Two months ago, Amazon.com flaunted its weight and halted orders from thousands of suppliers without offering any explanations. A few weeks later, the orders resumed and everything was back to normal. Amazon later said that this step was taken as a measure against counterfeit products. However, the suppliers may see a much larger change that may permanently change the relationship between Amazon and them.
According to a source, it is reported that thousands of small suppliers will receive a lower number of bulk orders in the coming months. It is said to be a part of Amazon’s plan for cutting costs and focusing more on wholesale purchases to compete with giants such as Walmart, Best Buy, Target, and more.
All this while, several small suppliers have profited through wholesale deals with Amazon. With this new change in place, these small suppliers will now no longer be able to sell in bulk to Amazon. On the contrary, they may have to sell directly to the customers.
This new change, if implemented, might turn out to be the largest shift on the e-commerce platform to date. The plan may or may not be canceled. But according to sources, it is currently moving forward.
“This is the kind of change that will scare the living daylights out of brands selling on Amazon. Amazon usually doesn’t give a lot of lead time and brands will be left scrambling. If they make this change soon, brands will have until the end of the summer to get their acts together or their holiday quarter will be at risk,” said James Thompson, organizer of the Prosper Show, an annual e-commerce conference.
However, an Amazon spokesperson in an email exchange with Yahoo News recently said that they weren’t planning on a large scale reduction of vendors. They said that they are reviewing their selling partner relationships as a normal course of business.
Amazon generally secures its inventory by two methods. One, it directly buys from wholesale vendors. Two, it lets independent merchants post their own products and acts like a marketplace, similar to eBay. It is estimated that half the goods on Amazon come from independent merchants alone.
Now, by forcing all the wholesale vendors to sell as independent merchants, Amazon is free from the burden of holding inventory and suffering from a loss in case the inventory doesn’t get sold. On top of this, Amazon also gets to pocket a commission each time there’s a sale made by a vendor.
All in all, this potential change can boost the profits of Amazon while decreasing its time spent on inventory management, manpower and more in the case of wholesale purchases.
