Viewpoint - Asha Bhalsod

Asha has 10 years eCommerce account management experience, including at Amazon and managing the Amazon/eCommerce businesses at Tomy UK and Melissa & Doug. She now runs Etopia Consultancy, to help brands create their eCommerce strategy and grow their Amazon business, and can be contacted on asha@etopiaconsultancy.co.uk for guidance with trading on Amazon.

Amazon's Strategic Shift: The Aftermath of Bypassing Distributors

In February, when it was first reported that Amazon informed its European suppliers about the shift towards sourcing products directly from brands rather than wholesalers, numerous questions arose regarding the implementation and the classification of a "wholesaler" according to Amazon. It has been intriguing to observe the evolving outcomes of this strategic transition since its initiation in April. This new approach involves a more direct relationship between Amazon and brand owners, creating a streamlined supply chain that aims to benefit all stakeholders involved.

“As is common for all businesses, we regularly review our approach to product sourcing as we try to control our costs and keep prices low for customers,” Amazon spokesman, Harry Staight, said in an email. “With this in mind, we’ve decided to focus on sourcing certain products for our European stores directly from brand owners.” This adjustment in Europe has impacted the products Amazon purchases directly from wholesalers, as well as the blockers many vendors have seen with purchase orders.

The initial challenges we encountered revolved around a reduction in purchase orders from vendors who acted as distributors for a specific brand. Despite their authorised status in the Brand Registry portal, we found ourselves perplexed by the absence of order placement through Amazon's systems. Additionally, when we escalated the issue, it became clear that nobody within Amazon had the solutions to address these problems. Frequently, our path led us to Brand Registry and the necessity for vendors to be designated as authorised sellers within it.

Brand Registry can be complex, and it's common for people to express a need for it without fully grasping how it operates within Amazon. Recognising the effectiveness of Brand Registry and implementing it with diligent supervision is crucial. Granting vendors "authorised seller" status also grants them permission to modify content for all ASINs associated with the brand.

Brand owners can provide selling authorisation to vendors via the portal, often with the assistance of the vendors Vendor Manager or Brand Specialist/AVS. We have seen instances when this is all that is required, but more often than not, additional actions and steps are necessary for a vendor to be acknowledged as an authorised 1P distributor in the eyes of Amazon.

One fundamental requirement is clear – a letter of authorisation from the brand owner addressed to Amazon granting authority for the vendor to supply the brand owner’s goods directly to or on Amazon. Whilst this doesn’t necessarily translate to authorised vendor seller status within the Amazon portal, it is unquestionably critical documentation, and we strongly recommend all vendors and sellers who operate as licensees and distributors on behalf of brand owners to source this letter from the brand owner prior to commencing trade on the platform.

However, as always with Amazon there is rarely a one size fits all simple solution to a problem and we subsequently discovered that numerous discussions on authorised sellers also revolved around Amazon's profitability. There has been significant recent chatter regarding Amazon's financial performance, but we also became aware of a substantial decrease in purchase orders and ASINS suppression due to profitability concerns and pending terms with vendors.

The adjustment to focus on direct purchases from brand owners is not only a strategic business decision but also underscores the significance of brand integrity, control and transparency. By forging closer ties with brand owners, Amazon aims to ensure that genuine and high-quality products reach its customers, further enhancing customer trust in the platform. But does it?

To wrap up, Amazon EU's decision to cut out wholesalers seems rushed, without considering the big picture. Relying solely on automated systems might work in some areas, but it falls short in understanding the complex human connections that drive vendor relationships. As Amazon continues to be a major player, it's clear that its systems aren't quite up to the task of effectively managing its own 1P strategy. This situation highlights a flaw where these streamlined systems unintentionally let down vendors and the overall market, which leaves me with some lingering doubts about the thoroughness of their considerations. While change can undoubtedly yield positive outcomes, the extent to which Amazon EU has meticulously assessed the intricacies of this decision remains uncertain. Wholesalers play a substantial role in the market's functioning and their exclusion demands closer scrutiny and most definitely a review of Amazon’s current systems which seem to be struggling to cope with this new change.

For more information on Brand Registry or Amazon related support, contact Asha on asha@etopiaconsultancy.com