A week ago, Amazon halted purchases from thousands of vendors. What is happening now and what does it mean for manufacturers?
As previously reported by DIGIDAY and FORBES, Amazon unexpectedly stopped ordering from thousands of vendors on their North American platform on March 4th. Vendors, who for years received routine purchase orders, woke up to absent POs and no explanation. Many received notices from Amazon eluding to a system glitch, while others were flatly told not to expect any orders in the future. Many speculated this was the beginning of the long-rumored roll-out of the One Vendor platform, which is Amazon’s effort to merge the 1P (Vendor Central) and 3P (Seller Central) platforms. The reality is that while One Vendor is coming, it appears the latest scare is not the long-feared roll-out.
What We Know Now
- A week after orders stopped, most manufacturers have seen PO transmissions resume. It appears Amazon is evaluating each suspended account and re-activating as they see fit. However, for some of the reactivated accounts, order volume has been reduced, and subsets of products are no longer being ordered.
- Of the vendors who were told POs will not be resumed, it appears most were distributors supplying multiple manufacturer’s goods to Amazon. This is consistent with the well-documented effort of Amazon to work with manufacturers directly, not 2-step distributors.
- Some very small, highly SKU intensive manufacturers were permanently outed from the platform. Consistent with Amazon’s no apologies attitude, the abrupt change highlights the volatile nature of any manufacturer’s relationship to the marketplace giant.
- This may not be the overarching implementation of One Vendor, but it certainly sets the stage. Whether this is the start of a broader roll-out, a test, or a legitimate system issue remains an unknown.
What Does This Mean
Amazon has been poised for a major shake-up to the vendor landscape and it is unlikely the events of last week are the final straw. We believe most smaller vendors could be forcibly pushed out of Vendor Central sometime in Q2 or Q3 of 2019 with the birth of One Vendor. The question of what constitutes a small vendor is up for debate, and something Amazon is not likely to share. Many have speculated vendors with less than $10M in annual volume will be removed. However, Amazon’s actions reflect a more strategic approach, evaluating brands on their strength within a category, not just annualized volume. It has been estimated that up to 1/2 of all vendors will eventually be removed from the platform. For all but the largest brands, this creates an uncertain future for their Amazon business.
How Should Vendors Respond
This latest scare should highlight that Amazon is not, and cannot be treated like, a typical big box retailer. The famed endless aisle cannot go on forever, and those affected by last week’s glitch should treat it as a wakeup call to the volatile and unstable nature of Amazon business. We encourage all vendors to constantly evaluate 1P and 3P while they are still receiving POs from Vendor Central. Many will find it advantageous to pre-emptively make the switch, or build out 3P infrastructure as a back-up plan, should the inevitable occur.
Run AMZ is a full-service Amazon sales agency specializing in management on both Vendor Central and Seller Central platforms. If you need help sorting out the latest moves by Amazon and what it means for your brand, contact us and we would be happy to help.