Just as things seemed to be getting back to normal ...
This week major news outlets like Bloomberg and Yahoo Finance reported that Amazon is unleashing a long feared purge of small suppliers. This may have been old news to many as Amazon paused orders for two weeks in March. Speculation arose about this being the start of Amazon's mythical "One Vendor" platform that unifies Vendor & Seller Central.
Some of our clients also received an email from Amazon suggesting they open a Seller Central Account as they may only be ordering for 60 more days.
We are writing to confirm we have resumed ordering from your account following a temporary pause. We apologize for any inconvenience.
We note that you are not yet enrolled in Brand Registry. We prefer to source products directly from brand owners, so enrollment in Brand Registry will be important for vendors going forward.
By registering in Brand Registry, our systems will be able to automatically issue Purchase Orders for your branded products as needed. Given this is new, we will continue ordering from your Vendor Account for the next 60 days to give you time to enroll in Brand Registry.
If you are a brand owner, you can enroll in Brand Registry here
If you are not a brand owner, we encourage you to consider selling your products directly to customers in our store via Seller Central. If you do not already have a Seller Central account, you can get started by registering here
If you have any questions, please reach out to Vendor Support through Vendor Central
Two weeks later, it was business as usual. Weekly orders resumed and aside from the email above, no statement was released by Amazon. That is until this week.
Amazon insiders aka "The People" say it's coming
Earlier this week, three Amazon insiders that requested anonymity shared information on the matter with Bloomberg. In their article "Amazon Is Poised to Unleash a Long-Feared Purge of Small Suppliers", Bloomberg sited "Three people familiar with the plan" confirmed orders will likely be drying up for small vendors over the next several months. They went on to say this is part of Amazon's strategy of cutting cost and focusing on wholesale purchasing of major brands like Procter & Gamble, Sony, and Lego.
How big is small?
Although "The People" said the definition of a small supplier varies by category, generally speaking, vendors selling less than $10 million annually will no longer receive wholesale orders. Without a firm date announced other than "the next several months" and "this fall", it's hard to say when orders will cease permanently. All of our clients grossing less than $10 million a year with Vendor Central received their standard purchase orders this week.
With that being said, we do think this is real and have noticed that many of our clients in this sub $10 million group did not receive their annual renegotiated terms this Spring. From my experience as a third-party seller almost a decade ago, this makes sense for Amazon from a cash flow perspective. Generating almost as much revenue from third-party seller and FBA Fees while eliminating substantial inventory carrying costs is a no brainer.
Despite this change being extremely beneficial to Amazon, it's equally as impactful for small brands. More specifically, our most popular core service for the past three years has been helping brands transition from Vendor to Seller Central. The major benefits from such a transition are increased profit margin (in most cases 20% - 40%) and more control over your brand.
Increase Profit Margin 20% to 40% & More Control Over Your Brand
Although "The People" in Bloomberg's article called this one of the biggest shifts in Amazon's e-commerce strategy with another expert stating it will scare the living daylights out of brands selling on Amazon, it's really something to embrace rather than fear.
"It’s one of the biggest shifts in Amazon’s e-commerce strategy since it opened the site to independent sellers almost 20 years ago."
“This is the kind of change that will scare the living daylights out of brands selling on Amazon,”
Even with Q4 rapidly approaching and this change on the horizon it's not too late to start planning. Most of our Vendor to Seller Central transitions are completed within 30-90 days. We've also found transitions done in Q4 to be wildly successful and fast paced. The increased sales volumes is a great opportunity to flush Vendor Central inventory and prepare for a new life on Seller Central.
If you have any questions about these recent changes or moving to Seller Central please reach out. You can also confirm the increased profit margin I referenced using out Margin Tool that compares net revenue between Vendor and Seller Central for any ASIN.