Amazon denies that it is purging thousands of vendors in a nightmare scenario (AMZN)
- Amazon may be changing the way it works with thousands of vendors, according to a new report from Bloomberg.
- Bloomberg reported that Amazon is planning to focus on big name-brand vendors and end its vendor relationship with smaller ones. The move, known as One Vendor, would have catastrophic effects for some vendors who rely on Amazon for a part or all of its sales.
- In a statement to Business Insider, Amazon denied that it was targeting smaller vendors in a purge and said that "any speculation of a large scale reduction of vendors is incorrect."
- Visit Business Insider's homepage for more stories.
Amazon could be making a drastic move to completely change the way it acquires products to sell.
As the company continues to tweak what it buys from vendors, it could stop buying products directly from thousands of smaller businesses, according to a new report from Bloomberg.
If it happens, the tweak would mirror a nightmare many small vendors have feared becoming a reality: that Amazon would one day stop buying from them directly, and that they would instead have to embrace an alternative.
Drying up orders from smaller suppliers that may not move as quickly could be a move to create room in Amazon's warehouses for additional product from larger, in-demand brands. It could also create room for products from Amazon's growing suite of private labels.
In a statement to Business Insider, an Amazon representative denied that it is planning to purge vendors from its platform at a large scale.
"We informed Bloomberg prior to publication of their article that their sources and story are wrong. 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. Like any business, we make changes when we see an opportunity to provide customers with improved selection, value and convenience, and we do this thoughtfully and considerately on a case-by-case basis," the Amazon representative said.
Eliminating products from smaller vendors would allow Amazon to be more flexible with the product it sells on its website, relying on algorithms and eliminating the need for humans to decide what it sells, according to Michael Krakaris, co-founder of Deliverr, a third-party fulfillment platform for sellers and vendors.
Smaller vendors experiencing a halt of orders would have two options, he said.
First, the vendors could transition into selling like a third party on Amazon's marketplace in order to keep their products on Amazon — and "figure out how to sell on Amazon," Krakaris said.
Inventory would be managed by these vendors themselves, or handled by another system like Fulfillment by Amazon or a third-party company. Amazon would collect fees on any sale on the marketplace, like it does for every other third-party seller.
Or the vendors could sell to another large third-party seller and keep the vendor-type relationship they had with Amazon, but likely on terms that are "not going to be as good," Krakaris said.
In March, Amazon spooked its vendor partners with an email telling many smaller vendors that it would not be placing more orders going forward.
It reversed course about a week later, saying it would resume orders after a "temporary pause." Amazon also renewed a focus on its Brand Registry, telling vendors that if they did not register, the vendor relationship would not continue, according to Digiday.
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