Grappling with the coronavirus outbreak, Amazon is already taking steps to avoid supply-chain disruptions in China that could hurt its Prime Day sales event—a key revenue driver—taking place about five months from now.
This week the e-commerce giant sent emails to third-party merchants indicating it’s concerned about inventory for the two-day sales extravaganza in mid-July, according to the New York Times. One message reportedly read: “Amazon issued off-cycle orders to you last night in order to prepare for possible supply chain disruptions due to recent global events originating in China.”
Much of what Amazon and its partners sell on the platform is made in China, where, according to the latest WHO report (pdf), the coronavirus outbreak has claimed more than 2,200 lives and infected over 75,500 people. Amid the turmoil, which has included citywide lockdowns and quarantined workers, factories have been slow to resume normal operations. With production of consumer goods like phones, clothing, and automobiles hampered, Amazon has been making larger and more frequent buys, the Times reports. Meanwhile, suppliers are pulling back on advertisements and promotions so they don’t run out of items too quickly.
Amazon is more likely to suffer from potential shortages than other retailers due to how it structures its inventory. The company tends to keep fewer items in stock than rivals, allowing it to run more efficiently. In addition, because most products on Amazon are bought and sold by third-party merchants, the retail giant has limited visibility into supply since it simply facilitates those sales.
Some brands have pulled back on their ads on Amazon by 25% to 50%, as well as stopped promotions they had planned, according to the Times. Other sellers are contemplating whether to raise prices to prevent running out of stock.
Numerous companies have said that the coronavirus outbreak could take a toll on them. This week Apple cut back its sales expectations, with the iPhone supply being “temporarily restrained.” Nike has shut down half of its stores in China, with Adidas taking similar measures.
Amazon’s scrambling indicates just how important Prime Day has become to its bottom line. Last year, the company sold more than 175 million items during the event.