Two months ago, Amazon.com Inc. halted orders from thousands of suppliers with no explanation. Panic ensued — until the orders quietly resumed weeks later, with Amazon suggesting the pause was part of a campaign to weed out counterfeit products. Suppliers breathed a sigh of relief.
The mom-and-pops that have long relied on Amazon for a steady stream of orders will have to learn a new way of doing business on the web store. Rather than selling in bulk directly to Amazon, they’ll need to win sales one shopper at a time. It’s one of the biggest shifts in Amazon’s e-commerce strategy since it opened the site to independent sellers almost 20 years ago. While the plan could be changed or cancelled, it’s currently moving forward, the people said.
Amazon secures inventory two ways. The company buys products directly from wholesale vendors, reselling them like a traditional retail store, and it lets independent merchants post their own products on the site in a marketplace model similar to EBay Inc. or a consignment shop. About half of the goods sold on Amazon come from independent merchants, and the change will push the marketplace share of revenue even higher.
In another sign that a supplier shakeout is looming, Amazon didn’t renegotiate annual terms with many smaller vendors, a usual springtime ritual, one person said. Amazon also isn’t filling many vacant vendor manager positions, another person said, indicating the company expects to need fewer people to handle supplier relationships since there will be fewer suppliers.
Online marketplaces can offer greater selection than even the biggest of stores. Walmart and Target are both copying Amazon’s marketplace model to increase selection. U.S. shoppers will spend US$317 billion on Amazon this year, representing 52.4 per cent of all online sales, according to EMarketer Inc. Profits have increased for seven consecutive quarters, a trend investors expect to continue through the rest of the year.
This will make it harder for small business to grow.
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