More Than Ever, Amazon Seems To Be Saying It Is No Longer A Retailer
30 May 2019
We should have seen it coming. Jeff Bezos always had a master plan and it always involved so much more than just being a business that sold stuff.
With its planned moves, reported yesterday, to purge thousands of smaller vendors from its core business and relegate them to the sidelines through its Marketplace format, Amazon seems to be telling the world it’s truly not a retailer anymore.
Details are still sketchy — and Amazon is denying there’s anything new here — but it appears that, following a trial balloon it launched several months ago that it eventually backed off from, Amazon is planning to remove what appear to be thousands of smaller vendors from its core business model: Amazon buys goods from suppliers and is wholly responsible for their sale, collecting its money when the purchase is made. It was the way retailers have done business since the general store days.
Now, those sellers will still be able to use the Amazon platform to sell, but they will own the inventory, they may or may not handle fulfillment and, most importantly, they will only get paid if and when a sale is made. Amazon will collect a commission for its services.
The cut-off for vendors to continue to use the traditional Amazon system has been reported to be $10 million in annual sales, with variations for particular classifications. As such this could impact a huge number of companies that sell on the site.
Bezos & Co. has always used this model for many of its vendors and in fact sometime last year, it passed the threshold of having a majority of its retail sales go through third party vendors. Amazon has never made a secret of the fact that it likes doing business this way but this move, if it turns out as reported, would represent a huge acceleration in this strategy.
Amazon, for its part, says nothing is going on and it’s business as usual. In a statement to Bloomberg, it said, “We review our selling partner relationships on an individual basis as part of our normal course of business, and speculation of a large scale reduction of vendors is incorrect.”
That has done little to stop that speculation, all of which raises the question of if Amazon is not a retailer, what is it?
Is it a landlord, an owner of a mall – albeit online – that rents out space to individual businesses that want to set up shop under its marketing umbrella?
Is it a commission sales rep, taking a cut of every sale, no longer responsible for whether the product in question is any good…or will ever sell?
Is it a logistics company, handling the back room processes for sellers too small or under capitalized to have their own systems in place, often handling fulfillment as well?
In fact, the correct answer is that Amazon is all of the above and anybody who continues to doubt its massively overwhelming role in American business is both short-sighted and incredibly naïve. While competitors like Walmart, Target, Kroger and Wayfair are all chasing Amazon’s retail business that battle has already been won and the company has moved on to bigger things.
All of which represents yet another fundamental change in the way the business of getting goods from seller to buyer is done. Smaller vendors may not like it – most have never really liked doing business with Amazon anyway – but they will have no choice but to adapt once again to the rules being set.
Amazon has been redefining those rules since it made its first online sale in 1995. Nearly a quarter of a century later, it’s doing it again.
By Warren Shoulberg