Virtual Marketplace Summit - Part 1 - The Amazon Marketplace
Marketplaces can no longer be ignored as a channel for scalable brand growth. If your brand isn't selling on marketplaces, you’re missing out on over 50% of all transactional search queries, plus millions of high-intent customers.
But over the past month, marketplaces embraced a new role. As states started implementing regional lock-downs, and widespread store closings, shoppers rushed online, many for the first time to buy emergency supplies, food, and household staples.
We hosted a virtual summit to speak with marketplace experts and technologists to get a better understanding of how brands, and marketplace sellers could adjust to the new world following the COVID-19 outbreak.
You can watch the recording here and check out the transcript below:
So today's initial webinar was really all about cornering the market place. There was a lot of amazing content, but we all pivoted the content to make it a lot more relevant to what we're experiencing on the front lines due to the coronavirus outbreak. First up we have Russ from Cleveland Research Partners.
Thank you and really grateful I have the opportunity to present today. I actually did change much of the presentation as the crisis has unfolded because I know from working with all of our customers, managing through the COVID-19 crisis is incredibly challenging right now both personally of course and also professionally. So I'm going to cover some thoughts from the fourth quarter, and then share our latest benchmarking research on how COVID is specifically impacting brands business on Amazon. Its unique data that I haven't seen elsewhere, so hopefully everyone watching the video can get some insight on the current situation.
I lead CRC ecommerce council, which is a community of E-commerce professionals that we help through engaging research events and advisory work. If you're an E-commerce professional inside a branded manufacturer that's doing business on Amazon and wish you had a resource to help you navigate what are a myriad number of strategic and tactical challenges, that's what we wake up every day trying to do. So if you'd like to learn more, just reach out to me and I'm happy to talk more about our service.
So the gray portion of the columns here, so the gross merchandise value that Amazon did in 2018 and then the colored portion show the incremental growth in 2019. Really incredible when you think about the scale Amazon is operating at, it grew an incremental $19 billion dollars in the fourth quarter alone. That growth is almost three times the size of Target's digital business. It's bigger than all of Walmart online grocery. Really incredible that it's been able to grow at that pace.
Let me go back. Now Amazon is having an impact across retail. We started to see headline after headline come out since the end of last year. So many retailers are seeing distress and this was all before the crisis, so Walmart changing some its leadership team, Target had a bad fourth quarter including digital. Brandless announced it was shutting down. Department stores of course, struggling and even some of the pure play retailers were struggling like Wayfair and eBay. Not all of this of course, is tied to Amazon, but certainly a lot of it is associated with Amazon's dominance.
We put together this table to illustrate who were the winners and losers during the fourth quarter and we don't have time necessarily to tackle all of these, but you'll see Amazon listed under the winners on the right side of the slide. A couple of things stood out to us on Amazon this holiday.
First, manufacturers tended to go deeper on promotions on the site compared to prior years. They also spent more on advertising. Some participated in Amazon live, which was featured very prominently on the site. Payback on Amazon live has been somewhat mixed from our manufacturer partners perspective. A lot of vendors are saying the production quality is generally quite good, but it is relatively speaking, a pretty expensive program.
Amazon also changed how they were delivering search results, so this year if you searched for an item after already being on the deals page, it only showed you the relevant deals for that search term. In the past it would show you all search engine results, so this change was good. If you had deals running, not so good if you did not. Amazon also let manufacturers feature more of their entire brand to have multi ASIN deals. So a lot of deals this past year took shoppers to brand pages where manufacturers could feature multiple ASINs.
So Amazon is really trying to communicate that they're here to help build brands and that's probably only partially true, but nonetheless, this tactic was new and manufacturers seem to like it. On the three P side, we heard many instances of three P sellers having many of their products de-listed between Thanksgiving and Christmas only to see those items get added back onto the site on December 26th. Of course, very problematic if you are a seller and there wasn't much information shared or detail from Amazon on why this was happening. We think Amazon was trying to optimize their FC space for FBA items that were impacted by this. And even outside of that, we know they're hyper focused on being price competitive, so they're willing to take action if they feel three P sellers aren't offering competitive pricing.
So all of that is great of course. And in February we updated our forecast for Amazon expecting growth in 2020 to be similar to 2019 at about 18% year over year. And you can see the breakdown here between one P sales in the gray and three P sales in the blue. The positive growth being driven by its growing Prime membership base. It's focused on increasing assortment and maintaining competitive prices and it is also becoming a much more formidable competitor in online grocery.
So in mid February we are forecasting incremental growth of around $60 billion dollars in 2020. Then of course, the COVID-19 crisis hit. Amazon though was one of the first to move quickly to secure more inventory across nearly all of its categories, both essential and non essential categories. A lot of manufacturers saw significantly higher than normal orders hit in February and they were telling us that really no other retailers at that time were taking that same aggressive approach. That of course changed quickly as the crisis worsened.
This past week, beginning on March 16th, Amazon sent a note to one P and FBA sellers that they would be suspending orders on non essential items in order to make room for items like household and medical supplies. They're also moving quite aggressively too looking to hire another 100,000 workers, probably many of which are likely going to be coming from restaurant and entertainment industries and other businesses like that, that are temporarily closed during the crisis.
Amazon is well positioned to benefit to a degree from the crisis as consumers are shifting more of their purchasing to online at this time. So to try to better understand the situation, we benchmarked 68 manufacturers on March 17th and 18th across food consumables and hardlines categories to try to understand what the impact is and what types of opportunities and threats manufacturers are seeing.
