What Effect Does The Coronavirus Have On Our FBA Business.
Updated: Mar 19, 2020
Firstly, we want to wish everybody well and hope you are all safe and healthy. This is a post to calm some nerves over the stress of what effect this pandemic could do to business.
There has been a lot of talk about how the coronavirus will affect business. And we are here to tell you that we are not that worried. By using our business model of selling Wholesale FBA, we bypass a lot of what hurts other business models like private label. The ALGO model is not only not experiencing negative impacts from the virus, but we are seeing a positive impact in sales.
Before we get into that, lets go over why FBA isn’t experiencing a negative impact from this virus that is affecting most of the world.
Seems crazy that Amazon FBA isn’t being affected when other companies are sending people home to work remotely, and the stock market is heading south, right? Even other Amazon selling business models are being held up. Well, when you break it down, it’s quite simple really. It all has to do with where your suppliers are located that you source and purchase from. With ALGO, all our sources of inventory are US based authorized suppliers of brand name companies. So, there is no need to go over seas for anything. That’s the key. The reason why the private label model will struggle in times like these is precisely because going overseas to find cheap manufacturers to make, or ship (or both) the products that you then sell on Amazon. Coincidentally enough, most of those manufacturers are from China. Always buy from within the country.
We hear some of you asking about what has recently happened with Apple, where their production has slowed down due to parts that are sourced from China being unavailable to to a halt of production in the country. So what about sourcing? Well as of now, there has been no impact. Long-term, issues in China could impact the manufacturers we tend to work with (Sony, Disney, Mattel, etc.). In short, we have billion-dollar brands working applying their infrastructure to solve the problem for us. As of now, their (our) brand name distributors in the US haven't been majorly impacted by the virus as China shuts down. These brands might have some issues with their supply chain if the Coronavirus gets worse and last longer. In that case, we will have those companies’ billion-dollar sourcing teams ensuring our supply chain continues. They have the resource to find new factories, move production to other countries, pay more for procurement, and automate production. Compare that to small businesses (private label) that source direct from China. Those businesses are struggling because their 1-10 person team has to find a manufacturing solution themselves. Because ALGO’s business model is to sell big brand name products, we, in essence, have access to their billion-dollar infrastructure.
Enough with the negatives. Is there anything positive to take from this dark cloud that is our current reality? Yes. When you think about it, people still need their supplies. That coupled with the fact that people don’t want to leave their homes and get into large crowds are turning consumers to e-commerce platforms to make their purchases. Amazon searches have been increasing in the last couple of weeks. As stated by Lisa Lacy in Ad Week’s article, Coronavirus Is Influencing Shopper Behavior on Amazon:
But that hasn’t stopped U.S. consumers from turning to Amazon to research and buy supplies to protect themselves, per Amazon seller platform Jungle Scout…. products with boosts in search activity on Amazon include: ‘emergency backpack survival kit’ (up 694%), ‘cold medication’ (up 544%), ‘doomsday preppers’ (up 325%), ‘cold flu medicine’ (up 271%), ‘prepper’ (up 253%), ‘emergency C’ (up 205%), ‘doomsday’ (up 183%), ‘immune boosters’ (up 136%) and ‘virus’ (up 119%).”
As brick and mortar stores start to empty out, more and more people will be turning towards e-commerce to get what they need. Amazon itself has announced that it is hiring 100,000 new employees to keep up with the surge of orders being received due to the coronavirus. Will these customers continue to buy on e-commerce platforms? Discuss with us below in the comments.
Stay safe and keep on selling.
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