximum stock you can at Amazon. Everyone will be doing the same and stock processing times will increase, so you need to be on the front foot to be able to sell and keep your ASINs in stock.
- Be more agile and move quicker than before. The situation will change daily over the next four weeks so be prepared to trade daily and be bold in your decision making.
- Replenish your stock frequently to ensure you are always in stock, allowing for increased delivery and processing time by Amazon. Keep an eye on the maximum stock you can keep at Amazon as this is likely to increase from the 200 stock limit as your sales increase.
- Carefully consider which staff you need to keep in place to handle your replenishment to Amazon and your customer service to Amazon customers. This is likely to be one of the few channels to grow during this period and you need to keep in stock and avoid penalties for breaching KPIs that could damage your account in both the short and long term.
- Think about the gifting opportunity within your range. Christmas is going to be online this year so how can you create gift selections within your range for the gift shopper?
- Consider increasing/decreasing your ACOS on Amazon advertising to make the most of this opportunity. For some of you, reducing your ACOS to maximise profit at the cost of volume may be the right move to make. For others, perhaps those now looking at an overstock position, perishable goods or a cashflow challenge, you may wish to push your ACOS up to sell more goods and turn stock into cash.
- Review your pricing for Amazon to drive more sales. With Black Friday and the traditional pre-Christmas discount events now having a much more online focus, should you discount more heavily to drive a greater sales velocity?
- Enter into Prime Exclusive Discounts to drive sales of your products on Amazon. Although the window for submitting your products for the Amazon Black Friday event has long gone, Prime Exclusive Discounts are a good second best if you need to create additional sales in this relatively short period of time.
- Look at other options for trading your Amazon business. Very few of our clients use all of our services, and we may be able to do things for you that we aren’t currently doing that may give you more flexibility internally. We can support you with copywriting, design, Amazon advertising and much more if needed, if you do need to furlough additional staff and reduce fixed costs.
- Speak to us. We’re here as a partner and if you’re feeling the pressure and needing support, then please reach out. We are all in this together so whether it’s a reach out for professional help, an Amazon query or just a friendly voice to sound out on something we’re not even working on for you, please pick up the phone.
Whether you’re selling on Amazon or not, we’d like to offer our support to you over this challenging period.
We’re making a commitment to help as many brands as we can over the coming weeks with your challenges and queries around selling on Amazon.
If you’re already selling on Amazon and don’t quite know what to do in this challenging period, then please submit your question here and we will get back to you within 48 hours with as much information as we can.
For those new to Amazon, we’ll happily spend some time with you to show you how well your competitors are doing on Amazon and the amount of revenue they’re generating. Why not book in a 30-minute competitor insight session with us?
If you’d like to know more about selling on Amazon, why not also check out the Growth Blog on our website.