Amazon is set to purge many of its small suppliers over the next few months, according to Bloomberg. The purge could shatter the generally favorable relationship between Amazon and many of its long-time vendors, as we first discussed last month when we reported that Amazon was accused of “crushing” its merchants by undercutting products with its own.
The move is supposed to help cut costs and focus wholesale purchasing on large brands like Procter & Gamble, Sony and Lego. Amazon wants to ensure that the company has adequate supplies of “must-have” merchandise that will help it compete with companies like Target and Walmart. As a result, bulk orders for thousands of smaller suppliers may dry up over the next few months.
It also means that many smaller retailers that have relied on Amazon for a steady stream of orders will have to win sales one shopper at a time on the platform’s marketplace. This marks one of the large shifts in Amazon strategy since it opened the site up to independent sellers nearly 2 decades ago.
James Thomson, who organizes the Prosper Show, an annual e-commerce conference focused on Amazon said that “this is the kind of change that will scare the living daylights out of brands selling on Amazon. Amazon usually doesn’t give a lot of lead time and brands will be left scrambling. If they make this change soon, brands will have until the end of the summer to get their acts together or their holiday quarter will be at risk.”
Amazon stated: “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.”
Amazon traditionally secures inventory in two ways: it buys items directly from wholesale vendors and resells them, and it allows independent merchants to post their own products on site, similar to a consignment model. About half the goods sold on the site come from independent merchants and the change will push the company’s marketplace share of revenue even higher.
It’s one of the latest moves in Amazon‘s “hands off the wheel” initiative, which is supposed to help it continue expanding product selection without spending more to oversee it.