Panic Among Suppliers as Amazon Purges To Boost Profits

There is growing panic among wholesale vendors that have supplied products to Amazon for years, as the company suddenly stops buying from them.

Amazon’s action is its way of encouraging its suppliers to sell their products to the public by using Amazon’s online marketplace. This way Amazon flips the cost of purchasing, storing and shipping products while it charges suppliers for these services and still makes a commission on each transaction making it less risky than the Amazon buying products outright.

Wholesale suppliers source out products months ahead of time so if their usual Amazon orders don’t come in they will have to change their selling methods.  

Many suppliers are heavily dependent on Amazon for orders and are panicking. 

Dan Brownsher, Chief Executive Officer of Channel Key, which is a Las Vegas e-commerce consulting business that has more than 50 clients that sell more than $100 million of products on Amazon annually says that if Amazon continues its action it could put a lot of people out of business.

Other consultants in the field also agree and say that thousands of vendors are being affected by this move by Amazon.

Amazon’s purpose to move suppliers onto its online marketplace is an effort to reduce overhead costs while providing suppliers with an automated self-service system which will require no input from Amazon managers.

There are already many suppliers who are doing just that and Amazon’s goal is to have all its suppliers doing the same thing to provide customers with improved selection, value and convenience. More than 50 percent of Amazon’s sales come from its online marketplace merchants and it is doing better than from its own online store. 

According to EMarketer, Inc., this year alone, Amazon is predicted to generate e-commerce revenue of $317 billion which represents 52.4 percent of all online sales in the US.

Amazon’s action was the topic of conversation at the Shop talk retail conference held in Las Vegas this week that had 8,000 attendees which included retailers, brands, and consultants.

The online marketplace concept offers greater selections than any of the biggest stores like Walmart, Target and Best Buy which are attempting to copy Amazon’s online marketplace model to increase their own online sales.  But that will be hard to compete with as any online marketplace business needs more product to show for online than it has in its stores.

So according to Will Land, CEO of Marketplace Valet, an e-commerce logistics provider and consulting firm in Riverside, California, more vendors and suppliers will be forced to sell on Amazon’s online marketplace or risk getting left with unsold inventory.  But in actuality, it could be a better method all the way around for them.  Vendors just need to step up to the plate and get organized to do the storing, packing and shipping while Amazon provides them the online presence to millions of already established customers.