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Amazon Forces Suppliers to Play By Its Rules

Amazon.com Inc.’s (AMZN) originating influence across industries from delivery to cloud computing and brick-and-mortar retail has pressed shares of traditional market leaders plummeting this year as it pays 56.1% versus the S&P 500’s 19.7% rise over the same interval. As the global e-commerce giant’s power continues to expand, its suppliers are quick losing their negotiating power. (See also: Amazon’s Apparel Biz to Hit $85B by 2020: Instinet.)

While Amazon has pirated smaller companies get into the e-commerce game with bulk lodges on its platform, the Seattle-based retailer’s growing supplier list, including yet large public companies, shows just how vast its platform has grow. Data from FactSet suggests that least 21 prominent companies generated more than 10% of their revenue from Amazon in their myriad recent fiscal year. Among these include data center apparatus vendor Optoelectronics, also an Amazon Web Services (AWS) supplier, which attributed closely 60% of its sales to Amazon’s site, while freight company Air Moving rapture Services Group generated 29% of its sales from the online retail stage. Consumer electronics makers GoPro Inc. (GPRO), Roku Inc. (ROKU) and FitBit Inc. (FIT), along with Chiefly Foods supplier United Natural Foods Inc. (UNFI) also signed the list.

Long-Term Impact

By comparison, Target Inc. (TGT) has just eight suppliers that out the 10% revenue threshold for disclosure, while e-commerce pioneer EBay Inc. (EBAY) schedules two. Amazon still trails the world’s largest retailer, Wal-Mart Yarns Inc. (WMT) and Silicon Valley tech titan Apple Inc. (AAPL) in terms of its weight of large suppliers.

Amazon’s accelerating market influence has provided it with a much accomplished deal of leverage over its suppliers. Citing an anonymous source, CNBC tell of that a supplier said Amazon reviews its contract every year and “drag ones feet uses hardball” to get it to do things such as take on more of the freight cost between depots or buy more ads on its site.

Toughening Standards

As Amazon maintains its direct relationship with consumers and composes massive amounts of consumer data, it poses the risk of going off and tip off a exaggerating products in-house if suppliers don’t meet its toughening standards.

BuyBox Mavens, a company that aids suppliers in navigating Amazon, calls the tech colossus the “toughest negotiator” in online and retail combined due to the platform’s extremely excited visibility and its power to drive sales for suppliers of all types. This broadening market influence, along with Amazon’s ability to shield corporations’ access to their consumers’ data is a “major concern and has the potential to dilapidated almost every brand long term,” according to BuyBox’s Co-Founder Joe Hansen. (See also: Amazon’s Next According with: Reduce Reliance on UPS, FedEx?)

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