Rumor has it that Amazon is about to purge its small supplier in order to favor larger branded companies that can better supply its customers. The move will put Amazon into even more direct competition with Walmart and Target. Bloomberg’s Specer Soper reports:
In an emailed statement, an Amazon spokeswoman said: “We review our selling partner relationships on an individual basis as part of our normal course of business, and any speculation of a large scale reduction of vendors is incorrect.”
Amazon secures inventory two ways. The company buys products directly from wholesale vendors, reselling them like a traditional retail store, and it lets independent merchants post their own products on the site in a marketplace model similar to EBay Inc. or a consignment shop. About half of the goods sold on Amazon come from independent merchants, and the change will push the marketplace share of revenue even higher.
The vendor purge is the latest step in Amazon’s “hands off the wheel” initiative, an effort to keep expanding product selection on its website without spending more money on managers to oversee it all. The project entails automating tasks like forecasting demand and negotiating prices which were predominantly done by Amazon employees. It also involves pushing more Amazon suppliers to sell goods themselves so Amazon doesn’t have to pay people to do it for them.
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Jeremy Jones, CFA
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