So first, a net positive number of manufacturers that we benchmarked are seeing the crisis positively impact their sales at Amazon during the month of March. Food and consumable companies in particular cite better than expected demand. While hardlines manufacturers had more mixed results. It's very early on in the crisis right now and manufacturers for the most part haven't really changed their forecasts for Amazon for the rest of 2020 at least at this point. I think the biggest swing factor here is going to be in those grocery type categories because you're seeing so many customers try out online grocery for the first time and depending on how their experience goes, Amazon and its online grocery peers really do have a real shot at converting these into longterm customers.
And to give you a sense if you think about the experience in China, in January and February, their retail sales dropped approximately 20% but their online sales only dropped about 3%. So even if the U.S. enters a recessionary environment and retail sales broadly are down pretty significantly, it doesn't necessarily mean that Amazon or other online retailers are going to see as dramatic of a fall. There's some reports that I've been reading out there that have been published that suggest E-commerce could easily reach 20% of the total retail sales in the last couple of weeks of March and heading into April.
So there's going to be a balance between how much does consumer demand fall off? And what is the mix of online sales to brick and mortar sales. How does that change? And I think as we go through the next week we're going to have a better understanding of what that mix shift ends up being.
About 39% of manufacturers that we benchmarked in our study are having to allocate inventory across their different retail customers at this point. I think most manufacturers are trying to be fair in their allocation decisions. We do expect Amazon to get at least its fair share of inventory and we actually suggest manufacturers overweight the inventory going there just because of how much shopping is migrating online at this point like I was just discussing. And one additional point, we are getting some feedback from manufacturers that have seen a suspension of their orders that their vendor managers are telling them to anticipate a lump sum reorder on April 5th or 6th to get back to normal inventory levels.
At this stage, it's a little unclear to us how Amazon FCs could deal with that surge and frankly how manufacturers will react, especially those that are on allocation, but that's the messaging that Amazon's vendor managers are telling one P and FBA sellers at this point.
AMS opportunities are presenting themselves, but unequally for advertisers on Amazon, you're of course balancing a lot of things right now, but mainly you need to figure out how your inside performance is performing and how that's going to perform over the next month, especially relative to competitors. And then determine what the implications are for your advertising spend. If you can stay in stock, you'll likely see CPCs decline and ROAs increase during this period of time.
And then finally on Prime Day, it's essentially too early for manufacturers to be adjusting their Prime Day plans. I think we need to get through the next couple of weeks, hopefully get some more clarity to the crisis and Amazon's plans for reordering and then manufacturers will be able to determine the right level of focus that they put on to Prime Day this year.
So that's our latest benchmark. We're going to be repeating that benchmark in two weeks to see how the data changes. I think Amazon was certainly well positioned pre-crisis based on some of that data that I showed you to begin with coming off a really strong 2019. We do anticipate them seeing the largest dollar growth of any E-commerce retailer, and I think with the crisis they're going to see at least a multi-month bump here as consumers shop online more and potentially a longer term structural increase depending on the degree to which they can keep consumers happy during what is of course a very stressful time. So I'll stop there and turn it back over to our host.
Thank you so much Russ. That was so insightful. It's such crazy times for Amazon sellers and having the information firsthand is so incredibly valuable. So, with that said, next we're going to go to Chad Rubin of Skubana focusing on an Amazon sellers guide to surviving COVID. Chad, to you.
So I'll just go ahead and introduce myself, I'm Chad Rubin. I started my ecommerce business actually in a recession, back in '08 and '09. And I came out of that and started Skubana out of the pain of running an ecommerce business through multiple sales channels.
As I mentioned, I've been through one crisis or recession and it looks like we may be heading in that same direction, although a little bit too early to tell. There's no question that we are in a health crisis, an economic crisis, and a financial crisis right now for sure. And right now it's all about being prepared. A lot of these newbie sellers or newbie brands and retailers or even brands who've been doing this for a long time. We're experiencing pretty crazy times.
So it's really important to be prepared so that your company can actually see this through and actually come out on top. So this isn't about Skubana, this is really about how we can win as retailers and brands in today's day and age.
Skubana is a platform to run and automate your business on the backend no matter how you sell or where you sell. And I do think automation is a bit important of seeing this through and coming out the other side.
LIKE NOTHING WE’VE SEEN BEFORE
I think for me as a human being, I just want to be here at a time of need for those that are trying to get through this. And it just about being real because the U.S. at least where I am located is completely shut down. And I just want to help people and certainly doing the research and doing this analysis and talking to other brands. I wanted to bring some perspective of what I'm seeing that others are doing during this time period. So yup, we're experiencing something we've never seen before. Obviously prices are surging on Amazon. Businesses that I'm talking to are figuring out what are they doing with their variable expenses and their overhead expenses.
What are they doing about the supply chain? What are they doing about their revenue? I've seen some brands that have revenue going up but it totally depends on the category. Amazon specifically is up in major categories, 20%, 30%, and 40%. And in specific categories, for example, like suitcases are down tremendously. And so again, this is all about how we can deal with and how we can be prepared. I can tell you that these are screenshots on the right of me trying to ship stuff to FBA for my eCommerce business. We have over 1800 SKUs at Amazon. Most of them are Prime eligible, and we are now down to just four SKUs that are Prime eligible right now on Amazon.
AMAZON’S RESPONSE STRATEGY
And so Amazon's announcement on limiting FBA imports means that only medical supplies and things that are very important to their customers are allowed to come into FBA. Until April 5th. So that's pretty big. And the most important thing is we're just not going to stop, right? We are actually going to keep going. We're not shutting down. We are re-prioritizing and I'm just thinking more strategically of how I can serve our customers and adapt to the environment of what's happening. So we put together, we categorize it as like, "Hey, here's what we're doing for employees. Here's what you can do for your business. Here's where you can do for your customers and here's what you can do for yourself."
