Amazon Prime Day is really a disappointment for these sellers

(CNN Business) – The amazon Prime day It’s typically one of the best days of the year for Keababies, which sells baby care and maternity products on its website.

Last October, Keababies amassed about $ 500,000 in revenue during the two-day event, co-founder Ivan Ong said. Lured by the steep discounts Keababies offered customers on Prime Day, a flood of Amazon users bought bibs, combs, pillows, baby carriers and changing tables.

But this year, Ong can’t afford to offer so many discounts. The company faces Shortage of inventory and fears of running out of stock on a day with especially high consumer demand. The Costs of manufacturing and Supply Chain They have also skyrocketed, making it difficult for Ong to offer offers.

Prices for everything from steel and lumber to corn, diapers and toilet paper, are rising as a result of growing consumer demand and strained supply chains. The shortage of shipping containers and bottlenecks in ports They have increased the cost of moving products around the world, affecting both small retailers and large chains.

“I don’t have enough profit margin to do it,” Ong said, noting that Keababies you’re paying twice the price for shipping containers to import goods from China than a year ago.

Without big promotions, Ong hopes that sales will not be the best this year. Discounts are a key factor in driving sales on Prime Day, in part because they can help elevate sellers’ rankings in Amazon’s online store or appear on special Prime Day deals pages on the site that drive traffic. .

A recurring factor

Other independent marketers interviewed by CNN Business don’t expect Prime Day, scheduled for June 21-22, to be a bonanza this year. They can’t offer the promotions they used to because they’re worried they won’t be able to meet customer demand, and they can’t afford the impact of profits at a time when supply chain expenses are increasing.

Its problems arise when Amazon is making an effort to push independent merchants in the run-up to the event. The sellers External accounts represent about 60% of Amazon’s $ 236 billion in annual retail sales. And Amazon is running a deal for customers in the weeks leading up to Prime Day to boost purchases at independent merchants: Prime members will get a $ 10 Prime Day credit if they spend $ 10 at select small businesses starting on Sept. 7. June to June 20. Amazon has called it the “biggest promotion for small business sellers in our history.”

An Amazon spokesperson said that “we continue to innovate and grow Prime Day to ensure that our Prime members and sales partners find incredible value.”

The spokesperson said that Amazon is offering more deals this Prime Day than last year, “with more than one million offers from small and medium-sized businesses around the world and more than two million offers in total” during the course of the event.

‘Add fuel to the fire’

Promotions are typically used to help build sales and move a large volume of products. But some marketers told CNN Business that promotions will be limited this year for three reasons.

One is that consumer demand exceeds supply, so sellers worry that they won’t be able to fulfill orders if they give buyers additional incentives to buy their products.

“Many brands are struggling to keep a constant inventory in stock due to supply challenges,” said Mike Black, director of marketing for e-commerce analytics firm Profitero, which advises brands on e-commerce strategies. Companies also often use Prime Day to build enthusiasm and sales traction for new products, he said, but predicted that “this Prime Day will be more curated by products that are in stock and available.”

“Offering offers and promotions in addition to this dynamic is like adding fuel to the fire,” he said.

Amazon restrictions

Another factor that puts the offering to the test is that Amazon imposes new restrictions on suppliers like Keababies on the amount of inventory that can be stockpiled in the company’s warehouses. In order for products from most third-party sellers to be eligible for Amazon Prime and receive free same-day or two-day shipping, they must be shipped via Fulfillment by Amazon, Amazon’s e-commerce distribution network.

Inventory limits hamper the ability of sellers to offer discounts. “The reality is that promotions will not be that great this year,” Elder said.

Amazon said that all sellers who use FBA have inventory limits and that it continually updates those limits based on factors such as past and future sales, current inventory levels, new selections, and available capacity in its fulfillment centers. .

Rising prices

The third factor that some sellers say will limit their ability to offer promotions this year is that since supply chain costs are becoming more expensive, sellers cannot afford to affect profits.

“Sellers have had to increase their prices to compensate, not only for logistics price increases, but unit costs have also increased from factory level,” he said.

Charlene Anderson, who sells crafts on Amazon, does not plan to offer deals on her products this Prime Day because she has trouble keeping inventory and her suppliers have high costs.

“Products are hard enough to get. Why sell them at a lower margin than I need? ” He said. “If I can’t keep them in stock for the prices I’m selling them for now, there is no incentive to lower the prices on Prime Day.”

Anderson typically sees a 40% increase in sales on Prime Day. This year, you will be happy if sales increase by 10%.

“This year is a difficult one because the problems of the supply chain are the most important”.

Molson Hart, CEO and founder of Viahart, which makes toys like Brain Flakes, will not be running any promotions on Prime Day this year.

Viahart is paying twice the cost of shipping containers from China than it was a year ago, and Hart says Amazon has imposed a new limit on the products Viahart can deposit in its warehouses.

Promotions are “just not a game I want to play.”