False Alarm: Amazon Did Not Cut Off Thousands of Vendors Last Week

Such a purge would be ‘like giving Walmart a gift’

Many smaller vendors didn't receive orders, but it's not clear why the interruption occurred.
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Last week, news spread quickly that Amazon suddenly—and perhaps heartlessly—cut off thousands of vendors by simply not placing orders with them. This, in turn, prompted panic, as these companies would have no choice but to sell directly to Amazon customers or be forever estranged from 150 million unique monthly U.S. visitors.

But fear not, Amazon vendors. While change is coming to the Amazon Marketplace, it is not here yet, and it’s certainly not the doomsday scenario that causes Amazon’s Vendor and Seller marketplaces to merge.

Communication breakdown

Amazon’s habit of playing its cards close to its vest fanned the flames of speculation, leaving spooked vendors with generic statements from service reps. Case in point: An Amazon spokesperson said in a statement, “We regularly review our selling partner relationships and may make changes when we see an opportunity to provide customers with improved selection, value and convenience.” This confusing language led people to do what people do when they need more information: talk among themselves in online forums.

An additional accelerant was the realization that those not receiving purchase orders were almost exclusively smaller vendors.

“Our larger clients got orders; the smaller ones didn’t, which supports this theory that smaller vendors are getting kicked off,” said Larry Pluimer, CEO of Amazon-focused agency Indigitous.

And while the new One Vendor marketplace is coming eventually and should actually be good news for sellers, vendors and Amazon alike, the former still have some time to prepare. And as of March 11, everything is back to normal for many.

It’s still not clear why the interruption occurred, however.

“The boilerplate response from Amazon included a reference to ‘making sure vendors were signed up for Brand Registry [a new service that helps brands protect their intellectual property],’ but [it’s] hard to say if that will result in a policy requirement,” Pluimer said. “I have a hard time believing Amazon would just shut out vendors and not explain anything. That’s like giving Walmart a gift.”

So what happened?

Call me, maybe

In a nutshell, Amazon didn’t call, and vendors freaked out.

“One of many challenges with Amazon is the way they communicate to their vendors, sellers, press, analysts—they are not sharers when it comes to information,” said David Hutchinson, national director of paid platform merchandising at digital agency iProspect. “And when you don’t share, people jump to conclusions.”

Pluimer, however, said his guess is Amazon was dipping its toe into merging Vendor Central and Seller Central into One Vendor, but it “kind of bungled the execution.”

“Amazon works at massive scale,” he said. “Its systems are automated, so … making changes in the system are really hard and it’s easy for them to make mistakes and—oops, you forgot to send out orders.”

“One of many challenges with Amazon is the way they communicate to their vendors, sellers, press, analysts—they are not sharers when it comes to information. And when you don’t share, people jump to conclusions.”
David Hutchinson, national director of paid platform merchandising, iProspect

Hutchinson, too, suspects there was “some backend tech issue.”

Pluimer also noted that order interruptions are relatively common, such as when Amazon issues a proposal to buy products in bulk in exchange for a discount. The vendor must then accept or reject the offer, which could interrupt the order replenishment cycle if the vendor doesn’t respond in time.

“And it just so happens, a bunch of bulk proposals went out last week,” he added.

And, Hutchinson said, the panic will continue until Amazon reveals more about its consolidated marketplace, One Vendor, which will combine Vendor Central and Seller Central.

In Amazon’s universe, vendors are an invitation-only group of big brands with lots of inventory and demand in which Amazon purchases products directly and controls pricing—and therefore profitability.

“A lot of the time, that’s hard for big brands to swallow—especially if Amazon is coming along and undercutting your dot-come site and any retail price out there,” Hutchinson said.

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