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Amazon Move To Cut Out Distributors

Amazon is looking to cut out buying stock from distributors, in favour of buying products directly from brands. The move is seen as a cost-saving exercise that could hurt distributors in the long term.

The business believes that by cutting out a middle-man they can save costs.

Distributors who do want to sell via Amazon will be forced to use their Marketplace operation, with Amazon taking a large percentage of the revenue.

According to Bloomberg, Amazon has already warned distributors in Europe that they are set to cease placing orders with distributors from next year in favour of buying from brands direct.

European distributors, such as Aqipa, could be affected by the move.

According to Bloomberg, Amazon notified vendors that the changes would begin as early as January. The message encourages those affected to sell goods on Amazon’s Marketplace.

In smaller markets, such as Australia, distributors who have the rights to global brands could end up having to negotiate a fee with the global brand to do fulfilment only.

“As part of a procurement policy implemented at a European level, Amazon has decided to focus on sourcing brands directly from brand owners,” the email states. “You still have the opportunity to sell these products to customers directly on our store through Amazon Marketplace, as a third-party seller.”

The change in Europe will affect products that Amazon buys directly from wholesalers and sells itself at a markup. Going forward, the Company will rely more on third-party merchants, who shoulder the risk of holding inventory.

Bloomberg reported on Monday that, for the first time, Amazon’s average cut of each third-party sale surpassed 50 per cent in 2022. Marketplace Pulse, which sampled seller transactions going back to 2016, say third-party sellers have been paying Amazon more per transaction for six years in a row.

The increases make it harder for online merchants to earn a profit.

The changes in Europe will likely affect about 20,000 vendors and could limit product availability on Amazon, says Martin Heubel, a former Amazon executive who now advises brands selling goods on the site.

“Considering that many brands are not selling directly to Amazon and rely on distributors to reach customers, this latest move is likely to have a negative impact on availability and therefore overall customer experience.”

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