Navazon Monthly Amazon Update - September 2020

Click here to download a pdf of the slides, Sept 15 2020 Navazon Webinar Slides

It has been an eventful month, and there are a lot of happenings within and around Amazon that vendors and sellers should be aware of to ensure their operations run smoothly and they can achieve the greatest growth possible.

- Amazon is continuing to grow during the COVID pandemic
- 3P Sellers are now required to display more information about their businesses on Amaozn.com
- Amazon’s Annual negotiations are starting for many vendors
- Rejected invoices have been spiking – this can be checked in the new vendor central financial scorecard
- Amazon created a new pesticide marketing requirement that flagged hundreds of thousands of products – action is needed to get your products excluded from this requirement
- The minimum dimensions for SIOC exclusion have changed
- Prime Day will occur October 13-14 – make sure your products are retail ready
- The sponsored display advertising beta is active and allows for more targeting options
- Detail page suppressions have been spiking – make sure to check your top products to avoid loss of sales

Amazon Business Updates

Amazon Growth During COVID-19 Pandemic

Many states are reacting individually to their varying COVID-19 situations. In many parts of the country, Amazon remains one of the few options for shoppers to access goods. With the continued growth in online purchases because of the responses to the pandemic, Amazon is adding 33,000 corporate employees and other 100,000 employees in the U.S. and Canada.

Amazon is growing in other areas as well. Amazon is also growing in grocery sales, with shoppers that have used it up to 60% from 46% pre-COVID. Mobile sales have also grown up to 40%, with $190B spent so far this year. Within the next 12 months Amazon will have added over 21 jets for hauling timely cargo. Amazon is also opening 100 new warehouses delivery stations and other facilities this month. Amazon has also been expanding its use of smart cart and cashier-less tech in stores.

Changes for 3P Sellers

Starting Sept 1, Amazon may require third-party sellers in the U.S. to display their business name and address on their public-facing profiles. Doing this is meant to help track down third-party sellers that may sell counterfeit or unsafe goods as well as helping brands find unauthorized sellers of their product.

In February 2021, Amazon will require third party sellers to deliver products eligible for Prime in one or two days. This policy will also require the program to be offered across the country rather than only nearby areas, necessitating weekend shipping. Even prior to COVID, fewer than 16% of 3P vendors in the U.S. could fulfill the promised 2-day deliver with Prime.

Operations

Negotiations

When you are conducting negotiations, there are several things you want to remember and keep in mind. Discuss your current cost challenges and ensure they are considered. This can include COVID costs or additional constraints such as working conditions with the supply chain or supplies that are increasing in cost.

Try to delay additional costs until next year when there is more predictability in business performance. Requesting a cost increase can also help ensure you can maximize your profits after the negotiations. But during the negotiations, expect high pressure from Amazon and requests for immediate action. Don’t let this throw you off or make you settle for terms that are not favorable to you.

Born to Run

This useful program is limited to Amazon Vendors and is a great way to get inventory into an Amazon Fulfillment Center when your product is new or low in stock for some reason. Each BTR offer allows up to 50 products. Products that are unprofitable, suppressed, or have reduced quantities will be excluded from the program.

Once accepted, the units in the warehouse must be sold before more of the same ASIN can be submitted, and they have 10 weeks to sell. If they don’t, one of two things can happen. The vendor will pay for the return, including 100% of the product cost, plus 10% for shipping and handling. The other option is to allow Amazon to keep the unsold units and sell them for 25% of the cost. Even if a vendor uses Born-to-Run, it is a good idea to have Drop-Ship/Direct Fulfilment as an additional backup for fulfilling sales.

Rejected Invoices

There has recently been a spike in rejected invoices for many vendors. There have been no emails about the rejections. Some seem to be caused by EDI issues. In many instances, the invoice line items are not lining up with the total invoice, which usually results in a shortage or pricing claim, but is now causing the entire invoice to be rejected. Errors in Amazon’s system can be corrected if the vendor checks how the invoices line up with POs and putting in a ticket to get the invoices pushed through or corrected.

Looking at the vendor’s Financial Score Card can show missing invoices and shortages and be used as a guide for addressing this issue. Line up invoices with remittances to check if payment has been received.

Pesticide Requirements

Starting September 10, 2020, Amazon is requiring a new pesticide marker on applicable products. In order to receive the marker, vendors need to provide Amazon with EPA Registration Number or EPA Establishment Number. If this does not apply to your products, you still need to edit this section of your product details in order to avoid suppression.

Products are flagged for the marker based on keywords or existing in certain categories.

Keywords Examples: Disinfect, repel insects, remove allergens, prevent bacteria, antiviral, antifungal, etc.

Category Examples: Clothing, home goods, air and water filters, lawn, and garden

Many new products now have pesticide information as a mandatory field in their NIS. Existing products that need the marker must have their attributes filled out by January 11, 2021, so proactively providing the information will help avoid possible suppressions. Attributes can be updated in Vendor Central under: Items -> edit products -> safety & compliance -> Pesticide marking.

SIOC Chargebacks

As a reminder, the changes for SIOC dimensions go into effect January 1, 2021.

Non-sort packaged items fulfilled through Amazon are excluded from SIOC chargeback if any one of the following dimensions are met:

- - - Less than 6 inches on its longest side
    - Less than 4 inches on its median side
    - Less than 0.375 inches on its shortest side

Non-sort items are based on the 18x14x8 dimensions:

- - - Greater than 18″ on its longest side
    - More than 14″ on its median side
    - More than 8″ on its shortest side
    - Greater than 20 lbs.

Products that fall under SIOC requirements that remain uncertified will be subject to a $1.99 chargeback per received unit.

Marketing

Prime Day and Q4 Readiness

This year, Prime Day will occur on October 13-14, leading right into the busy Q4 holiday season. It is essential your deals and promotions are ready for the event to take advantage of a huge influx of shoppers and increase in audience.

This holds true for Black Friday, Cyber Monday, and through the holiday season. The deal period this year is relatively short. Black Friday is on November 27th, and Cyber Monday will be on November 30th.

Holiday Deal Dates:

- - - Holiday Deals: 10/15 –11/30
    - Turkey 5: 11/26 –11/30
    - Amazon high trafficked period from 11/23 –12/6

Deal types:

- - - Lightning Deals

o Q4 fee of $500

o 20% off minimum

- - - Best Deals

o 2 weeks at a time

o Must have 1 day between deals to avoid suppression (can’t be back-to-back)

o 15% off minimum

TACOS – Total Advertising Cost of Sales

Calculating the TACoS is only slightly different from calculating ACoS.

- - - - TACoS = Ad Spend/Ad Revenue + Organic Revenue
        
        ACoS = Ad Spend/Ad Revenue

TACoS shows the advertising spend relative to the total revenue generated. As we know that advertising can influence sales beyond the initial click and conversion, this metric helps understand how ads impact the entire business beyond the individual ad performance.

While a lower TACoS is better for business, there are several ways to interpret the measurements.

- - - - TACOS flat/falling: Organic sales are increasing
        
        TACOS rising: Organic sales are decreasing; Ad costs are increasing
        
        ACOS falling & TACOS rising: Organic sales are decreasing
        
        ACOS & TACOS both rising: Acceptable for new products; Ad optimization needed for existing

The more a vendor understands about these metrics, the better they will be at responding and improving the performance of their products on Amazon.