Amazon is temporarily blocking shipments to its warehouses in the US and Europe of all items other than household essentials, medical supplies and similar high-demand products amid the coronavirus outbreak.
At the weekend, Amazon warned unprecedented strain had meant it was out of stock on many important household goods.
This move, communicated to third party sellers and vendors on Tuesday, will allow Amazon to prioritise, a spokesperson said. But it will come as a devastating blow to the millions of companies who use Amazon to distribute their products.
"This could become an existential threat to many companies, including mine," said Jerry Kavesh, who sells footwear and clothing on Amazon.
The measure will begin on Tuesday and run until at least April 5th. Goods already in warehouses, or on their way to them, would be handled as normal, Amazon said.
“We understand this is a change for our selling partners and appreciate their understanding,” the spokesperson added.
The order does not prevent third party sellers listing and selling other items on Amazon.
Vendors and sellers must now use self-fulfilment methods that avoid using Amazon’s own infrastructure for storing goods, processing orders and handling delivery. As a result, the vast majority of third parties can no longer offer products as part of Amazon’s Prime delivery service.
“We do have self-fulfilment capabilities on part of our catalogue,” said Mr Kavesh. “But merchant-fulfilled listings do only a small percentage of the sales volume as compared to a Prime listing.”
In 2019, third-party sellers sold 700 million products that used Amazon’s Prime one day shipping option. On the company’s 2019 Prime Day event, sales from third party sellers exceeded $2 billion, according to data from Amazon shared earlier this year.
According to data from Superfly Insights, sales of hand sanitiser on Amazon saw a surge of more than 250 per cent at the end of February and beginning of March, compared to normal levels. Similar trends have been seen for products like masks and other medical supplies.
The company’s share price rose by about 7 per cent on Tuesday.
“Amazon is one of the biggest beneficiaries of coronavirus,” said Brent Thill, analyst with Jefferies. “No one wants to leave their house. This is the right move to focus on the most important elements customers need now.
“There will be a financial consequence which is hard to predict. Bottom line they are better protected than most in technology. And most investors are looking through the short term and focusing on higher quality long-term stories like Amazon.”
On Monday, Amazon announced it is seeking to hire 100,000 additional staff to handle the increased demand. It said it would invest $350 million in increasing the hourly wage for new and existing employees working in its infrastructure, including grocery stores. – Copyright The Financial Times Limited 2020