B2B E-commerce Freight Data Freight Insights Logistics and Supply Chain Technology Series Uncategorized

Why Amazon Prime Day Is More Important than Ever for Small Businesses

Over the past 15 years Amazon has paved the way for SMBs to grow, frequently at the expense of other Big Box retailers, like Toys R’ Us, Sears, and A&F, that saw a ten year peak in square footage closings in 2018.

With the Amazon marketplace, over one million US SMBs gain on-demand access to a global market.

In many cases, these sellers use Fulfilled By Amazon (FBA) for delivery, leveraging the modern world’s easier global sourcing, importing, and online sales to create thousands of global supply chains that all end up in Amazon fulfillment centers and then on customer doorsteps in an Amazon box.

However, 2019 presents a new challenge for the hundreds of thousands of small and mid-sized US importers, Amazon-fulfilled or not, with the 25% tariffs on $200 billion worth of Chinese imports.

New Freightos survey research across hundreds of Amazon FBA importers shows that SMBs are getting hit hard by the spate of trade tariffs taking place under Section 301.

Just one year after Trump’s tariff expanded from washing machines and solar panels to sweeping tariffs on 818 categories of goods, Amazon sellers are hurting.

In fact, 40% have said that the last year of Trump tariffs have directly contributed to a drop in their revenue and profits. In other words, the tariffs applied to help small US businesses have done anything but.

The lone compensation would almost need to be significant increases in sales…which is exactly what Amazon hopes Prime Day will bring.  If the past is any indicator, it will.

But, of course, the tariffs aren’t only an Amazon problem.

20% of Amazon sellers surveyed by Freightos said they sell on other channels, including their own website (19%).

So while Amazon may be seeing this first-hand, it’s an issue that will likely spread across a much broader ecosystem, hitting almost all retailers with smaller businesses first.

53% of surveyed businesses are trying to mitigate the negative impacts by looking to countries other than China for sourcing.

However, smaller SMBs are far more exposed to the changing trade environment. While a multi-national may have a sprawling global supply chain and experts to support global commerce, SMBs don’t.

We’ve heard again and again from users of our freight marketplace that tariff changes have eradicated product lines, effectively crushing businesses that they’ve spent years building on Amazon.com and elsewhere.

Amazon is gearing up for Prime Day and while it’s focused heavily on aiding SMBs, the global market access and sales tools Amazon provides may not compensate for the fact that the underlying supply for imported goods is now prohibitively expensive.

And a drop in imports to Amazon could impact another budding revenue line for Amazon – international freight.

Amazon as a forwarder

Since registering as a forwarder in 2015, Amazon has been edging closer toward providing international freight services, importing an estimated 5,000 containers from China to the US last year alone.

Much like its trucking brokerage years ago, this is a small business that it Amazon appears more intent on scaling to its FBA sellers.

Freightos survey showed that 10% of FBA importers have been offered air or ocean import services from Amazon. Some 6% have actually taken advantage of Amazon’s services.

 

Should Chinese imports become more expensive, this could represent a very real problem to Amazon’s growing logistics interests.

Tariffs or not, Amazon is moving into global logistics.

And as it offers import services to more businesses, it becomes a direct competitor of global forwarders and carriers that are increasingly targeting this market.

Importing to FBA has been a lucrative industry for midsized forwarders, with dedicated logistics providers emerging in the sector.

More recently, global forwarders and carriers have been improving their digital offering for small businesses, ranging from Maersk integrating with e-commerce retail platforms to Hapag Lloyd’s QuickQuotes tool.

What is yet to be seen though is how both Amazon and global logistics providers increasingly service SMBs will successfully navigate the unique challenges SMBs present, namely their business viability when market environments change dramatically.