In early March, Amazon suddenly and without explanation cancelled orders it had placed to buy products from thousands of wholesalers across a wide range of product categories.
Even more troubling for these sellers, Amazon’s order-cancellation emails informed them that the company would no longer buy products from them in the future—and that the only way for these wholesalers to do business with Amazon going forward would be to set up their own Amazon storefront, manage their own inventory and shipping, and sell directly to end-user customers.
As for its own retail operations, Amazon is now suggesting it plans to buy inventory only from the brand owners directly—not from any resellers.
Because so many vendors rely on Amazon itself as a buyer of the inventory they purchase in bulk from brands, this move created panic across the eCommerce landscape, and it left the industry with one big question:
“Why did Amazon do this?”
At TrackStreet, we’re focused on helping businesses protect and grow their brands. So we’re more concerned with answering a different question:
“What does this mean for your brand?”
Before we discuss that, though, let’s quickly review the likely reasons for Amazon’s recent vendor purge.
So, Why Did Amazon Abruptly Stop Buying from Wholesalers?
As Bloomberg reported, Amazon suggested one factor in its decision to stop buying inventory from wholesalers was to help the company reduce the likelihood of counterfeits finding their way onto Amazon’s marketplace.
This makes sense given the other anti-counterfeiting steps Amazon has taken recently. The company has beefed up its brand registry program, now called Amazon Brand Registry 2.0. It also recently unveiled Amazon Project Zero, an anti-counterfeiting initiative designed to encourage brands to spot and remove counterfeiters on Amazon.com.
But other industry experts believe Amazon’s vendor purge is really about improving the company’s own margins. By forcing more vendors to set up Amazon Seller Central accounts and sell inventory on the marketplace themselves, the company will no longer have the overhead of buying products outright, warehousing those products, and shipping them to customers. Amazon can simply take a commission on each transaction—and it can now charge these same vendors fees for services such as warehousing and shipping.
Regardless of the reasons for this recent vendor purge, if you’re a brand owner you need to understand how it could impact your company’s bottom line. Here’s what we see as the three big lessons.
3 Key Takeaways for Your Brand
1. It’s time to step up your MAP monitoring and enforcement.
Whether Amazon’s vendor purge is about fighting counterfeiters or boosting Amazon’s own profits, or both, you should assume the company will continue with this policy, or something similar, over time. That means even if your resellers haven’t yet been affected directly, they could be at any time if Amazon decides to stop buying from them as well.
Now, consider what this will do to your resale partners who rely heavily on Amazon to purchase the inventory they’ve bought from your company.
If they no longer have Amazon as a consistent customer for your products—a customer willing to take on the burdens of storing and shipping—your partners might find themselves eager to start offloading your products as quickly as possible. That could lead some of these sellers to dump your inventory onto other marketplaces, possibly offering your products for less than your MAP pricing policy allows.
This is yet another reason it’s time to prioritize your MAP policy monitoring and enforcement. When a large eCommerce player like Amazon puts your resale partners in a bind, you need to be ready to react effectively if they act inappropriately.
2. Sign up for Amazon Brand Registry
Whether you’re already selling directly on Amazon or you plan to in the future, signing up for the brand registry program is a good idea, especially now.
Enrollment in the program gives your company several benefits, including access to Amazon’s proprietary search technology to help you monitor the marketplace for unauthorized sellers, as well as greater control over how your brand’s content appears on Amazon.
But more relevant to our discussion here, if your resale partners are no longer able to sell on Amazon, it might be time for your company to prioritize your Amazon store—and your store’s operations will run more smoothly and effectively if you’re a member of the brand registry.
3. Your brand is more valuable to your bottom line today than ever.
Here’s our final takeaway from the Amazon vendor purge and the company’s new mandate to buy only from brand owners directly: This is another reminder of how vital a brand’s reputation is to its company’s bottom line.
To the extent that this move is about protecting its marketplace from counterfeiters, Amazon is effectively saying it needs to have a high degree of trust in a business before it is willing to buy inventory from that business for resale on Amazon.com.
Follow this thinking to its logical conclusion, and you can assume that Amazon will likely increase its scrutiny of brand owners themselves—their reputations with customers, for example—and begin to purge relationships with all but those brands that are known for delighting customers.
This means you now have another incentive to prioritize your brand’s health as a key business objective. That means limiting your resale channel to an Authorized Dealer Program, implementing Review Tracking so you’re ready to react quickly to negative customer feedback, and enacting other best practices for effective Brand Protection.
For help setting up a brand protection program that’s right for your company, schedule your free demo.