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Supplier Terms War Looms As Amazon Gets Set To Launch

The issue of cashflow and better terms for suppliers could become a major issue for retailers next year as Amazon launches in Australia, one retailers has told ChannelNews that they are “waiting for the first

One of the big talking points to come out of yesterday’s Amazon Summit in Sydney was the concept of shorter payment terms with Amazon offering to pay suppliers to their Marketplace within 15 days.

Compounding this, suppliers will also be able to draw down cash as soon as a sale has gone down while also eliminating the cost of instore merchandising, rebates to retailers and the high cost of constantly having to train retail staff.

When Amazon launch big brand, players will immediately be able to gauge the value of trading online in Australia Vs via a retailer who is only handing over cash after 35 days.
Several big brands have told ChannelNews that they anticipate that up to 20% of their sales in Australia could come from Amazon within the first 12 months and if so they anticipate that they will be in a better position to “negotiate” with retailers on terms.

“What we are seeing currently, is the likes of Harvey Norman and JB Hi Fi moving to extract bigger rebates ahead of the Amazon launch” said one supplier to both retailers.

“Australian retailers believe that they should get parity pricing in Australia while also getting higher rebates. The two don’t go together. All this aggie bargy goes away when you trade on Amazon and this is what a lot of suppliers are looking forward to in the future”.

Yesterday 500 potential suppliers to the Amazon online Marketplace gathered to learn how to connect with the Amazon online machine.

Many are already supplying retailers in Australia.

Some big brands believe that Amazon presents them with the opportunity to offer products that retailers in Australia have rejected”.

One major supplier to Harvey Norman said “The retailers have got to be extremly carful, in the past they have dictated terms. They make demands that big brands have had no alternative but to go along with, this could well change with the arrival of Amazon”.

“There is also the issue of the comfort factor” said a major supplier of appliances.

“If consumers, in particular women, are comfortable ordering online via Amazon, they could end up buying a lot more products than what they do when they visit a store. This could also create financial pressures for a family especially if they overspend online”.

The air of mystery that has surrounded everything to do with Amazon’s expansion to Australia was present on Monday and the suppliers that ChannelNews spoke to said that they were “ready to trade on Amazon”.
“We like it, we see it as a way to reach global audiences” said several suppliers of products.

Amazon is offering Australian businesses access to 300 million customers around the world. It will open for business in Australia with a discounted entry price. It plans to waive its normal monthly access fee of $49.95. They anticipate a fee of around $7.00 for freight.

The fees charged for each sale on the site will range from 6 to 15 per cent, which is in line with its global policies. The amount of “commission” paid to Amazon will depend on the products sold.

Several Companies already operating via Amazon said that their online operation is extremely powerful in terms of its reach, its logistical efficiency and its cash-generating capacity for small businesses.
Several suppliers said they had made a mistake in offering test products on the Amazon Marketplace without having sufficient inventory to meet demand.

There is apparently nothing more annoying for consumers than to find a product through an Amazon search and then discovering there are no products available.

Suppliers made it clear that it was potentially damaging to upset customers. Each seller is rated online and the clear message was that anything less than a four-star rating would affect sales.

In a telling sign for suppliers a senior buyer for a major consumer electronics retailer in Australia said “We are waiting for the first supplier to ask us for better terms. Then and only then will we respond and when we do they will realise the value of what retailers have delivered for brands in Australia”.

“Suppliers need to be reminded that it is store retailers who have delivered the brand clout in Australia, not Amazon”.


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