BUSINESS PLAYBOOK FOR GETTING THROUGH COVID-19
And so for me, this is the mindset that I'm in. And I just want to also just mention, I just came off of a three-day pivot with my wife. My wife owns a yoga studio in Nyack called Soul Flight. And that studio is physical. She has two floors and she's been forced to shut down. And we pivoted her business to virtual in three days. And for example, this morning she had about 20 people in a class, last night she had 30 people in a class. So things are not stopping. We need to adjust in real-time to what we're seeing on the ground to overcome this time.
WHAT TO DO FOR YOUR EMPLOYEES
SAFETY IS ALWAYS YOUR #1 PRIORITY
And the most important thing is to not let fear get to you. So let's just focus on the employees first. At least from my perspective, it's super important to over-communicate to the employees that are at your company. We've been really working on making sure that there's a human to human connection for people, so saying no to social distancing. We are "physically distancing" ourselves, but we are actually embracing the physical distance but not the social distance.
And you'll see later on what we're doing to make sure that we're actually keeping our culture alive even though we've been forced to go remotely. The other thing I've been doing is a meeting with key leaders, at the company that are managing teams to understand how I can actually support them forward. The biggest thing for a lot of employees has been just predictability. They want to know what's happening. They want us to keep them focused, they want us to be transparent with them. We're using, JustWorks as an HR platform and we just announced giving our employees TalkSpace, which is essentially mental health sessions, for them if they need it along with giving them resources.
SUPPORT YOUR TEAM SOCIALLY
And so we're really trying to be very involved because work is such a big part of our employee's life. And again, this is just the plan that we're adopting as we're seeing it in real-time. So another really good nugget that we decided to do is a virtual happy hour. So we use Zoom internally for remote meetings and we were trying to figure out how do we maintain culture? How do we get people? Because we hop on these calls together as a company and we're saying, "Hey, is it business as usual? Is it not business as usual!"
So we're doing check-ins on those calls, we're really getting in touch with their emotions. So everyone will go around and say, "Hey, here's an emotion that I'm feeling right now." And just getting it all out there before we dive into the business. Because again, our business must keep going on. Typically in my office before we have big meetings, we'll have a body scan using an app called Calm. You can do a two minute, five minute or 10-minute body scan. You can do that with your team collectively. And then today we're having a virtual happy hour.
In this virtual happy hour where we have five different rooms that are all on different topics. So the first room might be about recipes, what are you doing for eating at home? What is your routine looking like? A random channel. Like, "Hey, this is the music we're listening to or this is things that are going on for me outside of work." We're encouraging to people talk about their feelings in room three and then in room four is like, "Hey, what are you doing outside of work? Where are you hiking? What are you watching? What podcasts are you listening to? What are you reading?" So I think these are just good ways to counteract what's happening.
These are things that we're doing. We also managed to give our team just things to do during this time because it could be super lonely as you're quarantining in this time of need. We're just trying to be there for people of what they can do outside of the office during this time. So this has been circulating around the net and then we gave this to our employees. We're just doing everything in our power to be here for them.
WHAT TO DO FOR YOUR BUSINESS
ASSEMBLE A COVID-19 WAR ROOM
As a business we have essentially appointed a senior team to help us find solutions and to be on the ground analyzing what's happening. Understanding how our customers are doing.
For example, I just had someone on our CS team call our biggest and best clients to understand what are they seeing in their business and doing whatever we can to fortify our relationship forward. When shit hits the fan, you have to be there for people more than ever. And this is a great time to be here for your customers and your clients. Understanding the downside risks. So from supply chain to R&D to product lines. Just someone to have their ear on the ground and really be a voice of reason during this time.
CONSERVE YOUR CASH AT ALL COSTS
I truly do believe that cash is very, very important right now. We are in a once in a hundred-year event. So we are literally in the history books right now, living through it in real-time. I think it's a pretty fascinating time to be alive. Making sure if you are selling to brick and mortar stores that you're collecting money, incentivizing them to give you your money now.
Think about open bills. Even though they might have 30, 60, 90-day payment terms, see what you can do to incentivize and collect money now versus money later. Understanding just your cash flow planning. And I did allude to earlier your understanding the scenarios of like, "Hey, if this is a three-week cycle? Is this a six-week cycle? Is this a nine-week cycle? What's happening?"
If you do have office space and you're remote right now? I do expect landlords to be giving concessions right now. It's only fair to be asking for those concessions and those that don't ask don't get. So very, very important to just see if you can try to get a concession. Lastly, just understanding your acquisition costs. I know Facebook just came out with actually giving small business companies lines of credit. If you want that link after this webinar, just email me at chad@skubanna. I'm happy to give it to you. That's something that Facebook just launched,
Make sure you're adjusting your spending right now and monitoring your lifetime value of your customer. And keep adjusting in real-time. I think that's an invaluable decision to make because right now it's all about how quickly you pivot or change what's happening to survive. So they say the strongest survive. And right now I'm saying the quickest survive.
MONITOR SKU PROFITABILITY
One of the things you could be analyzing, and this is something that's built-into Skubana is variability forecasting. This means that based on my sales on a moving average of the last 10, 15, or 30 days, what am I going to run in stock in the next 30, 60, 90 days?
Understanding the profitability of those SKUs and either doubling down or even if they're a high velocity but low margin item, you may want to look at subtly increasing the price. Now on Amazon, the caveat is that with price, small hinges swing big doors. A small increase in price could actually affect your sessions and ultimately your velocity. So I'm recommending on Amazon to be doing small sample batches at a time. But right now you need to have a plan. You need to act quickly. If you don't have a plan, the people that don't have a plan are going to fail.
