The Orca Pacific Blog

False False Alarm: The Hidden Narrative Behind Amazon Cutting Off Vendors

Be wary of false alarms. They often give the impression that you can carry on as usual. And in Amazon’s recent back-and-forth with vendors, that course of action could carry a price.

Amazon Cutting Off Vendors

When Amazon shut off purchase orders for thousands of vendors a couple of weeks ago, the underlying narrative was clear. Finally, the time had come for the tech giant to begin shifting all of its suppliers into a unified portal. The long-rumored move would give them more control over where and how brands sell on their platform. That is, until purchase orders mysteriously resumed for select brands. The orders were accompanied by messages from Vendor Managers apologizing for the inconvenience and recommending that vendors now enroll in Brand Registry, a program which allows certain vendors to protect their proprietary information on the platform. The vendor shutdown was immediately labeled a false alarm. A unified portal wasn’t on the way, many argued; Amazon merely misstepped in an effort to promote its Brand Registry program.

And yet, many vendors are left feeling apprehensive about returning to business as usual. Those who saw their purchase orders suddenly shut off experienced first-hand the rapid pace at which innovative companies like Amazon can make decisions. What if it happened again, but with more permanent effects? Distrust of the false alarm explanation is not only valid, but it is supported by a missing narrative that has emerged between the two stories currently offered. Amazon’s walk back of the vendor shutdown may disprove that the shift is happening right now, but suggesting that it then proves that we are back to where we were is both fallacious reasoning and bad business. Chalking it up as an issue with communication or technology, as purported in Adweek, undermines the very real changes that brands can expect to weather in the near future. Therefore, it is imperative to hash out what’s hidden in the details and offer new conclusions for brands that advocate for more than just blind acceptance.

Read our guide for vendors transitioning to Seller Central »

Brand Registry is Aligned with a 1P & 3P Merger

Vendors who had purchase orders restored received emails from Amazon encouraging enrollment in the Brand Registry program. For a portion of those vendors, there was a 60-day window attached. What happens when that window expires? That is not completely clear. What is clear, though, is that the measure is consistent with recent efforts to shift vendors who do not own their brands into the 3P side of the platform. As time goes on, we expect to see more of this shuffling by Amazon to straighten out categories (1P and 3P) and make a merge less messy. But Amazon didn’t stun thousands of their vendors just to make a push for brands to enroll in Brand Registry. What provoked the sudden move?

It Was More Than a Misstep

Following the reinstatement of purchase orders for select vendors last week, the media was right to say that Amazon was walking back an error. But they were wrong to reduce the scale of that error to technology failure or miscommunication. Knowing that Amazon has been continually working to make the supplier portal merge happen makes some accidental flub an extremely unlikely, if not inconceivable, justification for shutting down vendors. More probable is that Amazon underestimated the chaos that their sudden move would cause and have now gone back to the drawing board to look for another way to bring a portion of vendors to the 3P side of the platform. The questions are: 1) when will they figure it out and 2) what is likely to happen and to whom. Anyone that claims to know the answer to the first question is claiming to know more than the decision makers within Amazon’s own campus. The second question, however, can be forecast by following some of the trends that we have seen up to this point.

What Happens and to Whom

Amazon is merging Vendor Central and Seller Central into a single portal so that they can better dictate where and how brands sell on their platform. The initial narrative following the vendor shutdown last week had this portion right. By analyzing who was affected by the shutdown, we can deduce that low-volume brands will be pushed into 3P selling and high-volume brands will be funneled into 1P. While we do not know how this will affect specific brands, we expect the line to be drawn around $10 million in annual sales on Amazon. Though businesses are currently able to utilize hybrid sales strategies across 1P and 3P, Amazon’s recent actions suggest that businesses will be limited to their assigned category. However, Amazon may decide to break up catalogs based on volume, bringing low-volume items into 3P and high-volume items into 1P. For example, if a 3P seller has four products that combine for over $7 million in annual sales on Amazon, then those products may be moved to 1P while the rest of the catalog remains in 3P. This would help Amazon make nimble decisions regarding inventory management and pricing.

The Actionable Conclusion

Between the two media reactions, 1) it’s happening and 2) Amazon made a big mistake, the hidden narrative is that portions of both are true. It’s happening, but there is a short delay. And it was a big mistake, but not an accident. The clear and actionable conclusion then becomes less about “carry on as normal” and more about “take this opportunity to prepare.” As stated, the the timeline for these changes is unclear. But brands would be foolhardy to think that they aren’t coming quickly and through uncertain measures. To ensure flexibility and maintain profitability while navigating unmapped terrain, it is crucial to expand capabilities by investing in improved Amazon operations. That’s where Orca Pacific can help.

With over a decade of experience helping 1P brands build 3P strategies, Orca Pacific is in a unique position to put our proven processes to work for those that need it now more than ever. Our full-service capability allows us to provide holistic strategies for partners across categories. Moreover, our expertise as both Vendor Central and Seller Central consultants provides unique insight into how the needs of a 1P vendor translate to the capabilities of a 3P seller.

When false alarms lead to inaction, there is nothing false about them. Reach out to the team at Orca Pacific to join over 100 industry-leading brands who we support.

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