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Amazon Stops Purchases to Thousands of Vendors, What Now?

Josh Owens
Mar 6, 2019 8:50:45 PM

In an abrupt and seismic shift, Amazon has made the decision to cease purchase orders to  thousands of Vendor Central accounts. Additionally, Amazon mandated that if the brand wishes to continue selling on Amazon, it must do so as a third party seller via Seller Central.  

According to Digiday, it seems that the affected accounts were those with less than $10 million in annual revenue and who do not have a dedicated Amazon account manager. While it may be as easy as flipping a switch for Amazon, brands are left scrambling to replace a vital source of revenue before their products stock out. Let’s break down the change and what it means for brands impacted:

A Long Time Coming

Amazon has long indicated its desire to limit its inventory exposure and instead pursue the third party model. In Jeff Bezos’ 2018 letter to shareholders, Bezos indicated that 2017 was the first time third-party sellers eclipsed Amazon Retail in unit sales. A recent Wall Street Journal article detailed Amazon’s desire to stop selling low margin or down-right unprofitable products. SupplyKick has identified that marketplace sales have been steadily growing in comparison to Amazon Retail, and we’ve built our Amazon strategy accordingly.

US Amazon Sales (1995 - 2030)@300x

 

The reason for the change is simple: with the shift, Amazon significantly improves its bottom line. It’s much easier for the e-commerce giant to focus on larger customers and take fifteen percent of every third-party transaction than purchase, manage, and replenish inventory from a variety of sources. Additionally, inviting more brands to participate in a third-party fashion incentivizes more advertising spend on Amazon as opposed to Facebook and Google.  

While brands may have anticipated this change with rumors of Amazon’s One Vendor program abound, they likely did not expect Amazon to stop purchasing product without any advance warning. Many brands and manufacturers may feel like Amazon is no longer an option for their products within the next thirty days.

However, the reality is that most products on Amazon are controlled by third-party sellers, and brands previously selling to Amazon have an opportunity to benefit from the Vendor Central shutdowns. Moving away from Amazon Retail, long-known for disregarding pricing agreements and charging exorbitant fees, is not necessarily a bad thing. While it may seem intimidating, brands have been moving away from Amazon Retail for years, and it’s almost always a positive switch.

What Can Brands Do?

Brands who wish to remain on Amazon have a few options; selling themselves, selling to multiple distributors, or selling to a single Amazon channel partner. Undoubtedly the quickest, easiest solution is to begin selling wholesale to a single Amazon selling partner that would immediately replace Amazon Retail. However, brands should be careful to select a selling partner that invests in their brand long-term through inventory management, pricing, branding, and advertising, such as SupplyKick.

SupplyKick operates similarly to Amazon 1P Retail, in that we buy and store inventory. But we also execute comprehensive Amazon strategies for our partners to increase their sales on Amazon. This includes product photography, Enhanced Brand Content creation, technology-enabled inventory forecasting, and we even put our own money into on-platform advertisements to increase the visibility of your products. We are an end-to-end partner that is here to work with you to grow your sales while maintaining your brand integrity.

The sudden halt of Vendor Central purchase orders is a pivotal moment for brands. However, it doesn’t have to be the end of a brand’s Amazon presence. Brands must move quickly (and with strategic intent) into the new era of Amazon, but, with the right partner in place, the switch to the third party model should be seen as an opportunity to regain control of a vital revenue stream. 

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