PREVENT REVENUE DECLINE
So looking at profitability across all your channels, how each channel is performing, where you can be diverting inventory, where you could be increasing the price or your margin, what's running out of stock and understand, of course, the implications of running out of stock for a high margin opportunity or high margin items that are necessary. You can start doing some marketing campaigns directly to specific customers and customer segmentation groups like high ticket customers, et cetera to offset any revenue decline.
One of the things I'm seeing that companies are doing right now, brands and retailers are, especially if they run out of stock for items, they're using gift cards, almost like bonds. Where they're essentially selling a gift card at $75 but it'll equal to $100 later. So this is one way to get money in the door, and keep revenue growing. If you are running into a supply chain jam, you can't get a product or you've just sold out a product because of the unanticipated demand that's happening, consider a gift card strategy.
STABILIZE YOUR SUPPLY CHAIN
What we're hearing right now is that raw material costs are going up. My eCommerce business for example, is experiencing raw material increases. The reason why is because the vacuum bags and the air purifiers are made from the same melt-blown cotton that is made of the mask that people are wearing today. There's a dynamic that's happening with your air freight right now because there's limited cargo being flown, and there's increased demand to have air cargo flown. The cargo capacity is more limited which is causing the cost of air shipments to rise right now.
So making sure that you're actually anticipating the demand and anticipating that there is going to be some supply chain logistical issues is important. Make sure that you're baking that into your lead time. Understand what's happening in your warehouse or your 3PL.
One 3PL I know said that they offer their customers the ability to pick up their inventory items and bring them into a storage container to ship it themselves. That's something that I was not willing to do, but maybe that's an option that you can employ. So just doing a check-in of what's happening to make sure your business doesn't get disrupted right now.
NOT TIME TO QUIT, TIME TO PLAY OFFENSE
You may want to be switching your FBA SKUs and making them merchant fulfilled at this time. If you do have an FBA SKU, you could add a title update for being a merchant fulfilled so that you're not out of stock and it doesn't hurt your Seller rank. I do believe that when these big sellers on Amazon run out of stock, it naturally affords the opportunity for others to essentially increase their bestseller rank and get the top position. So in a time of weakness, you need to make sure you're capitalizing on that.
Understand where items are being shipped from, and think about allocating more of your inventory to a more strategic location. Some orders we ship out of Mexico versus the United States but right now, of course, maybe the borders will officially close for the product. Now is not a time to quit. Now's the time to essentially double down. And essentially being in this mindset. I know we're all experiencing adversity. Outline a plan to lean out the cost structure using technology to drive more automated, variable, and shock-resistant operations. Set bold goals to outperform competitors and gain market share while others are struggling to pick up the pieces.
Have your team if you are understaffed, do higher-value activities during this time. Prepare for your ‘bounceback’ and try to predict new customer buying behaviors that might emerge as a result of the pandemic. And then the last thing I think is really interesting is if you do have cash on hand and you have been in a position of strength for the past five years, or even the decade is exploring M&As. Stuff's going to be really cheap right now. And I believe that there's an opportunity to capitalize on either Amazon businesses or other brands that are synergistic to you.
I think it's an interesting opportunity right now where there could be buyers in the market. When one door closes another door opens. It allows us to become better versions of ourselves.
I left my horrible job on Wall Street to go ahead and start a direct consumer brand called Think Crucial, which manufacturers home appliance parts and accessories.
WHAT TO DO FOR YOUR CUSTOMERS
So communicating with customers. I am certainly not someone that just likes to sweep things under the rug. I don't think this is business as usual. I think it's really important to actually strengthen your community and reach out to those customers on the front line. So you can see these are examples of just really bad advertising where they haven't tweaked their messaging and to me, it just falls on deaf ears. These emails I'm getting that aren't addressing the issue and aren't actually reaching out and seeing how they can be helpful in this time of crisis.
I think this means that there's an opportunity, right? These big businesses don't understand how to essentially relate to their customers. An example of someone who's killing it is Unbound Babes. They essentially sent out an email. There is a part of their email where essentially they've crowdsourced what you can do that's pleasureful right now in your business and letting their customers add their own ideas. So it's a crowdsourced spreadsheet. I thought this was freaking brilliant. The link is right here. I actually have the link in the PowerPoint, so we'll hopefully share this in the replay.
And of course if you want to email me for the link and you want access to this sooner, just feel free to email me at chad@skubana, but the subject was Let's Crowdsource Some Pleasure. Again, there are different tabs here at the bottom. Of all the different things that people are doing at home, listening to music, what they're reading, what they're watching, what content they're looking at. I thought it was really interesting and just a great way to build a relationship with your customers and to get them involved and proactive.
The last thing to mention here is that we've built a private Slack community for brands and retailers right now. It really was built before Corona happened, although there happens to be a covid-19 channel in our Slack community. But this is a place where essentially we as brands and retailers can get together and actually drop strategies and support each other. So it becomes a many to many relationship. It's not me speaking at people, it's everyone collaborating together and dropping value of what they're seeing real-time, not just as it relates to Corona, but it relates to growth, assets, collateral, swipe files. Actually the Unbound Babes was actually pulled from a swipe file that was dropped in the community. So if you want to apply, this is my bonus for my part of the segment here. If you want to apply. All right, go to this Bitly link at the end of this presentation.
Next we have Tinuiti, I'm very excited for your content, Pat. It's been a while.
Thank you everybody for attending today and Chad for setting us up. Like Chad said, this is not exactly business as usual, maybe not the most pleasant of circumstances for us to be gathered, but we all still have businesses to run. We still have our families and ourselves and our employees and our teams and most importantly our clients to take care of. So again, my name is Pat. I'm the director of Amazon strategy at Tinuiti. And at Tinuiti we're a full service digital marketing agency, servicing the triopoly and beyond.
