Recently the Amazon community went ablaze with the news that many 1P vendors are receiving termination notices which effectively end their presence on the platform just before the holiday season.
Apparently Amazon is optimizing its profit margin, so I can imagine that non-enterprise level brands are the ones impacted most. Amazon will probably reduce their headcount in the Vendor department and increase the number of accounts per vendor manager. Apart from that, pushing those vendors into becoming sellers, they are likely to make more money out of fees (commission, advertising, FBA etc.) compared to the net pure product margin they were making, which will further improve their bottom line.
I can only imagine what it’s like for vendors (who probably sit on a lot of stock before Q4), to be banished from Amazon so abruptly. You are probably still in disbelief and it’s hard to decide what to do next.
So, is there life after this event?
Amazon already advised impacted vendors to become Marketplace sellers. Probably many of those vendors had a Marketplace presence already, which they just need to scale. But if you are impacted and have no idea about how to run Marketplace sales, here are a few things you need to have in mind:
- Logistics – this one is tough. Of course, you can just move stock into FBA, but mind the complex fee structure, as Amazon is constantly introducing either new fees, or increasing existing ones. You need to establish a very good inventory planning process which will be much more granulated than before. Amazon hates slow moving stock and high return rates, and will punish you for it. At the same time, if you want to use FBM, moving boxes is very different to moving pallets. Your warehouse(s) will need a major flow readjustment in the pick, pack & ship part. Apart from that, you will likely loose the sacred Prime badge (unless you somehow quickly set up Prime by Merchant). So it’s not an easy decision to make.
- Order management – on Seller Central orders will just flow in and you need to fulfil. FBA can handle the logistic part, but mind the invoice generation and upload. If you are opting for FBM, keep in mind the delivery promise and the timely upload of Track&Trace data to Amazon, This is even more crucial if you use Prime by Merchant. Order management can make it or break it for your business, as the performance indicators are very tough.
- Customer service – Amazon will no longer handle that for you. If you use FBA, they will handle this partially, but you need some capacity for questions not related to “where is my package”.
- Pricing – retail pricing is a whole different ball game. You need to constantly look at the competition, factor in all the fees you will be paying, and establish a price management flow. There are automated re-pricing solutions out there, including the one Amazon is offering as part of Seller Central, but you need to manage the pricing rules actively if you don’t want your margins driven into the ground.
- Listings – Seller Central offers a bigger toolbox in this aspect. Keep in mind that you will no longer have the support of the Amazon algorithm for your brand – to rank high, your listings need to look great and feature all relevant keywords
- Account Health – this one is a full-time job. There are so many things that Amazon is flagging – from policy violating listings, to late deliveries and negative feedback – that you need to monitor this section constantly. The last thing you want is get suspended just before Black Friday.
- Advertising – it’s no longer a flat rate marketing contribution that Amazon is demanding and you just need to consider in your pricing. It’s campaign creation, keyword research, bid management and a bunch of other things.
On the bright side, you will have access to more data than before, and more freedom with your merchandising. As well as full control over your brand’s presence on Amazon.
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