Amazon.com Inc. sellers brace for a bleak holiday shopping season as inflation-bitten consumers rein in spending.
Many merchants, who sell more than half of the goods on Amazon’s online store, fear they will have to cut prices to move a mountain of inventory. It’s a stark change from the previous two years, when sellers scrambled to get enough products from Amazon’s warehouses to meet pandemic-fueled demand, even as chronic shortages meant they could. raise prices.
This year, U.S. online sales will grow just 9.4% to $1 trillion, the first time the growth has hit single digits. according to Insider Intelligence, which in June lowered its previous annual forecast. Spending on Amazon will hit $400 billion, up 9% and slower than the industry as a whole, according to the research firm.
“Consumers don’t seem to spend a lot of money beyond basic necessities, so sellers have to offer discounts and coupons and aggressive marketing, which can get expensive,” said Lesley Hensell, co-founder of Riverbend. Consulting, which advises Amazon sellers. . “The fourth quarter is looking scary this year.”
The tough holiday shopping season was topic A this week at Surge Summit, an e-commerce networking event hosted by the Hensell company that drew about 300 sellers to Tampa, Florida. During a session titled “Navigating the Bear Market as a Seller,” dozens of traders discussed the abrupt change in consumer behavior and how to adapt their business accordingly.
Korion Morris, who led the bear market session, is the chief growth officer at Unybrands, which owns e-commerce companies in categories including baby, fitness and personal care. He told attendees that Unibrands was trying to hold the line on prices by cutting logistics and other costs.
“Consumers are hurting right now,” Morris said at the event. “In the rare event that we raise prices, we will add a promotion to compensate for it.”
Amazon itself is forced to adapt to the new normal. The world’s largest e-commerce company was struggling with too many warehouses and workers when the pandemic boom ended.
Amazon has since given up dozens of existing and planned facilities across the United States, according to research firm MWPVL International Inc. Some of the closures are related to a retrofit program, an Amazon spokesperson said, and the company continues to open facilities where customer demand requires additional capacity.
Responding to merchant concerns about a lackluster holiday shopping season, an Amazon spokesperson said sellers using the company’s logistics service typically pay less than other methods. Amazon has also expanded a program offering low shipping on inexpensive items to include products weighing up to 3 pounds; previously the limit was 12 ounces.
“Sellers are incredibly important to Amazon, and we work every day to provide them with powerful tools and services that help them reduce their operational burdens, grow their brands, and connect them with customers so they can grow quickly. their business during busy shopping times and beyond,” spokesman Patrick Graham said in an emailed statement.
Meanwhile, merchants are taking their own measures to reduce shipping costs.
Montreal’s Marlee Rabin launched her organization’s brand Homie Collection on Amazon two years ago and her bestseller was a $25 clear plastic trash can. She’s gearing up to launch a smaller kitchen organizer this year that she plans to sell for less than $10. In addition to targeting cost-conscious shoppers, she says, the smaller, lighter bin will save her a bundle on Amazon storage and shipping costs.
“I would love to charge high prices,” she said. “But in this environment, I think I’ll do a lot better at a lower price.”
The effects ripple from sellers to the businesses that support them, including small business lenders. An Amazon merchant typically borrows around $100,000 to buy inventory and pay for holiday marketing campaigns, repaying the loans with their proceeds.
Seth Broman, chief revenue officer of Swiftline, which offers loans to online merchants, is turning down more loan applications this year. Rising costs and slowing growth have simply made lending sellers money too risky, he said.
“A lot of customers are over-leveraged and their sales are down,” Broman said.
Even the smallest traders are feeling the effects.
Nancy Philips sells used books on Amazon that she buys at garage sales and library liquidations. She slashed prices of about 100 books that had been lying around in Amazon’s warehouses for about a year before her storage fees went up. Amazon is increasing storage fees on products that don’t sell quickly to keep its warehouses from becoming crowded.
“Books that I would sell for $20, I discounted them to $10 or less,” she said. “Amazon’s fee is about $8, so I won’t make any money. I have to get rid of it, and people are buying less.
Steven Pope, who has been selling gifts on Amazon for seven years, says he’s never been so nervous about a holiday season.
Sales of her $50 “mom box” which includes a bath bomb, soaps and lotion, fell more than 50% this Mother’s Day from 2021. The Atlanta-based seller fears a similar drop as Christmas approaches as shoppers focus on necessities like food and gas and have less money for indulgences.
“The giftware industry has completely collapsed,” said Pope, who is developing new snack products to compensate for slowing gift sales.
Pope, who also provides advisory services to more than 300 traders, recently changed its marketing slogan to reflect lean times. Before it was “We increase sales”. Now it’s “We offer peace of mind.”
“It’s very difficult to navigate the climate right now,” he said. “This will be a breakthrough year for many companies.”