So Google, Facebook, not Instagram, Amazon as well as SEO, CRO, email, creative services. And now in this time as well consulting around seller central and vendor central as it's specific to Amazon. So we'll talk about a few of those things, but before we jump into those, I want to back up a moment and just talk about what trends we're seeing related to COVID-19. I also think too, it's good as an operator to take a moment and try to lead with calm as much as can be possible. I know it's easy to say. There's a lot of bad news going around, there's a lot of trust, but verify news. There's a lot of click bait panic inducing articles and so it's really important in this moment for us to operate from a place of fact as much as we possibly can.
I know that should be true all the time, but I think in these moments in particular, it's easy to get drawn in a thousand different directions. And so I did want to share with you and as Chad mentioned, if this deck gets shared, there's links to all these articles and their sources here. But a few of the global trends that we're seeing across digital retail right now. And so we're already starting to see some of these and we'll get into it a little bit more here as well. Is that time spent on mobile as you might expect and as you're probably experiencing in your own lives is increasing.
So people are on their phones, they're on their computers because what the heck else do they have to do? Right? So there are still plenty of eyeballs to get your impressions to get your product out in front of the, assuming you still have the inventory to support that advertising. We're seeing a delayed impact on Western retailers as you might imagine. It's almost like a Ray of light that leaves the sun if you want to look at it through that analogy. What we're seeing right now is actually, from a period of time prior to us, before that ray of sun actually gets to us. And when I'm saying us, I'm defining us as the Western world.
And so we might see these inventory and some of these issues peak not yet, but in April or in may. If we use past as a precedent, even though there may not necessarily be an exact precedent for what we're currently experiencing, that shock phase lasted up to four months. And in that followed by a recovery in a stabilization period, which is not uniform. That recovery and stabilization period is unique to product type, vertical category or specific business. Which we'll show you on the next slide here and now in terms of interacting with your customers, with your clients, it's a critical time to reinforce loyalty. So I think Chad just shared that spreadsheet a few slides ago where people were contributing to their own ideas. I think that's a phenomenal idea.
Now's a good time to reach out with gift cards, with email campaigns, with ways to really show your customers that you don't just take them for granted and that you do care about them. I think protecting those customers is as important as acquiring new customers in this time period. And then what I want to jump to here is the different patterns of dips and rebounds. And so after an epidemic, and after these kinds of moments in eCommerce, we typically see one of three patterns. One is the rapid stabilization pattern. And I know you're going to have to retrain your brain because all these graphs we've been looking at over the last couple of weeks have been positive cases and unfortunately, human mortality tolls in different countries.
And so think of this in terms of eCommerce, rapid stabilization. So that would mean a stable recovery. Soon after the outbreak ends, this is going to really closely correlated with how healthy, particular nations and particular countries are able to move forward. So this is right in line with essentially this notion of flattening the curve. And so we might see this in places like Hong Kong or maybe South Korea. Short term pantry loading. I think actually we saw a lot of this anecdotally. I can say we saw a massive spike across a number of different verticals as you would imagine, health, beauty, pet supplies, home goods, cleaning products, Purell, hand sanitizers, wipes, all those things.
And then it actually flattened out and a big reason for that flattening out as a supply side issue. That supply side issue just being those alpha, those heroes skews stocking out. And because of supply chain disruptions, brands having a difficult time getting that stock back in place, which we'll talk about that a little bit as well. And in the third pattern is the dip and rebound. We see a quick rebound right after the crisis. And I think it would be irresponsible for me to sit here and tell you what's going to happen because I don't think anybody really no for sure.
And this experience isn't going to be uniform, but we can use passes precedent for what we might expect. What was big this week that did happen the other day and is Amazon made a fulfillment announcement, which Chad alluded to in his open as well. And this is where I think it's really important to make sure that you are following the facts and not potential click bait articles. Because I saw this news originally shared and I saw some people sharing it on social media. Amazon has stopped selling certain products, certain categories, and that's not true. What Amazon is doing is prioritizing inbound products coming into their fulfillment network.
And that started on March 17th, it will run through April 5th. The reason that they're doing that is because those products that are in the highest demand right now, those cleaning products, those beauty products, those health products that are in the highest demand, those households, stables, they've stocked out. And so Amazon is no longer a destination that's working for customers because people are looking for things and their demand can't be met because the selection has gone out of stock and Amazon wants to get that stock back into place. So if you are in seller central, I'm assuming most of the audience are sellers and not vendors, but we'll cover both.
Under the new section you'll see this announcement. In vendor central, you'll see the same thing, a few other specific call out specific to vendor central. So vendor, just real quick lesson vendor 1P vendor. That means Amazon is your customer, you're selling directly to Amazon and then it shows up on the detail pages, ships and sold by Amazon 3P. I probably don't have to get into that. I assume most of the folks on the line are 3P sellers. But for vendors they got a message as well saying that they were going to see reduced purchase orders. Essentially that means Amazon is going to stop ordering from them, not that's their lifeline, that's their bloodline that keeps the lights on and keeps their employees paid.
And also extended delivery windows for existing PO. So basically Amazon said, we're going to be cutting down on what we're ordering from you, but we're extending delivery windows for the things we've already ordered from you. And what they're doing is prioritizing these specific categories. So baby products, health and household, beauty and personal care, grocery, industrial and scientific, and pet supplies. And again, the reason for this is because this are the product types and the categories that are the highest demand right now.
