Amazon have written to multiple 1P sellers (those selling first party with Amazon Vendor accounts) to inform them that their contracts will expire. Amazon will only retain Amazon Vendor relationships directly with brands and distributor Amazon Vendor accounts are for the chop.
Dear Vendor
As a part of a procurement policy implemented at a European Level, Amazon has decided to focus on sourcing brands directly from brand owners.
As a result, we hereby inform you that we will stop sourcing all products from you, starting on [various dates].
We remain at your disposal to discuss the above with you, and if you have any questions please reach out to Vendor Support through Vendor Central.
You still have the opportunity to sell these products to customer directly on our store through Amazon Marketplace, as a third party seller. If you do not already have a Seller Central account you can get started by talking to a team member directly here.
– Amazon EU SARL
This announcement will have significant ramifications for those that act as agents or distributors for brands. If they are not the direct manufacturer then it’s likely they are on the list of 1P sellers whose contracts Amazon intend to terminate and will have to become 3P sellers.
This isn’t the first time that Amazon have trimmed Vendor accounts with a major purge having taken place in 2019. It’s worth considering the costs for Amazon as a business:
The 3P marketplace business through Amazon Merchants has been growing at a faster rate than Amazon Retail with Amazon Vendors. Merchants now supply over 50% of the products for sale on Amazon. For Amazon Retail to continue to grow at the same pace is prohibitively expensive and not very profitable – Amazon reportedly make about 5% on direct sales and about 10% after costs on products sold by merchants. It’s not actually in their interest to sell directly.
Amazon also want to trim their upstream supply chain costs. Buying directly from a brand cuts out not only transportation costs, but also the distributor margin. If the margin is retained by the distributor and they sell as a 3P seller Amazon don’t have to carry the upfront costs of buying the inventory. If the brand caves in and supplies Amazon directly then they are likely to negotiate hard on their purchasing price and have, if not the most, one of the most competitive offers across the web.
What this means for merchants is that you may see even more Brands becoming active with Amazon Brand Registry and wishing to control the supply of goods on their marketplace. All the time that Amazon were acting as the retailer they could sit back and leave Amazon to control the buying experience, but if they’re selling direct they may wish to limit competition to their authorised distributors and authorised retailers and if that’s not you then you may find yourself looking for new marketplaces to trade on, brand gating is certainly a concern.
If you are currently an Amazon Vendor and not already operating a hybrid approach to Amazon and already additionally selling as an Amazon Merchant then it’s time to open an Amazon Seller Central account and prepare to do so. No matter how big a Vendor you are, at some time in the future, if not in this round of Vendor cuts, Amazon may decide that it’s no longer profitable to stock your goods and insist that you also start to sell as an Amazon Merchant.
