Amazon to Cut Smaller Wholesale 1P Suppliers

Two months ago, Amazon.com Inc. halted orders from thousands of suppliers with no explanation. Panic ensued -- until the orders quietly resumed weeks later, with Amazon suggesting the pause was part of a campaign to weed out counterfeit products. Suppliers breathed a sigh of relief.

Now a larger, more permanent purge is coming that will upend the relationship between the world’s largest online retailer and many of its long-time vendors. Generally speaking, vendors selling less than $10 million in products each year on the site will no longer get wholesale orders from Amazon in the next few months, although that will vary by category, said the people, who requested anonymity to speak about an internal matter. Amazon’s aim is to cut costs and focus wholesale purchasing on major brands like Procter & Gamble, Sony and Lego, the people said. That will ensure the company has adequate supplies of must-have merchandise and help it compete with the likes of Walmart, Target and Best Buy.

The mom-and-pops that have long relied on Amazon for a steady stream of orders will have to learn a new way of doing business on the web store as a 3P seller. Rather than selling in bulk directly to Amazon as a 1P seller, they’ll need to win sales one shopper at a time. It’s one of the biggest shifts in Amazon’s e-commerce strategy since it opened the site to independent sellers almost 20 years ago. While the plan could be changed or cancelled, it’s currently moving forward, the people said.

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