This past year was a wild ride on Amazon. After the vagaries of Covid and the drama of e-commerce growth during lockdowns, many thought that sales would level out and the market would establish a “new normal.” We discuss the 8 lessons learned for selling on Amazon in 2022!
Oh, how wrong we all were.
Here’s a look back at the roller coaster year of 2022 for Amazon sellers, including some of the most surprising developments in the industry and what we have learned from them.
8 lessons learned for selling on Amazon
Lesson #1: Rethinking the supply chain
As U.S. ports began gradually clearing in late 2021 and early 2022, some brand owners began to relax a bit about their recently fraught relationship with the supply chain. They believed that delivery times from their Chinese manufacturers would go back to normal – meaning timeframes from prior to Covid.
Unfortunately, continued lockdowns in China kept the supply chain in chaos. Some Chinese manufacturers folded, and a zero-tolerance Covid policy shut down factories and even entire towns seemingly on a whim – with no end in sight. This was all compounded by protests, which could be a factor in the future as well.
That’s why many Amazon private-label sellers and other brand owners began looking to other countries – including closer to home – for manufacturing capabilities. Popular choices included India, Mexico, and here in the United States.
Lesson #2: Backup logistics operations
In 2022, Amazon showed its complete disregard for FBA sellers by adjusting its warehouse space in such a way as to maximize fees, while still not providing adequate capacity for Q4.
When the economy slowed and interest rates began rising in Q1, Amazon seemed to suddenly discover it had overbuilt its warehouse spaces. The e-commerce giant even tried to cancel or sublease warehousing spaces it had leased all over the United States.
And yet, when Q4 rolled around, inventory storage limits again were ratcheted down – even on sellers with high-velocity sales and hot seasonal items. Amazon also dramatically increased storage fees for Q4, and even rolled out an inventory storage program meant to compete with third-party logistics (3PL) providers. Unfortunately, like other Amazon FBA offerings, it offers no accountability along with sky-high pricing.
Then came mid-December, when many Amazon fulfillment centers around the country suddenly changed the status of items from Prime-eligible to “arrives after Christmas.”
Just as 2020 and 2021 did, 2022 taught sellers without backup logistics plans that they must have a 3PL or other fulfillment strategy in place for when Amazon inevitably lets them down.
Amazon inbound inventory issues will remain – and Amazon is finding more ways to make money off of them. That’s why sellers still need some kind of 3PL solution – even if it’s shipping themselves.
Lesson #3: Even great ideas have corrections
The meltdown of the e-commerce aggregator market took many by surprise – and most surprising of all was the speed at which conditions for these companies changed. These businesses started the year as movers and shakers, sponsoring every e-commerce event and pushing to acquire brands as quickly as possible.
Then the shake-out began in earnest. To some extent, consolidation and right-sizing of a new industry segment is to be expected. With negative economic pressures and quickly rising interest rates, everything changed. Many aggregators are highly leveraged, with as much debt on the books as they have in equity raised.
Some struggling aggregators began to look for bailouts or to be acquired themselves, while others just laid low and tried to make it through the storm.
In the end, this likely will be seen as a correction, not a failure. Those aggregators that made careful acquisitions based on hard numbers will thrive – especially if they truly become consumer packaged goods (CPG) experts. There is still plenty of room to grow on Amazon and in the e-commerce markets for highly integrated, well-run companies.
Lesson #4: Going to retail is a thing
Being in brick-and-mortar retail has been the norm since the invention of stores. But during the last decade, CPGs and brands of all stripes have focused on getting their products online.
Now, a reversal of sorts is occurring. Amazon-only brands with a successful track record are seeing shocking success in the traditional retail milieu. Over at Project Retail, a partner company of Riverbend Consulting, we’ve helped clients land their products in major outlets such as Walmart, Target (including Target Plus), CVS and similar drug chains, TJMaxx and similar discount chains, grocery stores, specialty stores and more.
This strategy offers all the benefits of diversification, while also building brands and expanding reach. Look for more of this in the future, as brick-and-mortar stores embrace online products with the sales data and reviews to support them.
Lesson #5: “Guru” scammers keep scamming
Amazon “gurus” keep selling the “done for you” storefront. And it keeps working.
Some of these scams have gotten so large that the Federal Trade Commission has gone on the attack.
In short, scammers charge tens of thousands of dollars to either set up or take over an Amazon storefront. Then, in this get-rich-quick scam, they drop-ship inventory from retail stores – against Amazon policy. Eventually, Amazon catches on, shuts down the store, and holds the seller’s funds.
Unfortunately for the account owner, they are often left in debt from the inventory purchased for shipping. And they are out all the money sent to the scammer and their team of overseas virtual assistants. In some cases, their Amazon accounts are even used for money laundering, making it impossible for these sellers to ever be welcomed on the platform again.
Lesson #6: Amazon enforcement blows with the wind
There is a long list of offenses for which Amazon will suspend accounts. In 2022 more than ever before, enforcement became confusing, uneven and inconsistent.
Suspensions seemed to be driven by internal initiatives or external threats (think the feds threatening action against Amazon because of fake reviews). For a brief time – usually a few months – Amazon would seem dead-set on catching bad actors for a certain offense. Then, enforcement around that particular rule-breaking would virtually disappear. We saw this with high-pricing violations, pesticide claims, and review manipulation – among others.
If Amazon should be stopping these violations on its platform – and it should – it seems odd that enforcement would come and go like the tide.
Lesson #7: Admitting fault gets more complicated
When an Amazon seller is suspended, or has an ASIN taken down, admitting fault has been key to fixing the problem. And in the past, admitting fault was seen as a positive by Amazon – not a gotcha.
That changed in late 2022. Amazon began giving an option for ASIN violations, where a seller would simply click a box to admit fault and move on.
But this admission of guilt comes with a caveat – though it is not stated. The seller can never sell this ASIN again. If they do, Amazon will see this as circumvention of the rules, which can lead to extreme enforcement like a Code of Conduct violation on the seller’s account.
For the first time, Riverbend began to caution against this kind of broad admission of guilt. Our message became – always appeal, every ASIN.
Lesson #8: Amazon is cracking down hard on RA and OA
Retail arbitrage (RA) and online arbitrage (OA) are the heart of the small Amazon seller community. For the first time, based on Amazon’s actions in Seller Performance, Riverbend began to question whether Amazon is hellbent on ending RA and OA.
Retail receipts and online order records often are not being accepted as proof of authenticity, even when this documentation is high quality. In addition, Amazon allowed brands in 2022 to rampantly file intellectual property (IP) complaints against sellers – and sustain those complaints – even when the items being sold did not violate IP.
This flies in the face of Amazon’s promise to not enforce distribution. And yet …
What lessons did you learn on Amazon in 2022? Tell us in the comments.