Is Amazon Skipping Distributors and Wholesalers a Threat?

In recent years, Amazon has made a significant impact on the e-Commerce industry, both in Europe and across the world. The company has disrupted the traditional distribution and supply chain model, and its latest move in Europe is no exception. Amazon has announced that it will be skipping distributors and wholesalers in Europe and dealing directly with brand manufacturers, in an attempt to streamline the supply chain and offer a more efficient service to its customers.

The move is not entirely surprising, as Amazon has already implemented a similar strategy in the United States. By dealing directly with manufacturers, Amazon is cutting out the middlemen and creating a more direct relationship with the suppliers. This has a number of benefits for both Amazon and the manufacturers.

For Amazon, the move means that they can offer a wider range of products at a lower cost. By dealing directly with manufacturers, they are cutting out the distributors and wholesalers who often add markups to the products they sell. This allows Amazon to offer more competitive prices to its customers, while still maintaining a healthy profit margin.

What does this mean for manufacturers?

For manufacturers, the move means that they can reach a wider audience without having to go through the traditional distribution channels. Amazon’s massive customer base means that manufacturers can reach a larger market without having to invest in their own distribution and marketing infrastructure. This can be particularly beneficial for smaller manufacturers who may not have the resources to market and distribute their products on a large scale. On the other hand, brand manufacturers will have to either adapt to 1P model selling directly to Amazon or a 3P model by listing their products on Amazon marketplace by themselves or via their current distribution partners. There are also concerns that this move by Amazon could have a negative impact on distributors and wholesalers in Europe. Many of these companies have built their businesses on the traditional distribution model, and the shift towards direct dealing with manufacturers could leave them out in the cold. Some fear that Amazon’s move could lead to job losses and economic disruption in the industry.

From a product content quality and customer experience perspective, brands having control of the product listings have clear advantages. Currently brand manufacturers mostly rely on their distribution partners for listing their products on Amazon and submitting required product data. Brands and distributors mostly do not have advanced PIM to PIM connections to facilitate product information exchange. The lack of such process flow not only creates longer time-to-market of products but also results in sub-optimal data quality and affecting consumer shopping experience negatively. Solutions like Icecat`s Amazon Connectivity help brands to automate product listing and content publishing on Amazon as a 1P vendor or 3P seller.

Conclusion

Overall, Amazon’s move to skip distributors and wholesalers in Europe is a bold one that has both advantages and potential downsides. It remains to be seen how this move will affect the industry in the long term, but it is clear that Amazon is continuing to disrupt the traditional supply chain model and shape the future of e-Commerce.

Contact Icecat if you want to learn more about how to automate submission of listings and product content on Amazon.

Emre Tan

Managing Director of Icecat, MSc. in International Finance, investor via E-nvest., ex- IBM, PwC, McKinsey