Amazon.com on March 9 hinted that fighting counterfeits was a reason for its sudden and unexplained purge of thousands of vendors that sowed panic among longtime suppliers.
The company selectively reinstated some accounts, apologizing for “any inconvenience” caused by the “temporary pause” in orders, according to communications reviewed by Bloomberg. It encouraged those reinstated to enroll in “brand registry,” a tool to help brands knock counterfeit products off the platform.
The communication sheds further light on why Amazon abruptly canceled routine merchandise orders from thousands of its longtime suppliers over the past two weeks.
Amazon’s web store includes a mix of inventory. The company buys some products directly from wholesalers and resells it in a traditional retail model. Other goods come from independent merchants who post their inventory on Amazon and give the company a commission on each sale, similar to eBay Inc.’s online marketplace model or a consignment shop.
The two models complement one another, making sure Amazon has an ample supply of must-have products at competitive prices and giving it a bigger inventory than one would d find at a nearby store.
An Amazon spokeswoman declined to comment, beyond sending the statement that the company issued March 6: “We regularly review our selling partner relationships and may make changes when we see an opportunity to provide customers with improved selection, value and convenience.”
A key challenge has been maintaining relationships with brands who complain counterfeit products flourish on Amazon’s free-wheeling marketplace. Counterfeiters can take advantage of Amazon’s system that is designed to let merchants post products quickly and easily after setting up accounts online.
“It’s all about further cleaning, which are some measures we are happy to see,” said Ryan Craver, CEO of Commerce Canal, which helps more than 50 brands sell products on Amazon. “The cleaner the marketplace, the better the sales integrity and product integrity.”
Amazon wants to make sure it is only buying inventory directly from brand owners. Other product suppliers are being pushed to Amazon’s marketplace, which is a more profitable model for Amazon and less risky than buying goods outright.
In recent years, Amazon has increasingly prioritized its marketplace. More than half of all products sold on Amazon in 2018 came from marketplace merchants, and revenue-providing services to those merchants are growing at double the pace of revenue from the online store.
Online marketplaces can offer greater selection than even the biggest of stores. Walmart Inc., Target Corp. and Best Buy Co. are copying Amazon’s marketplace model to increase online sales. Amazon will generate e-commerce revenue of $317 billion this year, representing 52.4% of all online sales in the U.S., according to EMarketer Inc.