The move is part of a new policy that is being rolled out, where Amazon will only deal directly with manufacturing brands.
Amazon has advised Vendors of a revised buying policy, under the terms of which, it no longer intends to deal with 1P distributors. Many brands currently rely on distributors to reach customers via the online marketplace, and the new policy is expected to have far reaching effects.
The letter to Vendors, seen by Toy World, reads:
As 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 XXXX*.
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 customers 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 speaking to a team member.
*Toy World understands that different recipients of the letter are being given different deadlines, some as early as April this year.
As Amazon looks to increase profit margins in its retail division, the move appears to have been designed to take distributors who take a share of the profits out of the equation. This will necessitate big changes for brands which rely on distributors to sell on the platform, who will be forced to either start a direct 1P relationship with Amazon or move with their distributor from 1P to 3P.
Asha Bhalsod, of Etopia Consultancy, who regularly writes for Toy World with advice on dealing with Amazon, commented: “This is a huge piece of news for any manufacturer that uses distributors to sell their brands through Amazon 1P. This move comes in line with ongoing news about Amazon’s focused efforts to increase its retail profit margins – at almost any cost. Cutting out the middleman will help secure profit margins by only going directly to the manufacturer.”
Asha said that it is somewhat unclear still just how Amazon will determine whether a Vendor Account is managed by the manufacturer or distributor, but said she expected it to be determined through Brand Registry setup.
“Amazon will need to clarify the complexities of a Vendor Account having a blended catalogue of third-party vs own brand,” she added. “It’s an interesting time for anyone trading with Amazon retail. No doubt this will be a global initiative.”
Following initial publication of the story, Amazon contacted Toy World with a statement, which reads:
“As is common for all businesses, we regularly review our approach to product sourcing as we try to control our costs and keep prices low for customers. With this in mind, we’ve decided to focus on sourcing certain products for our European stores directly from brand owners. We will continue to source products from wholesalers and distributors if they are the brand owner or have sole distribution rights.
Wholesalers and distributors are still welcome to work with Amazon, and can choose to sell these products to customers directly on our store through Amazon Marketplace, as a third-party seller. In order to help wholesalers and distributors prepare for this change, we will not implement this change until April.”