Amazon Shuts Down FBA Temporarily

The minute I publish this, something will change.  This is a continuation of last week’s blog on crisis planning.  I can tell from the discussions (outrage) in the seller communities that people did not plan.  It is not too late. The scenarios I listed last week are still in play. The storm is not over yet.  Here’s the hot issues facing the community today:

1. Profiteering
2. Amazon shuts down FBA and we can’t sell
3. Government agency restricts our ability to sell
4. Delivery companies shut down
5. Verification for grandfathered sellers

Profiteering – The Matt and Noah Colvin Cautionary Tale

By now, most of you are aware of what happened to Matt and Noah Colvin. Regardless of how you feel about what they did, what happened to them was wrong.  They are ruined, in hiding and fear of their lives from some damn scary death threats, being sued by at least one state (so far) under consumer protection laws; and banned from selling on Amazon ever again (and possibly other platforms).  They are an internet meme and fodder for political cartoonists and media everywhere.

In my opinion that is too high of a price to pay for what is normally typical retail arbitrage behavior. Whether you agree with me or not on the consequences, this is a bad thing for the seller community because:

1. It makes consumers hate 3P sellers even more than some of them did before (most don’t distinguish among types of sellers).
2. It puts a harsh spotlight on retail arbitrage that may cause Amazon to take action against this model of selling.
3. Amazon retaliated against the Colvins, and they don’t do that normally.  Most sellers who get media attention get help – look at the recent change.org petition which helped sellers get reinstated. I don’t like the precedent.
4. What they did, was done and is still being done by thousands of sellers on the platform during this crisis.  They are a scapegoat – a sacrifice offered to the angry consumer gods.

In a group I’m in, sellers were condemning the Colvins on one hand while trying to figure out how to sell the thousands of masks, sanitizers, etc. that they had left on the other hand.  We are opportunists and have created our businesses by finding the gaps between supply and demand. We have time and money invested in our inventory. When it is a hot toy we are selling, consumers might get mad, but the toy is not a matter of survival for them.  They usually can find it somewhere else and so on.

COVID-19 has changed the rules.  When the Colvins were buying inventory, however, there was no crisis.  No emergency had been declared and they had every expectation that stores would re-stock.  They didn’t foresee the run on stores that has overwhelmed the grocery business. They weren’t trying to endanger healthcare professionals and first responders.  Since Friday’s New York Times story, they have donated all the rest of their inventory to local first responders and charities.  These are not evil people looking to fiddle while Rome is burning. They are pretty typical sellers who didn’t recognize when things changed on them.

Why am I talking about this?  Because you could be next. Dried beans are sold out on Amazon nationwide, for example.  If you sell dried beans for “too high” a price, will you be banned from Amazon and possibly sued?  (I’ll buy a bag of your kidney beans, by the way.) Amazon has stated it will be delivering virus tests for free to people’s homes.  If you have tests you want to sell, will you be able to charge for them? Is it wrong to make a profit in times of crisis? How much of a profit? It’s risky, that’s for damn sure.

Several states have come out with clarification of their profiteering laws.  Some of them are only going after sellers from the time the state of emergency was declared in their state (generally last week) and on the federal level (last Thursday).  What you need to know is that you can be sued by ANY state, not just your home state, if you sold inventory at an inflated price to citizens of that state. Amazon is cooperating fully with states and turning over seller records to them, so they know who to go after.  

The Colvins were an obvious target and the state of Tennessee wasted no time, but they won’t be the last.  The Colvins are banned from Amazon. It is unclear how Amazon will be approaching other profiteers. For example, will they only ban the ones that are sued?  Or everyone? Amazon did a listings takedown before a state of emergency was declared. Are those sellers safe? I wish I knew.

Some of the states have listed specific products or product categories that they consider “essential” and thus are not able to sell for more than 20% above normal retail prices.  I’m hoping that message gets through to sellers fast because my grocery bill doubled in the last week – some of it from Amazon itself charging high prices for packaged food items.

The reality for sellers – unless our products are only sold locally – is we have to comply with the rules of the strictest state and Amazon.  Because we can’t control who buys our products, we must assume we will be selling units to those states at some point. And really, do you want to fight off profiteering lawsuits when the dust settles?

