‘Bullying brands’: How a consolidated marketplace helps Amazon assert more control over sellers

This piece has been updated to include comment from Amazon.

The imminent arrival of Amazon’s consolidated selling system, One Vendor, could be another way the company continues to assert dominance over the brands that sell on its platform.

It’s set to roll out in the next six months, according to sources who work with brand clients selling on Amazon. The system, first reported on by Recode, is expected to combine Amazon’s two marketplaces — one for first-party sellers, which it calls Vendor Central, and Seller Central, for third-party sellers — into one. Internally, retail management teams have been consolidated under one svp, Doug Herrington.

Specifics on exactly how One Vendor will operate are scarce. Amazon said that it doesn’t have a One Vendor program. But according to former Amazon employees that now operate agencies assisting brand clients in selling on Amazon, it’s coming, and a consolidated marketplace would be both an efficiency play (one marketplace is easier to operate than two) and a way to exercise control over how brands appear on Amazon. There’s also the media play, as this could be a way to muscle brands into spending more on Amazon’s ad products.

Fred Killingsworth, CEO and founder of the Amazon consultancy Hinge and Amazon’s former principal business development manager, said that One Vendor would effectively eliminate brand choice around how they want to sell on Amazon. Right now, brands can decide to apply to Vendor Central, which comes with perks like Prime shipping and Amazon-supported content and marketing, or set up a storefront on Seller Central, which gives brands a clearer picture of customer insights but puts more burden on their shoulders to handle demand and inventory. Judging by Amazon’s communication with clients, One Vendor would put Amazon in control of what brands sell where. For customers trying to find legit products on the site, that’s a good thing.

“Given the vast issues with brand authority and control of unauthorized sellers, unifying it on one platform would make it easier to manage and mitigate the brand challenges to eliminate knockoff product,” said Killingsworth.

But it’s a hairier proposition for the brands in question. While wholesale sellers have a more simplified Amazon operation — since Amazon handles inventory and shipping — recent updates to the third-party marketplace have made it look like greener pastures, particularly as wholesale brands get their e-commerce operations and logistics off the ground on their own websites. According to Kiri Masters, the founder of the Amazon agency Bobsled Marketing, Amazon’s developments over the past year have added a slew of “bells and whistles” to Seller Central. Namely, third-party sellers get a better insight for free on customer data and behavior, and better Amazon advertising options.

And choice matters, especially for brands that sell third-party on Amazon because they understand the exposure potential, but don’t necessarily want to hand the keys to product pricing over to Amazon through a wholesale deal. Considering that more than half of Amazon’s business is third-party, such a shift in structure could spell trouble for the company.

“For a smaller, niche brand like ours, this is a worse deal,” said a brand founder who used to be a third-party seller on Amazon, and asked to speak on background. “It feels like Amazon is bullying its brands by saying, ‘The only way is our way, and we get to choose what’s better for us, regardless of how you want to run your business.’ If we were to be forced into a [wholesale] relationship, that would lead to price slashing, and that’s not something we’re comfortable with as a brand.”

Not to mention, the founder added, regardless of how much advertising horsepower Amazon puts behind its wholesale brands, there’s no telling how much access to data and insights that come as a result of those efforts it would provide. Amazon Retail Analytics Premium, a data feed system for wholesale sellers, costs a percentage of the retailer’s sales — sometimes costing as much of tens of thousands of dollars a year, said Masters — and gives insight around metrics like conversion rights, click-share and what their customers are also buying, so they can paint a better picture of their customer and strategize accordingly. The basic version of ARA, which is free, provides only rudimentary sales and traffic data. Third-party sellers, however, get a much clearer picture of the type of customer that’s shopping the seller’s products without charging them to get access to that data.

On top of that, wholesale sellers pay a percentage of their sales to an Amazon co-op fee, that Amazon uses to market the brand on the site. But wholesale sellers often complain they don’t really get a clear picture on how that money is being used and what the results are.

“For many vendors who have decided that being on the third-party marketplace is more beneficial to them, for reasons related to pricing and profitability and inventory availability, this would mean taking that choice away,” said Masters. “It’s not exactly surprising from an Amazon perspective, but it is a new dimension.”

One Vendor essentially gives Amazon the best of both worlds. Big-ticket brands, like LG, Dyson and L’Oréal, would be automatically brought in as wholesale so Amazon could guarantee that high-demand items are always in stock and shipped on time and that these brands have a big presence in advertising on the site. But Amazon gets a 15 percent margin from those sales without having to do much on its own. That business will still be maintained, just now under Amazon’s own terms.

Both wholesale and third-party sellers, however, will have to carry more burden in general. Killingsworth said that Amazon continues to have a more hands-off approach to wholesale relationships by shrinking management teams and shifting support away from these wholesale brands, meaning that they’ve had to sustain business almost as independently as third-party sellers.

“It’s going to be more on the brands’ shoulders,” said Killingsworth. “From their seat, I’d wonder what other changes are coming. Amazon is always changing the rules and the operations. So what is this a signal of? Companies have hundreds of millions of dollars flowing through that site and one small change can make a big impact.”

That shift in support, however, could have one positive upside: Amazon could release ARA Premium to all wholesale brands for free, Killingsworth said, reasoning that it would give the brands more tools to operate efficiently on their own, and lift business in such a way that it makes the fees it receives from the data share less consequential.

Another upside can be that it would force out more unauthorized sellers or counterfeit product.

“When brands start understanding that value of Amazon, through the customer lens, that’s when they’ll start saying, OK, I need to work with Amazon. I need to figure out their terms,” said Eric Heller, the CEO of Marketplace Ignition.

Download Digiday’s guide to 6 ways Amazon will eat the media and marketing industries here.


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