Amazon recently surprised a number of Vendors, letting them know that they would be terminating their agreements in the middle of peak season. While this feels sudden given the notice period and time of year, this isn't necessarily surprising. The writing has been on the wall for years that Amazon is deprioritizing vendor relationships in a number of ways:
- More services and marketing levers have been offered for sellers at no cost (ie Premium A+)
- Amazon reduced the number of vendor managers making communication and troubleshooting increasingly challenging
- Service options like AVS have become more of an expectation of brands, impacting overall margins in a significant way
- And we've seen this play in one form or another over time and in other marketplaces with Amazon 'purging' other vendors.
So what’s the motivation behind this move for Amazon? And could larger brands self-select to a new business model?
Why do we see Amazon moving further away from the 1P model? It could come down to one word: profitability. The overhead for Amazon to manage vendor (1P) brands is higher than 3P. Profitability is not an issue with Seller Central as Amazon adjusts their fees and cost structures without onerous renegotiations. Over time, AVNs have become increasingly challenging for even large brands - a trend I don't anticipate will change any time soon.
From increased financial terms to reduced control over assortment and POs, even large brands are evaluating their options for moving away from 1P. Whether it's testing the waters with a hybrid model or moving to 2P, brands are looking for ways to grow assortment and revenue on the marketplace in a way that limits the degree to which they're beholden to Amazon when it comes to product availability, profitability and price in the future.
What’s next for the affected brands and manufacturers?
In their notice to the impacted brands and manufacturers, Amazon suggested a move to 3P or Seller Central, “If you’d like to continue selling our products on Amazon, we welcome you to list your items as an independent seller.”
While a move to 3P could be the logical next step, shifting your whole selling model on Amazon in such a short period of time can seem daunting. Here are a few key steps for brands to act on quickly to ensure their presence on Amazon doesn’t miss a beat in their transition away from 1P:
- Inventory - How many units are available at hand on a VC account? What’s your sell-through rate and how much coverage do you have?
- Internal Operations - take a look at your warehouse and fulfillment infrastructure to assess readiness for a shift to FBA. If your warehouse operations are set for a move to FBA, a 3PL could be a great option.
- Financials - run a sampling of your catalog through an FBA cost analysis to get a handle on the impact to your product margins.
- Brand Registry - once you have a Professional Seller account set up, ensuring you transfer Brand Registry is key.
What Does This Mean for Brands?
With Reddit content becoming more visible in search results, user opinions—whether positive or negative—are now more likely to be encountered before a brand’s own marketing messages. Positive discussions can enhance credibility, but negative feedback, if left unaddressed, can harm reputations.
As Reddit content gains priority, traditional brand pages may see a drop in their search rankings. This shift underscores the need for brands to focus on creating content that genuinely benefits users, rather than merely optimizing for search engines.
This isn’t necessarily a bad news story
This is a big change. It’s coming at a really inopportune time of year. And… it could be a great opportunity for your brand. Beyond the removal of gatekeeping from Amazon, there are a number of real upsides to Seller Central:
- Seller Central has been growing its marketing levers over the years to not only match but surpass, the options available on Vendor. Case in point: Premium A+ is free to 3P brands.
- You’ll now have more control over your catalog assortment and inventory levels.
- You gain pricing control of your products.
- You’ll have access to more robust reporting and analytics on Seller Central.
- You won’t need to go through AVNs anymore!