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Amazon’s Prime Day is shaping up to be its most challenging one yet

Men exploit at a distribution station in the 855,000-square-foot Amazon fulfillment center in Staten Island, New York.

Johannes Eisele | AFP | Getty Copies

In the six years since Amazon held its first Prime Day, the marquee shopping event has always been held in mid-July as an bid to drum up sales during the sluggish summer season.

But on Tuesday, when the two-day event kicks off, Amazon intention see whether it can successfully push consumers to search out deals more than a month before the holiday shopping salt traditionally begins.

The company pushed back its annual discount shopping event from mid-July to Oct. 13-14 after the coronavirus pandemic begot unprecedented strain on its fulfillment and logistics operations. Facing a deluge of online orders, Amazon quickly began to run out of regular of items on its site and couldn’t meet its vaunted Prime two-day delivery window.

Over the ensuing months, Amazon worked to crop up again conditions in its warehouses to normal by prioritizing shipments of essential goods. It brought on 175,000 new warehouse and delivery workers to improve shoulder the load. Amazon kept more than 70% of the employees it added, signaling that online castes continue to flood in long after the panic buying tapered off.

The company has been busy expanding its warehouse footprint, with the ideal of growing its global network square footage by 50% in 2020, up from a 15% increase in 2019. Amazon reported it’s on track to open 33 new fulfillment centers in the U.S. this year. It has also added a slew of new delivery stations, which assign Amazon to get closer to customers and speed up deliveries.

Amazon opened 158 last-mile delivery stations between Walk and October, more than any other type of facility, according to MWPVL International, a supply chain and logistics consulting hard. The last-mile facilities are likely to give Amazon a leg up against retail rivals during the holiday shopping season, noticeably when shoppers are looking for Christmas gifts at the eleventh hour. 

Amazon will need the extra space in right to weather the back-to-back rush of Prime Day and the holiday shopping season, as well as to prevent the delays and out-of-stock notices that nettled the company back in March. 

With Prime Day taking place in October, Amazon’s “peak season” will survive longer than ever before. Peak season typically refers to the week before Black Friday on account of Christmas, during which warehouses are fully staffed and employees are required to work overtime. 

For many warehouse wage-earners, working during peak season is somewhat of a badge of bravery, due to the long hours and seemingly endless stream of containers flowing out of warehouses. Some workers have even created commemorative T-shirts to mark the period, with watchwords such as “You can see your family in January” and “Instapot season,” likely in reference to the fact that the Instant Pot pressure cooker is much a top-selling item on Prime Day and during the holidays. 

Prime Day, which started in 2015, has grown to become one of the company’s most consequential retail and marketing events. It secures new Prime subscribers, allows Amazon to further promote its products and services and contributes a sales boost, normally in the middle of the year. 

This year’s Prime Day is expected to be just as lucrative for the company. Amazon doesn’t ration Prime Day sales volume, but JPMorgan forecast this year’s event could bring in revenue of $7.5 billion, up 42% from its 2019 thinkings. eMarketer estimated Prime Day sales could hit close to $10 billion.

For shoppers, Prime Day may overshadow this year’s Vile Friday and Cyber Monday, with 67% of U.S. shoppers planning to make a purchase during the event this year, according to a RetailMeNot examine of over 1,000 consumers.

Amazon’s decision to hold Prime Day so close to the holidays, or even at all this year acknowledged the coronavirus-related constraints, is a testament to its importance to the company, said Bernie Thompson, a 10-year seller on Amazon and founder of electronics business Plugable Technologies.

“Amazon wouldn’t want to simply forgo it for a year,” Thompson said. “It’s too important to Amazon’s flowering cycle and how they win consumers.”

Bracing for chaos

With Prime Day set to kick off soon, it’s not just warehouse workers who are stimulating for an onslaught of online orders. 

The millions of third-party sellers that make up Amazon’s marketplace will also be continuous discounts on their products, which run the gamut from used electronics and custom T-shirts to pet supplies. The group is of attraction to importance to Amazon, accounting for 58% of the company’s total merchandise sold.

Despite their key role in Prime Day, multiple sellers differentiated CNBC that they felt they were unprepared for this year’s discount event. Usually Amazon sends mess of alerts to third-party sellers leading up to Prime Day, reminding them of cutoff dates for marketing, discount submissions and new shipments. But this year, third-party sellers erudite when Prime Day would be held at the same time as the public.  

“How can you consider your sellers partners with you if you don’t give up them time to prepare?” said Jason Boyce, a former Amazon seller who is now a consultant to third-party merchants. “It’s second-rate.”

With little time to prepare, some merchants are only running a few Prime Day discounts and plan to offer agreements throughout the holiday shopping season. Boyce and Thompson said sellers are also approaching Prime Day cautiously due to recently signaled inventory limits in Amazon’s warehouses.

In July, to conserve space, Amazon said it would start limiting the amount of cloths third-party sellers can send into its warehouses. All product categories are affected by the change, with quantities differing on a product-by-product base. 

Amazon has been working closely with third-party sellers ahead of Prime Day and is making sure it has enough span for sellers to store their products in its warehouses, said Jamil Ghani, Amazon’s vice president of Prime, in an check out with CNBC in September. “We’ve been making changes to our logistics and supply chain to adapt to an ever-evolving situation,” Ghani enlarged.

The quantity limits only impact third-party sellers who use Fulfillment by Amazon, or FBA, which is the company’s program that exude a confesses sellers ship their products to an Amazon warehouse and then Amazon ships the product to customers for a cut of each traffic. Sellers also store goods in their own warehouses and manage fulfillment, but the majority of Amazon’s top third-party merchants in the U.S. use FBA for their codifications.

Even with the new limits, most products will have enough space available for over three months of trades, which is more than many sellers require, given that most sellers carry about 1.5 months of inventory in Amazon’s facilities, the troop said. If sellers run out of stock, they can send in new inventory any time, Amazon added.

Amazon said it has also bring down its own retail product ordering to accommodate more products from third-party sellers in FBA warehouses. 

Still, Thompson claimed the limits mean third-party sellers will have to have their inventory “perfectly timed” to avoid on-going of stock, particularly on “top-tier” Prime Day promotions, like Deal of the Day. Deal of the Day promotions, which are featured prominently on Amazon’s position during Prime Day, can move up to a month’s worth of inventory in one day, Thompson said.

“So there’s a month of goods that are tell oned all at once in one day, which is great, but you know, you’re kind of down to about a month of other inventory that is available to deal in all the other days,” Thompson said.

“It can be done, but we’ve never before had these kinds of inventory limits.”

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