Amazon Archives - Electric Thoughts in a Digital Era

Amazon Terminates Vendor Agreements

The more things change, the more they stay the same. My LinkedIn feed contained posts about Amazon mass terminating vendor (1P) agreements. These businesses have been given sixty days to move their businesses to sell via Amazon’s third-party seller platform. Why are these terminations news, and what impact will the terminations have? While I am sympathetic to these brands that have been bad news in Q4 before Prime Big Deals Day and the festive season, it could have been much worse.

The viral screenshot of the Amazon Vendor Central email sent to select vendors.

Amazon vendors must be reminded that selling via 1P is seemingly a privilege, not a right. Amazon uses supply and demand and exclusivity better than any e-commerce platform. The business model has been replicated by venture capital and private equity with little or lower margin. The business model only works for Amazon due to contribution profit. Using different parts of the Amazon business, such as advertising and logistics, combined with volume, will generate margins that make sense.

Q4 – What Is Next?

Over the last two weeks, I have been seeing signals that make me concerned about the next twelve months. As someone who has looked at patterns for a large part of my career, these signals individually can be seen as news, but combined, they highlight a challenging year ahead. What happens in Q4 and in 2025?

What am I seeing? I am seeing customer spending patterns change worldwide and large incumbents laying off staff. These incumbents are large-cap companies that rarely do layoffs, which tells me companies see a problematic financial time ahead. Yes, in most cases, these companies overhired but laying off 1000 or more people is about cost savings or shuttering businesses. Is this an early sign of the artificial intelligence impacting employment? I think not.

Source: Cheezburger

The Battle Between Amazon and Temu

Over the last few weeks, I have been thinking about the battle between Amazon and Temu in multiple e-commerce markets. Who is winning, and when will this end? This will not end like Wish, as Temu has access to much more capital than Wish ever had. The question should be, how does this battle between two horizontal marketplaces end?

In multiple markets, such as South Korea and China, consumer-to-manufacturer (C2M) marketplaces take market share away from dominant horizontal marketplaces. What is this all about? Which horizontal marketplace can offer Chinese factories/manufacturers access to consumers who want to purchase their goods?

The End of the Algorithm

When I started in e-commerce the algorithm was akin to a secret. It was immovable nor helpful but eas needed to be respected as it could hurt businesses.

Over the last 18 months, it has become clear that we are at the beginning of the end for the algorithm. Regulators are no longer satisfied with companies negatively impacting businesses, sellers, or customers. Self-regulation failed as platforms could grow revenues through the use of an algorithm without oversight, nor were there any consequences for anomalies that benefited one side of the platform partnerships.

Increasingly, European regulators are asking platforms and marketplaces for data and explanations of recommendation services or their algorithms that determine search results. What data is being used to calculate the location of listings (never mind relevance or accuracy), or how are recommendations being developed to drive additional consumer purchases? As artificial intelligence gains momentum and usage by platforms to drive personalization across various parts of the web, e-commerce, as we know, is likely ending. Bias, inaccuracy, and irrelevance can negatively impact platforms, consumers, and brands. Regulators want transparency to offer a level environment as competition intensifies in all e-commerce markets.

the end of the algorthim driven by Europe

Amazon To Challenge Chinese Cross-border Marketplaces

Amazon has had Chinese cross-border marketplaces such as Shein and Temu in their periphery more than what they will admit to. Chief Executive Officer Andy Jassy indirectly mentioned the companies when he referred to “cost to serve” in his annual shareholder letter. Amazon adding a dedicated discount store on its marketplace for Chinese goods that are cheaper and shipped at slower speeds enable them to play both offence and defence to competitors.

A decade ago, no marketplace would think about launching in the US, Germany, UK and emerging markets such as Brazil as in all cases a market leader exists. The four Chinese Dragons – Shein, Temu, TikTok Shop, and AliExpress are all connecting customers to Chinese manufacturers who have factories that are idle and are in need of orders to drive revenues and be able to pay salaries to staff. Cross-border e-commerce has evolved from being a niche to a direct competitor to marketplaces in global markets in offering customers access to cheap goods made in China shipped in days instead of hours to consumers.