Much has been written, and even more discussed, about the supply chain chaos that overwhelmed the U.S. economy in 2021. While this year has leveled off, there are still record backlogs of container ships off the West Coast, product shortages, worker shortages and rising freight rates.
While most of the focus has been on the quantifiable impacts of this chaos, there is another segment of the economy that has not been addressed as much — the e-commerce seller, many of which are small to midsized companies that rely on the global supply chain for their livelihoods.
E-commerce sales reached nearly $470 billion in the U.S. last year. Amazon, which accounts for roughly 40% of total U.S. e-commerce sales, is also a large platform for third-party sellers, with nearly 50% of its sales coming from this source.
With so much of the U.S. economy coming from these sellers — and a large percentage of their products coming from overseas — it’s important to tell the story of how they were impacted by the supply chain disruptions of 2021, which a report from 3PL Central found led to 36% of businesses losing revenue during the year.
Jungle Scout, which provides data and resources for sellers looking to participate on Amazon’s Marketplace, surveyed sellers to find out how they have fared during the chaotic 2021.
The overwhelming answer? Not good.
Supply chain losses
According to the survey, 93% of e-commerce sellers said they lost revenue due to the disruptions, and the majority of businesses said inventory was delayed by two months or more. Many turned to selling products they could stock to try and make up for lost revenue, the company said.
Among the detailed findings, Jungle Scout reported:
- 48% of large brands said their inventory orders were delayed between one and four months.
- 42% of large brands said they are unable to order new inventory from their supplier and 27% of small business owners said the same.
- 44% of large brands and 26% of small businesses report that their existing inventory was affected by supply chain issues.
- 23% of large brands and 11% of small businesses report losing the Buy Box because products went out of stock due to supply chain issues.
Bye, bye Buy Box
The Amazon Buy Box is a critical tool for sellers. According to Feedvisor, 80% of Amazon Marketplace sales are made through the Buy Box. The Buy Box section, which appears on the right-hand side of the product page, automatically surfaces the highest-ranked seller at that time, leading to increased sales.
Inability to get inventory in time affects the sellers’ opportunity to stay within the Buy Box. Jungle Scout said inventory order delays are as much as a year or more for approximately 3% of sellers, with a great number of businesses (about 17% of large businesses and 6% of small businesses) suffering delays of four months for products.
“Unfortunately, supply chain challenges complicate brands’ efforts to win the Buy Box. To be able to ‘win’ and maintain the Buy Box, a seller needs to stay in good standing with Amazon — by having great shipping performance, adhering to Amazon’s terms of service and offering good customer service, for instance,” Jungle Scout wrote. “Sellers can lose the Buy Box by going out of stock, which is exactly what happened to 23% of large brands, 11% of small businesses and another 11% of agency clients in 2021.”
One seller told Jungle Scout that delays in the supply chain affected their sales, “which affected revenues, which had knock-on effects when self-funding inventory purchase and when attempting to take out a bank bridging loan.’”
The survey found that supplier communication was and still remains a problem. The survey found 42% of large brands and 27% of SMBs are unable to order new inventory from a supplier, and 21% and 11%, respectively, said the suppliers have become inaccessible.
Overall, 44% of large businesses and 26% of SMBs said their current inventory was being affected by supply chain issues, including the ability to relocate existing inventory.
Watch: The inside story of an Amazon seller
In the end, supply chain disruptions hit the bottom lines of sellers.
“While 45% of small businesses estimate that their lost sales due to supply chain issues totaled under $5,000, 30% of small businesses report that their estimated losses totaled between $5,001 and $25,000,” Jungle Scout said. “By contrast, 18% of large brands estimate that their lost sales for their company were under $50,000, while 51% of agencies reported the same for their clients.”
Only 16% of large brands reported losses above $500,000.
Delayed inventory was primarily from China, with 69% of small businesses and 66% of large businesses reporting inventory from that country was delayed. Forty-two percent of all merchandise imported to the U.S. came from China.
Navigating the crisis
How brands reacted to the supply chain challenges varied and there was no single dominant reaction.
For small businesses, 20% cut advertising, 20% changed their fulfillment methods, 24% launched a new product that they could stock, 18% discontinued a product and 9% rented more inventory storage space to stock up on items they could get.
Larger brands were more likely to cut advertising spend, with 37% doing so, or change fulfillment methods, with 34% taking that route. Nearly one-third launched a new product, while 22% discontinued a product and 25% took on more warehouse space.
“Large brands took additional measures, like changing suppliers (27%) and increasing advertising spend to sell their well-stocked products (17%). They also raised product prices on Amazon and began scheduling their inventory orders months earlier than usual to account for delays,” Jungle Scout said.