What Is Amazon’s ‘Essential Goods Only’ Policy?
On March 17, Amazon announced that the company would temporarily disable shipments of certain “nonessential” products to its U.S. and European Union warehouses for third-party sellers who participate in the Fulfillment by Amazon (FBA) program. Amazon says it took the step due to shoppers stocking up in response to Covid-19, and “as a result some products such as household staples and medical supplies are out of stock.” By prioritizing these products, Amazon hopes to restock and ship highly sought goods more quickly and make space for more of these products in its inventory. Amazon says it’s “taking a similar approach” with retail vendors. (In Amazon parlance, “sellers” refers to third-party businesses that list their products on Amazon, while “vendors” refers to companies that sell products to Amazon, which then deals with listing products.)
In a moment of intense panic buying and dwindling grocery store shelves, the biggest logistics company on the planet deciding what is and isn’t “essential” might admittedly cause some confusion and more panic. It might also be easy to miss the impact this has on sellers and consumers. Here’s a quick overview.
So, what’s essential?
In a post on the Amazon Seller Central Help section, Amazon offered the following list of categories that would cover “most” of the products its currently accepting:
- Baby Products
- Health & Household
- Beauty & Personal Care (including personal care appliances)
- Industrial & Scientific
- Pet Supplies
However, just because a product is in an approved category doesn’t mean the product is approved. As replies to the announcement in the Seller Central forum indicate, there’s a lot of confusion over what is and isn’t approved—and Amazon’s not providing a lot of guidance. A handmade-soap vendor complained on the forum that their products weren’t being approved, and several grocery vendors claimed they were unable to submit shipments. It’s unclear whether the trouble stems from Amazon’s new approval process or simply too many vendors sending in last-minute shipments to get their products into warehouses by deadline.
OneZero reached out to find out how product priorities are being made or whether a full list of approved products would be released.
Can I still buy nonessential items?
For now, yes, you can still buy the various inessentials you would otherwise buy on Amazon. Any inventory that FBA sellers have already shipped and are already in Amazon warehouses can still be purchased. Products that were shipped to Amazon fulfillment centers before March 17 and are already en route will also still be accepted. However, if that inventory runs out and the product isn’t among those that Amazon is currently approving, sellers will not be able to ship new inventory to Amazon warehouses. Products will still be listed and available from sellers who switch to shipping products themselves.
How does this affect sellers?
Third-party sellers, whose sales make up more than half of Amazon’s total merchandise sold, range from recognizable consumer brands to small businesses to what the Institute for Local Self-Reliance has called “retail arbitragers who offer an ever-changing assortment of goods, often acquired from grey-market dealers.” But the e-commerce company isn’t beholden to the demands of small businesses. On the contrary, small businesses are coming to Amazon because they can’t afford to compete with those retail arbitragers, and they don’t have the reach or the logistics network to ship products as quickly or efficiently as Amazon.
Amazon also makes money from this arrangement. In addition to paying Amazon fees for storing products, some sellers pay $39.99 a month for a “Pro Merchant” account that makes them eligible to be included in the coveted “buy box”—that is, placement as a one-click featured purchase on Amazon. Amazon also operates a loan program for FBA sellers, offering loans that can range from $1,000 to $750,000. It’s unclear whether Amazon will suspend loan payments to FBA sellers during this period of suspended shipments.
Amazon evaluates sellers based on their Inventory Performance Index (IPI), a performance metric determined by things like sales, inventory, and a mix of other opaquely calculated factors. Sellers with a low IPI can face storage restrictions with Amazon and fees for any overage. Vendors who can’t replenish their inventory typically see an impact to their IPI. It’s unclear whether Amazon will be suspending this practice during the present crisis.
Okay, so this is bad for some sellers, but we are in a crisis. Isn’t this good for consumers who need these products?
Maybe, if we assume Amazon is acting in good faith to protect its customers. Amazon has already come under fire in the past for quality and safety issues with products sold via its third-party seller program—from computer-killing USB-C cables to lead-filled baby toys and expired food. Amazon hasn’t indicated that it’ll be scrutinizing prioritized products (which, again, include household items, groceries, and baby products) more closely. Although Amazon did recently stop accepting applications from new third-party sellers for face masks, hand sanitizers, and other products, it also received pushback from sellers who claimed their legitimate products were being removed. While products specifically important to preventing the spread of Covid-19 should be scrutinized carefully, it doesn’t seem any less urgent to protect consumers from lead poisoning or food poisoning.
How long will this go on?
Amazon says it will return to letting vendors selling all sorts of nonpriority products ship to Amazon after April 5, but seeing as we’re currently living through a planetary-scale paradigm shift, there’s no reason to assume that’s a hard deadline for a return to business as usual.