About a month ago Amazon announced that for it’s European 1P business, it will be focusing on sourcing brands directly from brand owners from January 2024. So no more distributors.Amazon is focusing on profitability. Last week they announced higher pricing on logistics and freight. Yesterday they announced another round of layoffs, the third in a short period. Besides the cost reductions, extra demands on 1P contract conditions are being addressed. All of this is aimed to increase their operating margin while simultaneously brands are experiencing inflexibility on charge backs, or 1P already refusing to place stock orders.If you have a 1P relationship with Amazon, what are your options?

Option 1

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Negotiate with Amazon Vendor Central – share the extra margin that was taken by the distributor and focus your relationship on accelerating growth, by doubling down on your advertising strategy and organic listing quality. Increase your New To Brand (NTB) revenue and focus on re-targeting, increasing conversion and CTR, reducing cost per click.

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Option 2

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It is now March and regardless of your product category, or your industry seasonality, it is safe to say that Amazon will not be placing large orders with distributors during the 2nd half of this year as they transition to buying from brands direct. Another option already pointed out by Amazon itself is to go 3P, or locally referred to as Seller-Central. Do it as soon as possible as you need to learn the ropes and get your supply chain in order. Many distributors take on a big part of the inventory financing a brands growth, therefore, this means brands need to re-think how to finance their European stock. If you start planning a direct relationship with Amazon now it means you might still be able to gear up for high-season Q4 sales.  

It is painful to see this happen to distributors. In many cases they have been the ones building brands for years whilst financing the journey and being exposed to the risk of betting on brands. As pointed out by Amazon, these distributors can also set-up a Seller-Central relationship in which they can continue to sell brands that are in their portfolio. Also here, time is of the essence given all the administration related to listing.  Reach out to us should you have any questions or require support with this transition.

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