These are what consumers are wanting. And so these are the products that stocked out very quickly. So Amazon wants to prioritize receiving. So Amazon is not allowing you to create inbound FBA shipments for a essence which fall outside of these categories between March 17th and April 5th. Nope that between March 17th and April 5th does not mean forever. Also note that if you have inventory in Amazon's fulfillment network, it's not being disturbed at all. They're not going to discontinue sending that product to end users. That's not the case at all.
I don't know if David was originally going to go more into this in his section, but I can touch on it here. Is that Amazon is determining what category of product lives within using the ITK, which is an Item Type Keyword. And so you can see here an Item Type Keyword. You can find that in the flat file upload for a particular product category and also in the one by one. And also that's a data field that's available through systems like Cubana, for example, that are running off of Amazon's MWS. But of course, what was the, one of the first thought, what are some bad actors going to do? There's going to be bad actors who try to categorize their sunglasses as their shoes. As your baby wipes or has hand sanitizers as hand cleaner.
Amazon is not accepting reclassification of listings at this time. In particular and specifically to protect against those bad actors and those black hat kind of tactics. I mean, there's a business ethic component to that as well. I won't get into, but essentially this is how Amazon is defining those. If your product is correctly classified and you're not able to create a shipment, that basically means Amazon is saying it's not prioritized at this time. Okay, so again, what are the most important things to remember in these moments? What are the facts? What can I do? What is my plan?
So for 3P sellers or 1P, 3P hybrid operators. And what I mean by that, it means you have both a seller central account and a vendor central account. You can still sell products in those categories using Fulfilled By Merchant FBM or Seller Fulfilled Prime SFP. And I'll get to that in a moment as well. Now the thing to remember about this is you can do that in so far as you're still able to fulfill. So Amazon will let you do this, but FBM is not hands off the way that FBA is where you send inventory in and then you're good and you let Amazon handle that for you.
You have to still have an inventory and you still have to have a warehouse and people packing, labeling, marking items with their tracking. And if you can't do that, then you shouldn't try to. Your account can get suspended if you fail to meet those on time requirements. So if that's an option for you, if you're set up for that, I absolutely recommend that that's something that you can do as a backup. Even if that means, "Hey, I'm not normally doing this because I'm leveraging FBA," but you can begin to do that just with your most important skews to start. If you haven't done so as a result of this, you're going to want to set up your regional shipping rates and shipping windows to indicate where and when you can't ship.
The last thing you want to do is say, "I'm blocked from FBA. I'm going to fulfill by merchant." And then the default says that you can ship to a POS and FPOS and Puerto Rico and Guam and you get orders from those locations and then you say, "Oh, actually I have to cancel those orders because I can't fulfill to those places." You can protect yourself against that. This is not just for sellers, this is for retailer. This is for vendors as well. And actually for vendors it's even a little bit trickier because vendors don't have the option of enabling FBM. They can enable Drop Ship Central. So it's basically drop ship version for vendors. And this is currently applied to the U.S. and the E.U. marketplaces.
So this actually hasn't impacted Canada or Mexico or Japan for example, amongst some other marketplaces. And in any inbound shipments that you created prior to March 17th, those will still be received. When I mentioned in the previous about setting up your shipping templates. This is within seller central. If you go to settings in the top right, you go down to shipping settings. You can go in and you can set your ship template. So you can define based on your region. So you can see here, this particular seller has different timelines noted for Alaska and Hawaii versus the lower 48, versus Rico, versus U.S. protector territories.
And so if you don't ship to these places, you can disable them. But if you're switching to FBM, this is an absolutely a critical component to that so you don't get yourself in more trouble. Now you'll notice here it says enroll now to seller fulfilled prime. Obviously that's a hot topic right now. If you are in seller fulfilled prime, you're good to go. But Amazon is no longer enrolling new sellers in the program at this time. So if you're in it, great. If not, you're out of luck for now. This is not actually due to COVID at all. It's been this way for months.
All right, I want to be mindful of time here as well. So I'll go through this last part briefly. This was the original content that we were going to present as the walk through advertising. So within Amazon advertising you have two sides of the house. DSP, that's a Demand Side Platform. That's programmatic advertising. We're not going to touch that today. Ad council, those are your cost per click. Those are your sponsored display, sponsored products, sponsored brands.
I'm not going to go through each one to talk about them in terms of how they work and all those things. But I am going to talk about what you need to be mindful of them with how they function relative to the current state of affairs. So for sponsored products. Sponsored products are the ad units that you see on detail pages on the SERP during the carousel. And these ads will only display your products when you're in the buy box. So if you are competing for the buy box with other offers, other sellers for single ASEN. If you stock out or if you lose the buy box, you don't have to worry about these because these ads discontinue running when you're not in the buy box. And so you're not going to have to worry about paying for clicks that are driving to conversions that aren't impacting your bottom line.
In contrast, sponsored brands operate at the brand level. So you have to be the registered brand owner in brand registry to be able to run these for your brand. But these do not care about buy box. And these will continue to run if ads within your campaign run out of stock as well. Now, if they all run out of stock until this continue. So you do need to be mindful of the fact that these won't just stop running, based on buy box or inventory. And in sponsored display. These run both on and off Amazon.
And what you want to know about these relative to buy box is that these will discontinue running when you've run out of inventory, but they will turn back on once you have inventory, as long as you're still within the flight time of when those ads are running. It typically takes about four hours for those ad campaigns to come back on. And so from an advertising standpoint, again the facts are important. Understanding how things work are important. So look at your advertising. What are you running these three ad units? And if you are, make sure that you know how each of them function relative to buy box ownership, inventory, stock outs.
