The shortened work week got off with a bang, as a report in Bloomberg made the rounds that indicated a long-suspected culling of Amazon marketplace smaller suppliers has officially arrived.
Or to borrow the more dramatic language of many, many headlines written yesterday, “the purge” has finally come.
Or has it?
Amazon — within a few hours of the story breaking — had their official response out, and it was a denial. A strong one.
“We informed Bloomberg prior to publication of their article that their story and sources are wrong,” an Amazon spokesperson told PYMNTS in an email, noting that while Amazon does “make changes when we see an opportunity to provide customers with improved selection, value, and convenience,” those choices are made “on a case-by-case basis.”
So who’s getting the story right?
The Small Supplier Crackdown
Concerns first started bubbling to the surface about two months ago, when thousands of suppliers saw their bulk orders halted — without much in the way of an explanation as to why it was happening. Those concerns ebbed when the order resumed a few week later, according to Bloomberg, and all appeared to have gone back to normal.
But, according to the reports, that “back to normal” is actually a temporary reprieve — because a new normal is coming. According to the report, thousands of smaller suppliers are going to see their bulk orders “dry up,” according to unnamed sources cited by Bloomberg, as Amazon begins to intensify its focus on buying wholesale direct from major brands like Procter & Gamble, Sony and Lego.
Which means the mom and pop suppliers out there selling in bulk to Amazon may see that easy stream phased out — and they will instead need to do eCommerce the old-fashioned way, reaching out to consumers directly.
While the plan could be changed or cancelled, according to Bloomberg sources, as of now it is currently on the agenda and going forward.
“This is the kind of change that will scare the living daylights out of brands selling on Amazon,” said James Thomson, who organizes the Prosper Show, an annual eCommerce conference focused 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.”
For Amazon, the move provides two major advantages. One is supply, and making sure theirs is more than adequate to meet demand, particularly on popular items. Secondly, the move advances what has been termed Amazon’s “hands off the wheel” initiative, an effort to keep expanding product selection on its website without having to expand the number of managers necessary to keep track of it all. Also part and parcel of that effort are tapping AI to better predict demand and stronger negotiating on price. The project entails automating tasks like forecasting demand and negotiating prices which were predominantly done by Amazon employees and pushes more Amazon suppliers to sell goods themselves on the market place. As of today, the marketplace provides slightly more than half of Amazon’s annual sales — though this change, if it comes to pass, will likely run that figure up.
The new policy, according to internal sources, will affect vendors selling less than $10 million in products each year on the site — they will no longer get wholesale orders from Amazon, though that figure may vary some depending on the category of goods.
Amazon began discussing which vendors it would keep in the fall, sources said. Amazon employees who manage vendor relationships were able to make a written argument about suppliers that shouldn’t be cut, but the decision was ultimately up to senior leaders, one of the people said.
But Is It Really Happening?
Amazon, as we noted earlier, has rather directly and forcefully denied the report in an unambiguously worded statement that called the reporting wrong. Amazon further noted in their statement that they had informed Bloomberg of this before the story published.
“We review our selling partner relationships on an individual basis as part of our normal course of business, and any speculation of a large scale reduction of vendors is incorrect.”
However, observers have noted that ancillary signs point to Bloomberg’s report being accurate, or at least more accurate than Amazon is letting on. Amazon didn’t renegotiate annual terms with many smaller vendors this spring, according to Bloomberg, which it normal does. There are also, reportedly, a number of vacant vendor manager positions that are not being filled — indicating perhaps Amazon anticipates needing fewer of them in the future.
Which means, according to the experts right now, vendors should hope the reports are false, and prepare as though they are true. It takes 120 days to change from a wholesale seller on Amazon to a marketplace seller — and Anderson Salgado, a former Amazon vendor manager and CEO of Trisbell (a consultancy that helps merchants set up shop on the marketplace) says there is no time like the present to learn all about how to make that transition.
Winter, after all, is coming
“If this happens soon and people are not ready for it, they will not be ready during the holidays,” he said. “The people who get ahead of the game are going to thrive.”
If there is a game to get ahead of at all. We’ll keep you posted as more data become available.