Amazon's third-party sellers are worried that the surprise 'essentials-only' stocking policy due to coronavirus could put them out of business

Shannon Stapleton/Reuters

• Amazon surprised its millions of independent, third-party sellers with an email this week telling them that due to the coronavirus, it was dedicating its resources to re-stocking only essential items.
• While Amazon will continue to ship and sell whatever stock these sellers have in its warehouses already, it won't allow them to refresh their stock until at least April 5.
• The notice comes at a difficult time for a lot of these small businesses as some of them have seen their stock dwindle on Amazon's shelves while waiting for their Chinese manufacturers to come back up to speed after the coronavirus shut the country down through last month.
• Amazon also didn't tell them sellers if it will waive fees or loan payments if this policy impacts their sales.
• Sellers say that Amazon's attitude toward them is often cavalier, surprising them with changes in policy that impact their businesses.
• While they understand the need for this policy, it has potential to "effect people's lives just like hourly workers who are now laid off," one seller told us.
• Visit Business Insider's homepage for more stories.

On Tuesday morning, Carlee Peszko woke up to a string of frantic texts from her brother and business partner. They sell products on Amazon and were trying to restock Amazon's shelves with their wares. This Amazon store is the brother's full-time job.

But he was getting an error message. Amazon had issued a surprise announcement on Monday that it was temporarily banning sellers' from shipping products to its warehouses unless they sold essential wares like food, medicine, or pet and household supplies.

Thanks to the coronavirus panic shopping, Amazon said it was focusing on restocking only essential supplies and trying to hire 100,000 people as fast it could to help.

It would not accept new shipments of items it deemed unessential until April 5, when Amazon promised to "let you know when we resume regular operations."

The company said that any shipments that were on their way before Monday would still be accepted. And Amazon would continue to sell and ship any item that is in stock.

Fortunately for Peszko, she and her brother had begun the shipping process the day before and were eventually able to send their products to Amazon's warehouses.

But other sellers aren't so lucky, says Greg Mercer, CEO of Jungle Scout, an authorized Amazon partner that helps third-party sellers run their Amazon businesses.

"A lot of livelihoods depend on Amazon. The timing is pretty unfortunate for a lot of sellers because they source their goods from China," he said.

China's manufacturing is only now coming up to speed when the Chinese New Year - and then the coronavirus - shut the country down. Some sellers may have been waiting on back orders from China for months."They may just be getting their shipment from China and their general inventory would be low right now," says Mercer. If they can't restock, its the same as a governor shutting down a physical retail store.

"I feel for people where this is their only job. It's going to effect people's lives just like hourly workers who are now laid off. People don't realize how many it will effect," Peszko said.

Not forgiving fees and loan payments?

On top of that, Amazon hasn't answered all of its sellers' questions, Mercer, Peszko and other sellers point out.

For instance, Amazon has not offered to forgo charging sellers their monthly $40 fee for their professional account if it won't stock their items. (Amazon did not respond to Business Insider's request for comment.)

"It would be nice if they gave some people their $40 back or let up on storage fees," agrees Carrie Miller, who owns sustainable skateboard company Bamboo Skateboards with her dad and uses both Amazon and her own company website to sell. Because her business is past the holiday season rush, she's got 60 days of inventory at Amazon, so "this is not a big deal for us in the grand scheme of things. Right now, I'm pretty calm still. But if you contact me in three weeks and it's still going on ..."

Amazon also hasn't said if it will postpone loan payments for sellers in its Amazon Lending program. That's a revolving credit account based on sales data.

With that program, sellers borrow the money to pay their manufacturers and then pay Amazon back, often bi-weekly, out of sales receipts. But Amazon hasn't clarified what will happen if a seller runs out of inventory because of this policy and can't meet its loan commitments. That was a big question on Amazon's seller forum.

Peszko, who has a small loan with Amazon, isn't as worried about paying the loan and fees as she is about losing her precious page-rank standing in Amazon's search results, which depends, in part, on available inventory, she says.

On top of that, sales of many items, even the nonessential ones, have been skyrocketing for many sellers who are being boosted along with the panic buying of essentials, says Mercer. His company, JungleScout, tracks sales and inventory data, and says that the panic buying has increased sales over the past few weeks to the level of Prime Day. So they may run out of inventory by the end of the month, he says.

If that happens, they can still sell to Amazon customers, but they'll need to ship the products from stock they have in their own possession. It wouldn't qualify for free Prime shipping so their customers would have to be willing to pay for shipping and wait longer for the item. All of that could impact their search ranking.

Some sellers have complained that Amazon is refusing to restock their wares even if it is a food, pet or household product. If Amazon doesn't deem it an essential, it won't be restocked.

Amazon has also warned sellers not to try and game the system and to put their items in the allowable categories if it doesn't belong there. Amazon has warned sellers they could get banned if they do so, sellers told us.

Chronic 'short end of the stick'

Both Miller and Pesko made it clear that they love selling on Amazon as it's given them access to millions of buyers and healthy businesses. They say they signed up for the headaches that come from working with a partner that holds all the power in the relationship.

But they still wish the company would consider the impact before it drops some important policy changes on their heads.

"With customers they are great, but with sellers, we often get the short end of stick," Miller says.

Peszko feels like she dodged a bullet this time. Had she waiting until morning to complete that shipment order, her Amazon business would be in trouble.

"Amazon sellers get stuff thrown at them all the time. Some things are big news and some are not. This was OMG. It's a big deal," Peszko told us. "The whole coronavirus situation is effecting everyone's life. Yesterday I thought to myself, at least it's not affecting my Amazon business or my job but now it is effecting my Amazon business."

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