Anatomy of a Lockdown: Online Purchases in a Crisis Exploring Marketplace Dynamics in Italy

It should be no surprise that online sales are increasing across Italy as retailers respond to an increase in customer demand as a result of the coronavirus pandemic — and the behavior shoppers have been significantly impacted as a result of Italy’s strict nationwide lockdown. As Italy is 2-3 weeks ahead in this crisis than other markets we thought it prudent to dive a bit into what’s happening in Amazon Italy as a glimpse into what could make its way to other European & North American markets. 

We’ve seen incredible strides from retailers & delivery companies joining forces to ensure as many products & inventory are available as possible as consumers are required to avoid public places.  Amazon and large online retailers are leading the way as the most convenient way for many households to receive essential items they may not find in the local supermarket. That being said – while Amazon has been growing steadily in Italy for years, household adoption and category penetration is lower than in other EU markets – and significantly below the US. 

Evolving Amazon Logistics Constraints

• March 17th – Amazon Suspends all POs and inbound freight for non-essential items. Amazon’s bottleneck is FC availability and replenishment bottlenecks. Amazon communicated to its sellers that they would be suspending shipments of all nonessential items to its warehouses in order to prioritize high demand products which include household staples and medical supplies. 
  • See our take and brand recommendations here
• March 21 – Amazon halts all outbound shipments of nonessential items to shoppers in Italy and France. Amazon’s bottleneck is now delivery capacity. 

Given the above platform level business constraints and Amazon priorities we’re seeing quite profound shifts in the Amazon 3P Marketplace for the period of March 13th to March 25th:  

• POTOO analytics shows a 10% reduction in tracked ASINS listed from the period of March 13 – March 25 across the entire Amazon platform
  • There are a variety of reasons why this could happen but most likely it is a mix of both 1) 3P vendors selling out of FBA inventory and not replenishing or relisting as manufacturer fulfilled, and 2) 3P vendors are taking down their listings to hold onto inventory until the crisis winds down. 
  • We expect to see listings ebb and flow with the changing definitions of essential & non-essential categories as Amazon — so we recommend constantly looking at this.
• For the same time period that an overall 10% reduction was seen we witnessed a significant uptick for the number of 3P listings for those categories deemed essential. However, this comes at a cost: 
  • 8% of top 100 best selling items in Health & Beauty have estimated delivery times of one week or greater

Before the selling constraints we saw some fascinating trends in specific category purchasing behavior. Note — Amazon has since begun being more aggressive in blacklisting 3Ps for profiteering and we’re now seeing significant legal pressure from government regulators. For POTOO clients, please send a note to your account manager for access to your price gouging dashboard. 

Safety First

• No surprises that safety masks were the best selling item in the health & household categories on Amazon.it before Amazon pulled them – with one product selling at EUR5.99 6 months ago now being listed for EUR49.9. 
• 3M 6002C 6002-C Protective Mask sales rank increased 85% in the last 90 days-item is currently sold by amazon and is out of stock.  

Fit As Can Be: 

• Preventative health regimens become a must with Multivitamins & supplements like Vitamin D and C quickly selling out quickly — with top performers Solgar, Vitamina C con rosa canina, 1000 mg, 100 Tavolette (Natures Bounty).
• In anticipation for a lengthy lockdown we saw Italians clamour for home fitness equipment. Top ranked during this period were Elastic bands from Brands like Gritin(Gritin Elastici Fitness, [Set di 5]), and Fitness bikes specifically from Ultrasport ( Ultrasport Trainer F-Bike for Home model 200B, model 150 )

Staying Caffeinated:

• Without being able to have a daily trip to the cafe, Italians looked at dismay at their current espresso machines. Sales of Coffee Machines spiked with the number one selling De’Longhi EC685.W Manual Espresso Machine being priced at a respectable/modest EUR179.00 — now is not the time for extravagance. 
• Speaking of Modest – the little Lavazza a Modo Mio Tiny Coffee machine sold out instantly from 1P inventory – but it is still available if you’re happy with it being bundled with high margin coffee pods by an enterprising 3P. 
  • Note – We expect this type of bundling/high price point behaviour to accelerate as a way for 3Ps to differentiate away from the core SKU with existing inventory — as long as they can fulfill themselves rather than g FBA. 

Productive….. Yet Comfortable:

• As nearly every country begins to shift as many people to working from home as possible, we saw a significant uptick in all the WFH essentials. Monitors, Keyboards, Mice, Batteries, Docking Stations, Desk Chairs have all spiked in the runup to WFH. A trend we’re seeing across every global market. 
• Conversely — we also saw a significant decrease in B2B sales for things like Laser Printers & Bulk Paper. 
• Decreases are seen in Large Appliances and as Fulfillment constraints continue to hinder distribution

Home Schooling & Child Entertainment/Distraction

• We speak from experience here at POTOO HQ – Parents working from home while also ensuring their children are learning & engaged requires significant mental fortitude. To help ease the transition we saw Italians focus on Fire Sticks, Board Games, and Developmental toys such as LEGO. 

Blockbuster & Chill:

• Due to the nationwide quarantine in Italy, sales have spiked in a surprising category to say the least, DVDs are on the rise

Food & Water Uncertainty: 

• With so much uncertainty as to when the lockdown will subside, POTOO data shows an increasing demand for freestanding freezers. You have to store and preserve that stockpile of food somehow right? – Thankfully Toilet Paper is ambient and can be stored anywhere. 
• Water filters are also on the top of shopper’s list driven both by scarcity at the physical shelf and long term impact uncertainty of lockdown. 
  • LifeStraw personal water filter sales rank increased 4% over 60 days sold by Amazon — inventory still strong with minimal effect on distribution 1p or FBA. 
  • Brita Marella Carafe Kit with 7 Maxtra + Filters sales rank increased 73% over the last 60 days from seven 3p listings with one FBA prime — no apparent shipping constraints.. yet!
  • Brita Maxtra +  Replacement Filters sales rank increased 92% over last 60 days (Generic via 3rd party)
  • Brita On Tap Filter System for Faucet sales rank increased 5% over 60 days 
    • 1p listing & 12 3p listings (1FBA)

So what should you take away?

• Italy is foreshadowing what may happen in other European & North American markets. Expect distribution & availability constraints in other markets beyond Italy and 3P availability to dry up once inventory begins to draw down. Explore other retailers that offer dropshipping as a route to market if it fits your category.
• As distribution constraints come into play – expect pressure both from the retailer side as well as your own manufacturing & supply chain to narrow the category’s assortment to drive speed & efficiency for the next few months. For some, this may be the time to kill underperforming SKUs once and for all. For others, it means building a marketing plan to kickstart momentum on some of your line extensions come summer time. 
• Build into your plan alternative methods of fulfillment – whether that is using your own D2C logistics network, building partnerships with 3PL companies (ideally SFP eligible), or reallocating inventory to other customers without the throughput constraints. 
• Think customer-first — leverage the POTOO price gouging reports to identify which sellers are acting rogue to ensure we’re maintaining the right amount of trust with shoppers during this time of crisis. 
• Think about experimenting during this time of uncertainty – can you partner with Uber, Deliveroo, Just Eat, or any other last mile delivery company to ensure your shoppers can get the essentials they need? We’re already seeing M&S partner with Deliveroo to do grocery delivery. 

As always – feel free to reach out to your POTOO team if you have any questions of how to navigate the next few months – we’d be glad to help. 

---