AMAZON VENDOR CENTRAL CLOSING ALERT

By Scott Murphy

International Consultant at Masei & Ryland

Starting November 9th, 2024, Amazon announced they were ending Vendor Central accounts for many smaller wholesale vendors. For brands that counted on Amazon as a primary sales channel, this news is shaking things up right before the holiday season, particularly for Amazon sellers based in China. Anecdotally, all of us at Masei & Ryland, as one of Amazon’s SPN consultants, have heard about more than 100 suspension cases across China and elsewhere.

According to Alan Lee, CEO of Masei & Ryland, Amazon has been phasing out relationships with smaller vendors who sell under US$5-10 million annually on the platform. Such brands used to sell directly to Amazon in bulk, with the multinational technology company setting prices and handling logistics. In such cases, if the vendors want to keep selling, they’ll have to continue as a third-party seller while managing their listings and customer service on their own.

At the core of this new update is Amazon’s decision to terminate many Vendor Central accounts, while emphasizing US-based vendors. Following that November cutoff date, Amazon will no longer source products from notified companies under the 1P wholesale model. This move is seen as Amazon’s attempt to simplify its operations and concentrate company resources on key vendors and high-value companies like Apple, HP, and similar companies of that ilk.

By and large, notified vendors have received a 60-day termination notice, which means they will no longer receive PO from Amazon. In the worst case incidents, some or all of their funds have even been frozen or held by Amazon. Though there are ways around this, it’s often a time-consuming and costly process – and success isn’t guaranteed. These days, a safer and better alternative may be to operate and sell via Seller Central accounts instead.

Since March of this year, it’s also become apparent that Amazon has slashed expanding VC businesses in Europe and the U.S.  This has become especially prevalent for accounts that lack vendor managers. Though this isn’t a new cut-and-dried policy, some Amazon insiders that we’ve been dealing with claim that the company has been shifting their focus from Vendor Central – or first-party accounts – to Seller Central (or third-party sellers).

Current sales stats give clues as to why they have been changing their policy. Vendor Central sales account for 40% of the platform, while Seller Central accounts are responsible for the other 60%. Though this ratio isn’t entirely out of whack, another one is. There are less than 5,000 Vendor Central accounts on the site, as opposed to one million (or more) Seller Central accounts selling in the same market. It’s a tremendous imbalance, which could also point to why Amazon is shutting more VC accounts. “Like all businesses, we regularly review our product offerings and occasionally make changes,” wrote Amazon spokesperson Maria Boschetti, in an email to Retail Brew, an online retail industry website (and one of our sources).

According to Alan Lee, an active Vendor Central account is currently worth upwards of US$200,000 on the market in China. With these accounts, manufacturers with a large product output can gain greater bargaining power – hence their desire for what’s perceived to be an elite echelon.

But these days, it pays to be careful about what you wish for. Amazon looks to be clamping down…and you reap what you sow.