Amazon rejects reports that it plans to purge small vendors to cut costs

Small vendors would be pushed to sell on Amazon's Marketplace, according to insiders

Amazon has rejected reports that it is planning a large-scale purge of small vendors in a bid to cut costs and improve margins.

The plan would entail pushing smaller vendors towards the Amazon Marketplace, while the company focused business relationships on major brands, using its volumes to drive bigger discounts.

That was according to a report by Bloomberg yesterday, which suggested that the purge would represent a significant shift in Amazon's business strategy.

However, Amazon later rejected the report, suggesting that it was "incorrect".

In a statement to Computing, the company said: "We informed Bloomberg prior to publication of their article that their sources and story are wrong.

"We review our selling partner relationships on an individual basis as part of our normal course of business and any speculation of a large scale reduction of vendors is incorrect.

"Like any business, we make changes when we see an opportunity to provide customers with improved selection, value and convenience, and we do this thoughtfully and considerately on a case-by-case basis."

The claims by Bloomberg, based on interviews with insiders, follows on from a hiatus in March when the company stopped taking orders from thousands of small vendors for about two weeks, but later resumed orders. At the time, Amazon said that the move was aimed at identifying and reducing the level of low-quality and often counterfeit products in its stores.

Such a purge would almost certainly upset the relationship between Amazon and thousands of its long-time suppliers, three people familiar with the matter told Bloomberg.

According to Bloomberg's sources, Amazon has become less interested in wholesale orders to vendors selling less than $10 million in goods annually on its website, and more interested in volume.

AI & Machine Learning Live is returning to London on 3rd July 2019. Hear from the Met Office's Charles Ewen, AutoTrader lead data scientist Dr David Hoyle and the BBC's Noriko Matsuoka, among many others. Attendance is free to qualifying IT leaders and senior IT pros, but places are limited, so reserve yours now.

Moreover, Amazon has not yet renegotiated its annual terms with several smaller vendors, which it usually does in spring.

On top of that, a number of vendor manager posts remain vacant indicating, according to Bloomber, that Amazon doesn't need as many people now to oversee supplier relationships.

Such a move would help it to reduce costs and drive volume discounts by focusing on wholesale purchases from major brands. By limiting the number of smaller vendors it deals with, Amazon can continue growing product selection on its website without requiring so many staff to oversee purchasing and promotions.

Smaller Amazon suppliers should start learning how to sell their products on Amazon's marketplace instead

Under its "hands off the wheel" initiative, the company plans to push more suppliers to sell their products directly to consumers through its website, meaning that Amazon will need to hold fewer inventories itself. That will also reduce the risk of Amazon getting stuck with unsold products.

In addition, Amazon is moving ahead with plans to automate more tasks, such as estimating demands and negotiating prices that were mostly done by Amazon employees.

Anderson Salgado, a former Amazon vendor manager, warned that smaller Amazon suppliers should start learning how to sell their products on Amazon's marketplace instead.

"If this happens soon and people are not ready for it, they will not be ready during the holidays," Salgado said. "The people who get ahead of the game are going to thrive."

Delta is a new market intelligence service from Computing to help CIOs and other IT decision makers make smarter purchasing decisions - decisions informed by the knowledge and experience of other CIOs and IT decision makers.

Delta is free from vendor sponsorship or influence of any kind, and is guided by a steering committee of well-known CIOs, such as Charles Ewen, Christina Scott, Steve Capper and Laura Meyer.

Ten crucial technology areas are already covered at launch, with more data appearing and more areas being covered every week. Sign-up here for your free trial of the Computing Delta website.