Amazon dictates manufacture wholesale terms

We recently had an interesting conversation with a UK Retail brand who manufactures their own products and wanted to sell on Amazon. They’ve been told by Amazon that they will not allow it, due to ‘a new policy’, which has existed for the 6 months.

The manufacturer were informed that all manufacturers must now sell into Amazon using their wholesale model, where Amazon buys chunks of stock at wholeseale prices, which Amazon then sells. Effectively Amazon are insisting that the manufacturer become a first-party seller and use Amazon Vendor Central rather than Amazon Seller Central.

These are the terms which Amazon have said that they must abide by:

  • The manufacturer must use a wholesale model
  • Amazon MAY decide to use a drop-ship model, whereby the manufacturer would also be expected to hold the stock and fulfil the order at whatever price Amazon dictate.
  • Amazon MAY request that the manufacturer exercise a pre-existing clause in all their existing wholesaler contracts, where they are not allowed to resell into 3rd-party online spaces, like Amazon.
  • Amazon will use it’s Never-knowingly-undersold pricing strategy, scraping the web, including the brand website, to ensure they at least equal the lowest online selling price for each product.

Have you come across this if you manufacture your own products? Personally I find it hard to believe that Amazon can personally stock (or drop ship) products for every manufacture no matter how small, but perhaps they’re happy to allow resellers to sell on their site but not to allow manufacturers to sell direct?

The clauses they’re insisting upon are also rather harsh. Barring existing retailers to sell the manufacturers products on marketplaces seems a step too far, even if they don’t want competition on Amazon how can it be acceptable that they ban sellers on eBay, Rakuten and other sites? Also by Amazon matching the lowest price on the web and doubtless negotiation hard (dictating?) the discount that Amazon wishes to buy the product at will make it hard for other retailers to retain decent margins on their own websites.

We’d be very interested if you’ve experienced Amazon’s manufacturer supplier contracts and how it’s affected your business and your wholesaler/resellers. All comments welcome.