Amazon Sets Off Alarming Wakeup Call

Amazon sparked panic during the International Home + Housewares Show when several exhibitors had their Amazon Vendor Central codes deactivated and orders halted without notice.

A couple days passed before Amazon began reactivating vendors— restoring order by restoring orders. The reactivation, however, came with the caveat that vendors had to enroll in Amazon’s Brand Registry counterfeit protection program within 60 days or consider setting up shop on Amazon’s Seller Central third-party marketplace.

Vendor Central Review

Amazon, according to reports, wants to ensure its Vendor Central suppliers own the brands. But it didn’t do much to diffuse concerns by telling suppliers only that Amazon regularly reviews its vendor base.

That set off all sorts of speculation about Amazon’s long-term play given that vendors with Amazon sales of $10 million or less were reported to have been targeted in the sweeping deactivation.

Initial conjecture was Amazon wants to eliminate fringe, unprofitable vendors that sponge up Vendor Central resources. The Brand Registry mandate upon reactivation, though, fueled a theory that Amazon wants to rid itself of vendors of fraudulent goods that somehow slipped onto Vendor Central, ridding itself in the process of the potential for direct liability for such counterfeits.

Wielding The Hammer 

Reports surfaced that possible legal action against Amazon by a housewares company related to counterfeits sold on Vendor Central may have triggered the temporary vendor deactivation. HomeWorld Business has been unable to confirm this.

Amazon reportedly has looked to excuse itself from liability related to counterfeits sold on its third-party platform, even as it has implemented procedures to help fight counterfeits there, including a new program that would enable legitimate third-party sellers to delist questionable goods.

Amazon, naturally, wants to tighten its grip on its vendors. Amazon wields a hammer that comes with owning half of all e-commerce sales, making it difficult for suppliers to resist doing more business with Amazon.

Even so, Amazon’s temporary vendor shutdown, whatever the reason for it, should be a jolting wakeup call for the housewares business by exposing the vulnerability of vendors as they increase their Amazon business. Vendors of all scope and scale, whether or not they were caught up in the recent vendor deactivation, should find it imperative to diversify their retail customer bases to mitigate dependence on Amazon, or any single customer for that matter.

Diversified Customer Base

Suppliers are constantly reminded that the pool of prospective retail customers is shrinking as Amazon gains share and leverage (see Shopko’s liquidation). That is also a reminder that suppliers have to make well-measured choices as they diversify their customer portfolios to include a safer balance of the sturdiest traditional retailers, e-commerce players and, of course, Amazon.

Such customer diversification can help protect vendors from unexpected, damaging disruptions while helping to buttress the broader retail marketplace.

It can help restore order.