Upstream of that fulfillment. If because of Amazon's announcement, you are blocked from sending inbound inventory because you're in one of those categories, you do have the opportunity to switch to FBM. Also, keep in mind, April 5th isn't that far away. If you already had two or three months worth of inventory coverage in FBA prior to this announcement, the impact on you is going to be pretty minimal because you're already set up for success. What will be key here is the plan of what happens when this gets opened back up. If you're a vendor, when POS start coming in again, if you're not able to satisfy those POS. You're going to be behind the eight ball. An Amazon will source that inventory from another seller. They don't care.
They just want to get the selection. Same thing if you're a seller, and to the extent that you're capable of, it's easy for me to sit here and say what you should do. If you're supply lines are interrupted. Ideally you'd be able to send inventory in for other product categories. The moment that you're able to do that. So it doesn't mean wait for Amazon to lift this and then start trying to get inventory ready. Stage everything right now and in the moment that Amazon lifts that on April 5th you'll be ready to move. Again, I just want to say thank you for everybody for joining and let's as much as we can stay calm, move with the facts, be strategic as possible and be as flexible as possible because it the one guarantee we can make is that things are changing rapidly and the folks who are the quickest to pivot are going to be the ones who are best set up for success and so Chad I'll pass it back to you.
That was amazing, Pat. Thank you for providing that content. Next up is Shannon Roddy from Marketplace Seller Courses.
Hi my name is Shannon. I run marketplace seller courses. I've got a Twitter and email account there. You can also find me on LinkedIn or on the website @marketplacesellercourses.com. If you have any followup questions after the presentation. I want to talk briefly about a recent updates to Amazon reviews and ratings. And so one of the interesting updates that Amazon made recently was instead of calling them reviews, Amazon started defaulting the language to ratings. And you can see from this example here, that instead of saying 179 reviews, it says 179 ratings.
And if you click to see all customer reviews, it'll drop down. And in this example it's saying showing one through 10 of 130 reviews. So what that means is Amazon is showing ratings and reviews aggregated on the detail page. You could obviously go through and read the reviews, but the ratings are just going to show up in terms of the star ratings on the product detail page. And the reason for this is probably pretty simple. Amazon wants to get more ratings. They also wanted to lower the bar and the threshold for the amount of time and energy it took for a customer to leave a product review.
So basically instead of having to write a headline and write a review or add photos or video or anything like that, you can basically just click the star rating that you want. And then Amazon will add that as a rating to the detail page. But you can also go through and still add that headline, write the review, add a photo or content, and that will show up under the review section. So the goal is really to get more product feedback. We've seen the number of ratings skyrocket for many products, especially with, ones with higher sales velocity, by Amazon making this change.
So we know the importance of reviews and ratings still as significant today as ever. Specifically in terms of Amazon's platform, the algorithm and sales. We know that having better product reviews and higher ratings is going to increase the organic ranking of the product. So where that product ranks organically for any of the keywords that it's index for. As well as the click through rate. So if a customer discovers a product organically or if you have a sponsored product listing. The click through rate from a customer, senior product and search result page is going to be higher based on seeing those reviews and the number of ratings and reviews that are attached to your product.
From the social proof side, obviously ratings and reviews are so important for customers to see what other people think of your product. And so again, if you've got two products that can be the exact same in terms of product features, the title, images, but the product that has more reviews, higher ratings is going to sell more on because customers have a higher level of trust in those ratings. So let's talk about how you can get better and more product reviews and ratings moving forward. One of the tools that we use is called FeedbackFive by E-comm engine.
And it's a great way to automate this process. So instead of manually sending them out or doing email templates within the seller central platform, you can automate this and set up tons of rules to have these emails go out to customers. You can set the time of delivery, you can have different customized emails for different products, etc. And the first thing that you need to focus on to get more ratings and more product reviews is to increase the open rate of those emails.
So we know that Amazon allows customers to opt out if they don't want to receive emails at all. But for those who do receive them, we want to increase the open rate. And the three main ways to do that, the three things to focus on is the day or days of the week that that email sends, the time of day and the subject line. So that more than anything else. And you can start by looking at some average, best practices in terms of sending emails, but it's really going to be specific to your customer base. And the nice thing with FeedbackFive is you can AB test a couple of different ways, but see what days of the week. Get the best open rates.
So maybe during the week, Monday through Friday, maybe Tuesday through Thursday or in some cases the weekend. And then just test time of day. Do people open your emails more in the morning, more in the evening. When they're checking their emails when they come home. And then of course, subject lines. We've got some examples of some of our best open rates, subject lines on the right. Again, FeedbackFive allows you to add emojis, which is just another way to incentivize people visually to notice your email and have it stand out.
These email subject lines typically will get us between a 25, 26 to 28% open rate. And we like to send one of the times that I've found works best generally is like at 11:00 AM. So you can test that out and see what works best. So the first goal is to increase the open rate and then once you get them to open email, we're going to talk about how you get them to engage. So the first thing that we recommend with the email itself is to brand it. So this is an example of a email one of our current clients, Pure Country Weavers. We've added their logo at the top. We've even branded the email throughout by adding their logo colors to the email and putting some things in bold.
And they chose to go with a humorous email and just make it a little lighthearted. FeedbackFive has some great templates that you can start with. Well we really recommend customizing them to give it your own flavor, your own tone as a brand and use the language that you would use to converse with your customers, whether it's on social media or the packaging. But this is definitely going to increase engagement rate to personalize it, make it your own. And with this email, they actually get such a good response from it. People actually post in their product reviews, "Hey, I love the product, but I also love the email I got."
So creating that viral sense. And we've had people share them on social media, because they did something a little outside of the box. The last tip here is to personalize the email. And so instead of just having it come from your brand or your company, have it personally signed. In this case, we have it signed by the president of the company. In some cases we've had it signed by the first names of the people who handle customer service. Knowing that they're going to be the people that you're going to engage with. And it just creates a little more of a personal connection, emotional connection. And people are usually a little more respectful and a little more responsive when they feel like there's a real person on the other end of it.
