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article imageOp-Ed: Amazon dumps thousands of merchants, many rumors but few facts

By Paul Wallis     Apr 30, 2019 in Internet
Seattle - Amazon has shocked thousands of merchants by notifying them that it would no longer place regular orders with them. Some merchant accounts were also shut down. The merchants lost their cashflow, and some seem to have been hit hard.
The story is pretty garbled at this stage, but it seems Amazon wants these merchants to open seller accounts instead. The big shock hit the merchants on Monday. It apparently applies to vendors who direct to Amazon at wholesale prices.
The general impression is that Amazon’s move to make vendors open seller accounts is based on bottom line profitability. That means Amazon makes more money through third party sales, and removes the multiple overheads and costs of selling directly to customers itself. This is a major revenue model change, and it may literally supercharge Amazon earnings if it works.
To clarify – Every Amazon partnership has straightforward rules. Amazon can change terms and conditions without consultation. This change is well within the terms and conditions, not really debatable. The problem is that it’s come out of the blue.
There are rumors, some more credible than others:
1. Anti-counterfeit moves: Amazon has long been plagued by counterfeit goods issues and liabilities, and it may be that some vendors are being targeted on a “whatever” basis to remove them. Doesn’t quite stack up as a basis for the general move to seller accounts, though. Would counterfeiters care about which Amazon plan they use? Unlikely.
2. Bigger brands make more money: The seller accounts are a good way of getting the best returns for Amazon. Ironically, there may also be benefits for the brands in establishing a stronger presence on Amazon, which has exceptional market reach. A no-brainer for the brands, in some ways.
3. Wholesalers: The move to shunt wholesalers to the Amazon Marketplace has a few upsides for the wholesalers, too. According to the theory, if not proven in the market, wholesalers can control their prices better in the Marketplace environment.
Big deal? Yes. Bad deal? Not necessarily.
The longer-term theoretical picture of this move is a more straightforward and probably stronger selling environment. Selling directly to Amazon means selling at a fixed lower price, without direct access to customers prepared to pay retail.
There are many upsides, but it’s doubtful if Amazon partners who’ve just had their revenue streams upended will see it that way for quite a while. Cashflow interruptions are never welcomed by any market, and there will be some pretty severely disgruntled people as a result of this move.
Reinventing your cashflow isn’t easy. Even if it’s a pretty simple process, what about the gaps in cashflow? What about the overheads and new dynamics in the new seller accounts? Much cursing can be expected for at least a quarter or so until everything smooths itself out.
Could have been done a lot better
Amazon has a very fluid corporate media image which suggests an enigmatic, god-like approach, hurling thunderbolts down from on high. I don’t quite buy that image in any form. What I’ve seen over the years is that Amazon does a lot of pretty high visibility core business, and usually gets the bottom line issues right. This IS business, not some sort of ideological crusade. It’s how it’s done that raises the questions and eyebrows.
From the look of this move, a lot of planning and number crunching went in to it. This didn’t happen overnight, and there was no coincidence at all in the choice of merchants. Obviously, there was also a clearly defined dollar value in choosing these merchants for removal from the ordering process.
In this case, it would have been better to give the merchants some time to adjust and put in place resources for the new seller accounts. That makes more sense from Amazon’s perspective, too.
These are still high-value partners, and Amazon clearly wants them to stay on the platform, so some give and take wouldn’t have hurt. It may still be possible to add a time frame for changes, and reduce the bottom line impacts for the Amazon partners.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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