Tech

Amazon prioritizes household staples and medical supplies from merchants amid coronavirus outbreak

Key Points
  • Amazon told third-party merchants it's prioritizing shipments of household items and medical supplies at its fulfillment centers amid the coronavirus outbreak. 
  • The company said the change goes into effect Tuesday and will last through April 5.
A worker loads customer orders into a waiting tractor-trailer inside the million-square foot Amazon distribution warehouse that opened last fall in Fall River, MA on Mar. 23, 2017.
John Tlumacki | Boston Globe | Getty Images

Amazon is telling third-party merchants it's "temporarily prioritizing" household staples, medical supplies and other product categories in response to a surge in demand from the coronavirus outbreak. 

The change went into effect Tuesday and is expected to last until April 5, according to a document obtained by CNBC. It applies to third-party sellers and vendors, or retailers who sell directly to Amazon, who sell on Amazon's U.S. and EU marketplaces. 

Third-party sellers on Amazon who sell products not related to coronavirus demand may start seeing delays when they try to send their items to an Amazon warehouse. Amazon said it will continue to ship out merchants' existing inventory in its warehouses, as well as any shipments created before March 17. 

An Amazon spokesperson told CNBC it's seeing surges in online shopping, causing some products like household staples and medical supplies to go out of stock.

"With this in mind, we are temporarily prioritizing household staples, medical supplies and other high-demand products coming into our fulfillment centers so we can more quickly receive, restock and ship these products to customers," the spokesperson said. "We understand this is a change for our selling partners and appreciate their understanding as we temporarily prioritize these products for customers."

The company told sellers it's "working around the clock to ensure availability on these essential products," adding that it will notify them once it resumes regular operations. 

On Saturday, Amazon said it was running out of stock of popular household items and that some of its "delivery promises are longer than usual." In-demand items such as toilet paper and bottled water showed that many listings were out of stock. Amazon's normally speedy one-day and two-day delivery options also showed delays of several days.

Amazon told sellers Tuesday it will prioritize household staples and medical supplies.

Third-party sellers can still list and ship out products aside from household items and medical supplies. For sellers who offer products outside of these categories, they can still send orders to customers by using Amazon's Fulfilled by Merchant service, which allows them to list products on Amazon's site and ship out orders themselves.

In addition to household staples and medical supplies, Amazon told sellers it's prioritizing categories such as baby products, health and household, beauty and personal care, grocery, industrial and scientific and pet supplies. The company also warned sellers not to list products in an inaccurate category, as it violates Amazon's policies and could result in the seller's account getting suspended.

The coronavirus had already threatened to throw many third-party merchants' businesses into a tailspin. Sellers who depend on manufacturers in China have been looking to shift their supply chain elsewhere as some factories remain offline in the country. Now that the coronavirus outbreak has spread to the U.S., sellers are responding to even greater demand from online shoppers and taking extra steps to manage their inventory.

Sellers continue to fear that if their products run out of stock, Amazon's ranking algorithms may demote their listings from search results. Amazon advised sellers to put their businesses in "vacation status" to protect their listings from being demoted in search results by its ranking algorithms. Other sellers pulled back their advertising spend on products that face low inventory.

Amazon addressed these concerns in its notice to sellers, telling them it's "working diligently to account for this change in your Inventory Performance Index (IPI) score and in storage limits for the following quarter." Amazon uses an IPI score to measure sellers' historical sales, inventory levels and other factors to determine how well their inventory is performing in Amazon's fulfillment network. 

VIDEO2:2002:20
Shoppers stockpile supplies as sellers price gouge amid coronavirus outbreak