My advice is:

1. Read the profiteering laws of different states.  – Price Gouging Laws and Pricing Gouging Laws
2. Be honest with yourself as to what you are selling – is it essential?  Assume that everyday items definitely are essential. Luxury face cream? I don’t know.  Dial bar soap? Definitely.
3. Review your repricing tools and current prices to make sure you don’t become an accidental profiteer.
4. Review your inventory.  Do you really want to sell high-risk products like tests, masks, gloves, sanitizers and disinfecting agents? Only you can answer that.
5. Consider selling/donating your risky inventory to a healthcare facility, food bank, veteran’s group or other charity that really needs it.  Make sure to sell it for no more than 20% above normal retail. You can check camelcamelcamel or other tools to see pricing over time.

By the way, selling off-platform does not make you safe from prosecution by the states.  If someone reports you for profiteering (the states make it super easy to report), you will have to answer to the authorities at some point.  From an Amazon perspective, the sellers who lost their listings a week or so ago (except the Colvins) are still selling other products so far. 

Amazon Shuts Down FBA

Amazon slipped this little surprise into the forums – not Seller Central – in the dead of night last night.  The Chinese were furious. I imagine all the US sellers are now equally furious.  No new shipments will be accepted until April 4. If you had a completed shipment it should still go through.

Amazon said that it would still be accepting shipments of “essential” goods and it gave categories like Grocery, Baby, etc.  However, some clients of mine who are selling essentials report that they are still not able to create new shipments or send in ones that were in the works.  Like all things Amazon, it will likely be a cluster for a few days. We don’t know yet if essential goods sellers will be able to make shipments soon or if Amazon has a very specific internal list of what they want.

This was a predictable move on Amazon’s part that I talked about last week.  I was thinking it would be from trouble with delivery services (which they do have – they are hiring 100,00 new warehouse and home delivery workers today), but the result is the same.  They are prioritizing grocery and essential supplies nationwide so they can deliver to people – pretty much everybody – who is sheltering in place and avoiding grocery stores, like me.

Part of this crisis was triggered by consumer panic and hoarding.  While I’m sure they thought about that, no retailer – including Amazon – was ready for the intense onslaught because of how the supply chain works in grocery.  The good news is that more products are coming, and there is more than enough food to feed America. The bad news is it is taking time to ramp up and to speed up the supply chain.  Grocery is very much a just-in-time model because food spoils. There aren’t the stockpiles you might expect. Rest assured, however, that there are plenty of chickens to be slaughtered, etc.  Also, un-needed food for the restaurant industry will be diverted to grocery as well.

OK.  Back to us. So, what does it mean?

• Merchant-fulfilled sellers can still sell.
• Inventory that is currently at Amazon will continue to sell.
• Sellers of essential goods will most likely be able to ship in a day or two once Amazon works out who they are and turns on their Shipping Queue.  Some sellers are already able to send in inventory which makes me think Amazon may have a list or something more specific than a category.
• Some sellers may be going several weeks without income because all their inventory at Amazon is low and needing replenishment.
• Some MF sellers won’t be selling because they are not allowed to go to their warehouses (think California, New York, Illinois and soon-to-be many states who are not allowing non-essential travel and who are closing businesses).
• Amazon said April 4, but we can’t hold them to that, frankly.  They are doing the best they can, just like the rest of us.
• Sales of many non-essential goods will drop as consumer demand drops. They already have. Consumers are worried and focusing on the essentials right now.
• Sales of stay-at-home goods have already risen – homeschooling supplies, toys and games, crafts and hobbies, cookbooks.  So, it’s not bad news for everyone.

By the way, to the sellers in the FB groups who think that they can just change the category for their goods and send them in, you are insane.  Call me when you get suspended.

Some sellers had already turned off their stores because of the shelter-in-place requirements where they live.  Others had it forced on them by Amazon. No one has asked for our help yet getting classified as “essential” (this is very new), but I’ll tell you here that we don’t know if we can help.  Anyone we work with will be a test case. For our retainer clients we will try, of course. Stay tuned.

