How The Value of FBA Businesses Might Change After Coronavirus

Even now, the impact of the pandemic can be felt keenly across virtually every industry, with many wondering if we’ll ever get back to anything resembling normalcy.

The eCommerce space is no exception to this, either.  Online vendors face their own unique set of challenges. Supply chain issues, problems with material shortages, lack of access to manufacturing, increased shipping times, and reduced spending by customers have all become commonplace issues, even now.

Worse still, even as many regions look to reopen, the threat of a second wave of infections – and a potential second lockdown – is still ever-present. Never mind the fact that as a direct result of the pandemic, the world now faces yet another global recession, as noted by Forbes. This is only further exacerbated by the widespread civil unrest occurring in the wake of George Floyd’s killing by a Minneapolis police officer.

People are tired. They’re frustrated, scared, and uncertain about the future. That frustration is likely only going to grow more significant in the near future and will see many people tightening their budgets considerably.

Even vendors who rely on Fulfillment by Amazon haven’t come through unscathed. Amazon’s deprioritization of nonessential goods, though it only lasted approximately a month, created considerable disruption. As reported by CNBC, this disruption was the least of their concerns, many merchants were left wondering if their business could even survive the pandemic.

“Like many big and small businesses around the country, the third-party merchants that make up Amazon’s sprawling online marketplace have been hit hard by the coronavirus outbreak,” writes CNBC reporter Annie Palmer. “Sellers have taken more serious steps to protect their businesses. [They have] halted new hiring, put capital expenditures on hold, and [are] looking for ways to cut any other unnecessary expenses.”

Worse still, Amazon has postponed Prime Day 2020, typically one of its largest sales of the year, to  October 5th.

The immediate future, in other words, looks to be volatile for FBA businesses.  Looks can be deceiving, however.  For one, it’s inarguable that, due to COVID-19 lockdown measures, consumers have grown both more reliant on and more accepting of a wide range of digital services, from grocery delivery to online storefronts.

What’s more, market data suggests that, at least in Amazon’s case, consumer spending hasn’t gone down as much as one might expect.

And as noted by business-focused news publication Quartz, it has significantly improved Amazon’s financial health. Amazon’s physical properties and online stores both saw improved sales, while Amazon Web Services saw a significant increase in quarterly revenue. Amazon’s services, meanwhile, maintained relative stability, whilst Amazon’s products saw an upturn in sales.

The only area in which there wasn’t outright improvement involved fulfilment expenses, though this is largely attributed to COVID-related expenses. Quite the contrary, in fact. At the time of writing, the numbers actually look quite positive.

AI-driven ecommerce analyst Feedvisor, meanwhile, noted a huge upturn in Amazon Fresh, the platform’s grocery delivery service, while also noting sales increases across all product categories in March. And as indicated in research conducted by digital marketing specialist Common Thread Collective, eCommerce as a whole has seen considerable growth. The firm collected data from 28 different accounts at a $75 million annual spend rate. As of June 18, the growth from March 8 onward has been as follows.

• Revenue is up 86.4 percent.
• Spending increased 47.6 percent.
• Return on Assets went up by 24.9 percent.
• Cost per click is down 17.1 percent.
• Cost per thousand impressions has decreased by 17.1 percent.
• Clickthrough rate is up by 1.6 percent.

These trends are highly encouraging. They indicate that even in spite of economic hardships, even in spite of the chaos and unrest, eCommerce is recovering. And that includes businesses that rely on Fulfillment by Amazon.

Speaking of Amazon, the eCommerce giant has been working to help merchants recover from the downturn suffered at the hands of the coronavirus. Most recently, it kicked off a June 22 Fashion Summer Sale geared at promoting and boosting sales for both established and smaller fashion brands. It’s highly likely that, once this sale has concluded, there will be others.

That Amazon will continue making an effort to help its FBA businesses get back on their feet.

In spite of the hardships currently being suffered by FBA merchants, in spite of the current volatile state of the economy, we currently stand at the edge of a market ripe with opportunity. It is difficult to say when, but eventually, the economy will stop stalling out. Eventually, eCommerce will begin to not only recover but thrive.

Coupled with Amazon’s strong financial prospects, this means that moving forward, the outlook for FBA businesses is quite strong. With proper management and marketing, there is a good chance of both revenue growth and increased profitability. There will be roadblocks, of course – this is inevitable.

These are uncertain times, and there are bound to be further stumbling points. Provided your organization can weather this storm, however? It will be in an excellent position.

This is especially true if you offer luxury or niche goods of some kind.

These are, after all, stressful times, and there’s no clear end in sight. Now and in the future, customers will seek out happiness. They will search for products that help them feel comfortable and secure.

If your FBA business can do that, there are promising days ahead.