Now, one of the things that you may have noticed recently if you looked at your orders in seller central is this request a review button. And so this is brand new within the last few months. And so what you could do is, you could click that button manually and Amazon would send this templated email that was basically completely in line with Amazon policy because Amazon's providing it. And it sends an email to the customer to request a product review and seller feedback. FeedbackFive just came out with their official integration. So that you can actually use FeedbackFive to request a review using this feature, using their tool.
You can still set up rules to send. You cannot customize the email. But again, the benefit is, you know it's completely in line with the Amazon policy and Amazon's going to automatically send that if you integrate that FeedbackFive aspect of it. The nice thing to note is it does not go through buyer-seller messaging. So we know Amazon's been restricting buyer-seller messaging for a variety of things. Some that were part of their policy and some that even weren't part of their policy. But these messages, the request review does not go through, buyer-seller messaging.
So even if you've been restricted from buyer-seller messaging, you can still use this request or review feature, to send emails to request product reviews and seller feedback. The other thing that I want to mention is product insert some scannable QR codes. Again, we know that there's a certain amount of people who opt out of those emails, but with a product insert you get 100% open rate. Everybody who opens your product, they're going to see the product insert and there's no opt out. Nobody's going to opt out of receiving the product insert because comes with the product.
But if you can create a really cool visually engaging insert that's also valuable and adds value and is helpful for the customer, you're going to be able to increase engagement with customers. And the really cool thing is Amazon's app has a scannable QR code reader. And so if you click the camera button on the Amazon app, it can actually scan QR codes that go to links within the Amazon platform. And so you can actually send people to be able to go to a product review page to sell our feedback. Even Amazon, if they want to ask a question to the customer, contact us.
And the last thing that you can do is. If you've got a video of your product that you've added to Amazon, you can actually send them a link to watch that video on Amazon. So maybe it's an unboxing or how to assemble. That's a great value add for customers. And we can see that over the last a couple of years, the use of the Amazon app has just increased and especially during the holiday peak season, more and more people are shopping on mobile. And I think we're going to see the numbers of people who use the app to purchase on Amazon is going to increase making these scannable QR codes more and more valuable as time goes on.
So two big picture strategies in terms of this. One is responding to product reviews really builds credibility with the Amazon customer. So there was a retail wire article out that came out last year. It was something like 40% of customers are more likely to shop or buy from a retailer when they actually respond to all of the product reviews. So this could look like if you're on Amazon, a lot of people like to see the product reviews come in, but they don't actually comment on them. So if somebody leaves a positive product review. Have your customer service person go on and just say, "Hey, thanks so much for you know, that awesome review. We appreciate your feedback."
The idea is here that you're customizing those. It's not a generic template that you're just copying and pasting for everyone because people are going to see that get repeated. If people, especially people leave a negative product review, I know my wife, when she's shopping on Amazon, she only reads the negative product reviews. She'll scan through and say, "What's wrong with the product?" The benefit here is, if somebody's going through and doing that and reading the negative product reviews and they see that every single negative product review, you as a seller have responded to that and offered a solution.
So maybe they said, "Hey, I received my product and it was damaged in shipping." And you respond in the product view and say, "Hey, we're so sorry that happened. Please contact us. We'd love to ship you a free replacement." Right? It may not even be for the person who that happened to. You can't find out necessarily who that person was, but it's for the new customers who are going to be reading those product reviews and deciding whether or not to buy your product. If they know that you stand behind your product, they're going to be more likely to purchase. Even if there are some negative product reviews on your listing.
And let's just be honest, every product at some point is going to get a negative product review. The last key piece from here is to learn from the product reviews. So when you get positive product feedback, negative product feedback, look at incorporating questions or issues that people have. Maybe they had trouble understanding how to use the product, maybe they were disappointed by the size, the flavor, the taste, whatever those things are that you can learn from. Consider incorporating those into the listing to utilize what we call pre customer service. So it might be updating the product features to provide a little more explanation or updating your product photos with infographics that maybe better describe the product or get the dimensions or integrations that the product has or even some assembly instructions.
And then lastly, adding videos to your product listings, which you can do right at the top under the image block if you have brand registry or under related video shorts below. But those can be really helpful to answer customer questions before they have them as well as be able to make the most of the product once they get it. So lastly, just to wrap up here, some current review and rating policies. Don't pay for incentivized reviews. You're not allowed to review or rate competitors' products and you can't, whether in your emails or your inserts, redirect negative reviewers.
So you can't say, "Hey, if you had a great experience and loved the product leave a product review, and if you had a terrible experience, contact us." Amazon considers that redirecting and it is a term of service violation. Lastly, don't ask friends or family for reviews even though it's tempting. And you can no longer give away free products in exchange for reviews. So all of these will help you stay in line with Amazon TOS and be able to be a seller with longevity and increase sales over time. So that's basically it from my side.
We offer Amazon courses and Amazon coaching for brand owners that are looking to launch, grow and protect the brands on Amazon. Of course, certainly right now there's a lot of issues that are coming up with everything going on. So you can go to the website and book on-demand coaching, but the goal is to be as helpful and available as we can. Especially for learning. Everything's moving to online. So if you find yourself stuck at home with time to spare and want to get caught up on your A-game for Amazon, this is a great opportunity to do that.
Gina Tirelli manages Partner Marketing initiatives at Extensiv, the leading retail inventory and order management software for D2C brands and marketplace sellers looking to unify and automate their multichannel operations. When Gina is not marketing ecommerce software, she likes to spend time outdoors with her dog Elli.