Amazon's Latest Impact on Small Businesses
Nothing gets the pet industry going quite like hearing about Amazon’s current feat, or—in more realistic terms—its latest attempt to muscle out small businesses. A new report from Bloomberg revealed that Amazon is planning to sever its ties with its small business vendors and look to improve its relationships with other CPG conglomerates, such as Procter & Gamble, Sony and Lego, in order to stay competitive with companies such as Wal-Mart, Target and Best Buy.
While its website claims that, “Half of the items sold on Amazon worldwide are from small and medium-sized businesses that offer their products through Amazon Marketplace,” and that the company is “empowering to small businesses,” the e-commerce giant is allegedly going to cease bulk ordering from thousands of its small suppliers.
The report explains that while Amazon isn’t pushing those vendors off its site altogether, it will transition them from wholesale selling to direct-to-consumer. Any company that brings in less than $10 million is reportedly in danger of being converted. And, given the 120 day period those transitions would take to pan out, affected vendors could expect to be displaced just in time for the holiday season.
Even more telling is that back in March, CNBC reported that Amazon began blocking ads for unprofitable businesses.
Let’s walk through that for a second. Not only is Amazon downgrading the selling power of those suppliers, it’s also taking away opportunities for these soon-to-be struggling companies to promote their businesses.
While unfortunate (and likely devastating) for certain vendors, it does give small retailers a window of opportunity. Brick-and-mortar stores can reach out to those displaced businesses and offer them a different marketplace to sell their goods, providing new audiences and a personal touch.
That being said, there’s still a chance that this new initiative can fall through or get canceled. Amazon itself is denying the reports in an email sent to Gizmodo and other publications, claiming that it informed Bloomberg prior to publication that its sources and article were wrong.
That denial is interesting when coupled with the fact that Amazon didn’t renegotiate its annual terms with many of its smaller vendors—which generally happens in the spring—and the company hasn’t looked to fill those openings, either. Amazon’s also notorious for pulling the plug on brands with little to no warning, leaving them in the lurch.
While we’ll have to wait to see how this plays out, one thing’s for sure: Small businesses, Amazon is not your friend… but you probably already knew that.