If you are a seller who is idle during this FBA shutdown, there are a few things I recommend you do:

1. Review all your listings and fix them. Amazon has not stopped suspending sellers for variation issues, titles, etc.  Now you have the time to focus on your listings.
2. Delete/archive all your inactive inventory. It will save you problems down the road.
3. Housekeeping – if you have products that need to be tested, reimbursements to be filed, if you need to get your recycling certificate from Germany or VAT or anything else on your to-do list, do it now so you are ready when you can ship again.
4. Prepare for verification. As I predicted, Amazon is now asking previously grandfathered sellers to verify themselves.  Their timing is awful. More on that later.
5. Prepare for Prime Day. Get your ducks in a row.  Select/research inventory and have it shipped to you later.
6. Create A+ pages and Amazon storefronts.  This is often a task pushed aside until later as brands focus on selling.  Creating new pages will help you convert better when you are able to sell again.

We are available to help with many of these tasks if you need it. Find Out More

Government Restricts Our Ability to Sell

Obviously, this is already happening through “Shelter in place” restrictions in California and other states. It will only increase.  If you are not yet restricted, now is the time to plan for the possibility. Can you send in inventory/fulfill orders without a warehouse team?  Should you bring some of your inventory home while you can? Should you/could you switch to MF for the time being? Will UPS still pick up for you?

Delivery Companies Close

This would be disastrous for Amazon, Amazon sellers, consumers and the economy.  Delivery companies are currently classified as essential services for a good reason.  If a huge percentage of their workforce is sick, however, it could happen.

You need to ask yourself how long your family and business can survive without income.  What steps will you have to take for your workers, for example? Do you have cash reserves?  It would be prudent to slash expenses in the business and home now, just in case.

Verification Required of Grandfathered Sellers

With mind-boggling bad timing, Amazon has started requiring verification from established sellers – as predicted.  As regular readers know, I’ve been talking about the complexities of verification for some time (see recent blog).  So far it is a simplified version of verification and our clients are passing, but it is not a smooth process yet.  Expect a cluster.

• Driver’s license or passport of primary account holder/owner
• Bank or credit card statement

That’s all they’ve asked for so far. Their approach to it seems (this is new, remember) to depend on your standing with them as a seller.  My clients with imperfect records (previous suspensions, lots of IP complaints, etc.) had their listings taken down. Other clients with clean records did not have their listings taken down and continued to sell during the process.  We don’t have enough cases yet to be definitive about this.

For my clients who had their listings taken down, they went into stranded for some reason – tens of thousands of listings.  Once they passed verification, their listings did not go live, and they could not remove their US listings from “vacation” mode to “active.”  No idea why. It took us multiple calls to get to an FBA specialist/US Captive team. Once we did (took all day), they were able to fix the problem for us.  They didn’t know why the reactivation didn’t work either. Hopefully it is just a glitch that they will fix soon. This is what I meant by cluster. We got them approved within a day but had to wait until Monday to get help from Amazon.  Regular Seller Support couldn’t do anything but suggest we wait 24 hours for it to fix itself. Uh..no.

Even with such a simplified document request, it is still possible to fail if your documents are not perfect.  It is self-serving to say, but I earnestly recommend sellers have a professional review their documents before submitting them, even if it is not us.  The cost of failure is high – banned from the platform. You can check out my earlier blog to see why sellers fail and how to avoid common mistakes.  This service is included for most of our retainer clients.

For new sellers or sellers opening up a new platform, we also have several packages designed to make sure you succeed.  They include verification document review, setting up your account properly in the first place and setting up Brand Registry (if needed).

Conclusion

It is possible that the government will provide emergency relief, creditors might suspend payments for a few months and so on.  You can’t count on it though. You can only count on yourself and your resources.

Thankfully, COVID-19 will not interrupt our businesses forever.  The crisis is temporary. The trick is to get through the next six-to-nine months or so and to be prepared for what you can.  Some changes are predictable and/or possible. Prepare for them. You will be better off than many other businesses at the end of the crisis.

Please pay CLOSE attention to the Amazon forum and your performance notifications, the news and seller FB groups.  If Amazon has future changes, they will not give you much time to act. You need to have your plan in place ASAP.