Amid Wider Goal of Trimming Costs, Amazon Cuts Ties With EU Distributors

Amazon The company stated that it plans to cut ties to many European distributors that supply goods to its site as it seeks to reduce costs.

Third-party merchants do not handle the selling process. Distributors are a middleman between Amazon, retail brands, and the manufacturer of the product. They then sell it to Amazon.

According to CNBC, Amazon’s EU arm informed distributors in the area that it will cease sourcing their products over the next few months. Third-party merchants will allow distributors to sell goods on Amazon.

“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 spokesperson stated in a statement. “With this in mind, we’ve decided to focus on sourcing certain products for our European stores directly from brand owners.”

Amazon will delay implementing the change until April. “in order to help wholesalers and distributors” Prepare, the spokesperson said.

Andy Jassy, Amazon CEO It has aggressively cut expenses Amazon is facing a worsening economic outlook as well as slowing sales. Amazon is coming out of a period where it experienced unrestrained growth. In which it employed rapidly and grew its physical presence, it has ballooned its costs and had too many people. Amazon is now a worldwide company. January It initiated the largest layoffs in history, affecting up to 18,000 people. The company also instituted a freeze on corporate hiring, while closing some experimental projects.

Amazon can gain greater control over its relationships and products by cutting off distributors. Martin HeubelHe is the owner of a consulting firm that assists Amazon vendors.

“In the ideal world of Amazon, the first-party model is designed to have the relationship with top brands of each category, that way they can directly control the availability of products and the pricing because they purchase the product from the brand itself,” Heubel spoke in an interview. “If there’s a middleman, this middleman requires an additional funding or part of the profit margin that Amazon could take instead.”

This move is in line with Amazon’s larger push to automate parts of its vendor management business. Heubel stated that Amazon has reduced its staff responsible for managing product categories. Their roles usually involve improving profit margins and sales, as well as operations.

Vendors increasingly depend on Amazon’s internal system, Vendor Central. This allows them to negotiate purchase orders and manage shipping. Fewer distributors have direct communication with a vendor manager. In turn, Vendor Central is used by fewer of them. “raise a ticket” Heubel can help when they have trouble.

“Amazon wants to focus its available resources on manufacturers that really move the needle in a category,” He concluded.

Amazon stated in the notice that they will continue to source products through wholesalers and distributors, if they are the brand owners or have an agreement with the manufacturer.

It’s highly unlikely that distributors would have such an exclusive deal. Aidan Duffy, agency principal at DF5 ecommerce. He said that there are often multiple resellers, distributors, and retailers offering offers on one listing.

This change could have a long-lasting impact on the overall business of distributors. Duffy explained that vendors sometimes use the revenues from their distribution products to finance their own brands.

“Distributors that I work with are much more interested in developing their own brands because they don’t have to pay the brand margin essentially,” He stated. “So if that income gets taken away, you have distributors losing a revenue stream.”

Correction: Amazon’s marketplace segment does not include distributors. It is populated instead by third-party sellers.

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