How long do you have before Amazon ends its wholesale relationship with you?
Anything’s ‘fair’ game if you’re on Amazon’s watch. Just two months ago, the company startled thousands of suppliers by halting its weekly purchase orders—only to resume some of those orders a few weeks later.
Earlier this week Bloomberg also forecasted a larger, more permanent change. Bloomberg cited anonymous sources “close to the plans,” reporting that Amazon would soon fizzle out orders from thousands of smaller suppliers to focus on purchasing from major brands.
“Generally speaking, vendors selling less than $10 million in products each year on the site will no longer get wholesale orders from Amazon,” writes Bloomberg.
Amazon clapped back tweeting:
So, what’s real and what’s not? Let’s lay it all on the table.
What’s in It for Amazon?
If Amazon were to remove smaller vendors from its list of suppliers, they’d benefit in several ways:
- More room in their warehouses for popular brands. Warehouse congestion has been an ongoing issue for the retailer, leading to the uberification of fulfillment through programs like Amazon Onsite. Cutting out smaller brands would make room for big-name brands like Lego and Sony, alongside their own private labels.
- Less unsold inventory. Rather than holding onto inventory themselves, Amazon can prompt their wholesalers to sell direct to consumers via Seller Central.
- Easier and cheaper merchant management. By consolidating its bulk purchases, Amazon can shrink its management team and rely less on employees to manage the selling, reordering and handling of products.
- More savings all around. Amazon wouldn’t have invest money into buying inventory. By driving more and more merchants to Seller Central, a self-service platform, they can also reduce the amount of money they pump into two separate seller portals.
- Commission fees (‘nuff said). Amazon can simply collect fees when a merchant sells, stores and/or fulfills orders (the latter two via FBA) as opposed to balancing product/buy box prices with the cost of purchasing inventory themselves.
- Increased advertising revenue. As more merchants are forced to sell their own products, more people may opt to pay for Amazon’s advertising services and features.
According to Forbes, some sellers have a different explanation for Amazon’s rumored purge: counterfeiters. Eyeing the exclusive tools offered on Vendor Central, sellers may set up vendor accounts just to gain access to advanced advertising and content features.
“There was even a black market for amazon account approved on Vendor Central,” one merchant told Forbes, saying that these accounts could sell for as high as $30,000 before Amazon’s most recent purge in March.
While the above may be true, Amazon has kept everyone on edge for many months. The past few months have been telling of Amazon’s inner turmoil over how to evolve its growing marketplace.
The Trail of Breadcrumbs: One Vendor, Anyone?
Last November, Recode announced that “an Amazon revolt could be brewing.” The tech giant reportedly tried to strongarm brands on the other side of the divide. Large brands like Popsocket that previously sold through Seller Central began receiving 30-day notices of a shutdown of their accounts. Amazon would instead buy their products at wholesale prices and sell them through Vendor Central.
In March, we reported on the sudden halt of purchase orders from thousands of Vendor Central sellers. One week later, Amazon issued a vague apology to a majority of affected vendors, noting that they must enroll in Amazon’s Brand Registry to retain their wholesale relationships.
Meanwhile, Amazon CEO Jeff Bezos told shareholders that “third-party sellers are kicking our first-party butt. Badly,” though the company had been ramping up their private label ambitions with programs like Amazon Exclusives and Brand Accelerator.
If anything’s clear, it’s that Amazon is showing signs of unrest. There’s more and more reason for the company to be selective in their wholesale partners, push others to their self-sustaining marketplace—and to potentially merge its first-party (1P) and third-party (3P) platforms into what’s being called One Vendor.
While Amazon denies that such a program exists, former employees say otherwise. One Vendor would not only aid operational efficiencies but also give Amazon more control over outside brands. Under this rumored plan, Amazon would determine which ASINs are sold first-party versus third-party for every brand.
The retailer already has a policy that brands selling to retailers outside of Amazon that also want to sell on their platform are expected “to give Amazon Retail the option to source those products at competitive terms for sale as Retail items only.” One Vendor wouldn’t be a far departure from that.
“it’s going to be more on the brands’ shoulders,” CEO of the Amazon consultancy Hinge and Amazon’s former principal business development manager, Fred Killingsworth, told Digiday.
Killingsworth spoke to Amazon’s hope of taking a “hands-off approach” to sellers while running business on their terms.
“From [the brands’] seat, I’d wonder what other changes are coming. Amazon is always changing the rules and the operations. So what is this a signal of? Companies have hundreds of millions of dollars flowing through that site and one small change can make a big impact,” he warned.
Your Contingency Plan: Get Started on Seller Central Early
If Amazon comes knocking on your door...or worse, disappearing without a trace (that is, except a canceled purchase order)...you don’t want to be without a plan B.
Create your Seller Central account now and enroll your brand in Amazon’s Brand Registry to secure advanced protections and selling tools.
Start preparing your operations to handle a new channel, including resources for managing your catalog, inventory, fulfillment, pricing and demand forecasting.
Amazon enforces strict standards for marketplace sellers. You must be able to maintain a healthy order-defect rate (ODR), customer satisfaction and more to earn your right to sell. Only then can you fully enjoy the benefits of being a merchant on Seller Central, like greater control over your product data and prices, alongside greater visibility over your performance.
Having a reliable multichannel marketplace software like Zentail can make getting up and running exponentially easier. Beyond serving as a central place to manage your catalog, Zentail includes inventory syncing and automation (like its proprietary SMART Types algorithm for mapping your products to the right Amazon categories) to help you work and sell at top speed.
Perhaps most importantly, with Zentail, you can expand to other channels with a few simple clicks. You never want to be wholly reliant on one channel. Even after making the switch over to Seller Central, your business is prone to algorithm updates, policy changes and other sudden shake-ups.
Protect yourself by diversifying your sales channels and beating Amazon to the punch.
Schedule time with a Zentail expert to see how we can transform your Ecommerce business.