Deep Dives

Amazon’s big vendor clean up Many brands selling on Amazon are finding a nasty surprise in their inboxes these days: termination notices from the e-commerce giant, signaling an abrupt end to long-standing vendor relationships. Amazon’s email to affected brands reads, “We’ve made the decision to stop sourcing products from your company as part of our regular review of product offerings, and a strategic realignment to optimize our operations and better serve our customers.” The termination is effective as of November 9, 2024, with Amazon making it clear that, “we won’t enter into any new agreements, or extend current ones, beyond this termination date.” This decision has hit smaller brands particularly hard, many of which have relied on Amazon’s Vendor Central (1P) program as a key sales channel. In its email, Amazon suggests these brands transition to the Seller Central (3P) platform if they wish to continue selling on the marketplace: “If you’d like to continue selling our products on Amazon, we welcome you to list your items as an independent seller.” The timing of this decision—just weeks before the crucial holiday season—has left many small businesses scrambling to adapt. The accounts affected are primarily vendors with annual revenues below €2-5 million in the EU and $5-10 million in the U.S. These smaller businesses are now faced with the challenge of either migrating to Amazon’s third-party Seller Central platform or halting sales on Amazon altogether. The terminations are part of a broader “strategic realignment” aimed at improving Amazon’s efficiency by focusing on larger, enterprise-level vendors. A Strategic Shift Towards Efficiency Amazon’s decision to terminate small vendor accounts stems from its efforts to streamline operations and allocate resources more effectively. Martin Heubel, a German e-commerce consultant focussing on Amazon Vendor, estimates that thousands of smaller brands in Europe and the U.S. have been affected. “Amazon’s core motivation is to reduce resources in mass vendor management and manage brands under the self-service 3P Seller Central model,” Heubel explained. Gregor Leopold, founder of the German Amazon agency GlobalAMZ, agreed with this assessment but highlighted the logistical challenges facing smaller brands. “The setup of Seller Central is possible within two months, but companies new to the platform may face efficiency losses, especially in invoicing, logistics, and customer support,” Leopold noted. The Clock is Ticking: A Tight Window for Transition With the November 9 deadline looming, small and mid-sized brands are in a race against time to transition from Vendor Central to Seller Central, all while preparing for the holiday season. Heubel warned that most affected suppliers will struggle to make the switch in such a short timeframe: “Most affected suppliers will struggle to set up 3P accounts, brand registrations, and listings in such a short period.” He added that “Amazon’s timing is extremely unfavorable and could, in the worst case, mean the end for small and medium-sized businesses that have so far relied solely on Vendor Central.” Leopold emphasized the importance of keeping product content and marketing data organized and deciding quickly whether to transition to Seller Central or partner with a third-party distributor. “It’s important to keep product content optimized outside of Amazon, secure marketing data, and decide whether to move to Seller Central or sell through a partner,” he advised. What Can Affected Brands Do Now? For brands impacted by Amazon’s decision, the first step is to remain calm and make strategic decisions quickly. Heubel advises brands to file appeals through Vendor Central if possible or at least request an extension for the termination deadline. However, he cautioned that relying solely on appeals is not a reliable strategy, as success is not guaranteed.  Beyond appeals, affected businesses must evaluate their future on Amazon. Transitioning to Seller Central is inevitable for many, and brands should start preparing for this shift immediately. Leopold recommends analyzing the viability of Seller Central for each individual business and creating a step-by-step plan for the transition. “Stay calm but act fast. Ensure product content and marketing data are organized, and decide whether Seller Central or a partner is the right path,” he advised. For those transitioning to Seller Central, the process involves setting up new accounts, registering brands, and migrating product listings, which can take time. Leopold stressed the importance of having the right expertise in place to avoid common pitfalls. “The setup of Seller Central is possible within two months, but it requires careful planning and allocation of resources to avoid inefficiencies,” he said. Distributors may just be a temporary solution Some businesses may decide that Seller Central is not the best option and instead choose to work with a third-party distributor. This option allows brands to continue selling indirectly by partnering with a distributor who has an active Vendor Central account. But as Amazon has also already removed a load of distributors from the vendor program in 2023, and is likely to continue on this course, this might turn out to be more a temporary solution. “Working with a distributor can help bridge the gap for the holiday season, but ultimately, a direct Seller Central strategy may be more sustainable,” Leopold agrees. Heubel also emphasized the importance of securing all marketing and promotional data currently tied to Vendor Central accounts. This includes metrics, product rankings, and customer reviews, which are crucial for maintaining brand visibility during the transition to Seller Central. “Brands must ensure that all vendor-related data is preserved to maintain continuity,” Heubel said. Looking Forward: Vendor Central’s Future Despite these terminations, Vendor Central isn’t going away entirely. “Vendor Central will still be available for multinational suppliers, but Amazon is increasingly focusing on manufacturers with annual revenues of over €10 million,” Heubel explained. Smaller brands, on the other hand, need to diversify and reduce dependency on 1P to avoid being caught off-guard in future realignments. In conclusion, Amazon’s vendor strategy is becoming more selective, and smaller brands must adapt swiftly to this new reality. For many, this decision marks a critical juncture in their relationship with the platform. As Heubel put it, “Brands that aren’t