Will We Ever See Amazon’s Vendor Express Again?

Amazon Vendor Express

When companies try to improve upon existing products or services, there is always an x-factor that will come into play. That x-factor can be good or bad, depending on how a large number of customers respond or how a small group of customers can ruin the idea for everyone. In the case of Amazon Vendor Express, it was the latter of the two. Prior to the launch of Amazon Vendor Express there were two major ways to get your products sold on Amazon – Amazon Seller Central and Amazon Vendor Central. The idea behind the Express option was to give vendors the opportunity to sell to Amazon rather than to customers directly. One sticking point with both of Amazon’s existing seller channels at the time was that a vendor required an invitation from Amazon to sell to Amazon. Instead of selling a few items to many customers, Amazon Vendor Express would open the door for vendors to sell a few products in bulk directly to Amazon. This was clearly a very profitable solution for sellers.

Advantages

There were a number of other advantages that the Express method offered. Perhaps the greatest feature was that it was free to join. This meant that it was virtually risk-free for vendors with the potential to sell to Amazon in mass quantities. Another advantage was having the Amazon brand attached to your product. “Sold by Amazon” carries with it a lot more marketing power than simply “made by Smith Manufacturing.” Finally, there was the bottom line expense savings of having Amazon take care of all of your customer services for the product. This would require the vendor to adjust their return and refund policies to some degree, but it would transfer a lot of the typical headaches over to Amazon.

With these huge advantages attached to the Vendor Express program, in addition to getting your product advertised worldwide by Amazon, why would such a simple and advantageous idea end up failing? Officially, on January 1, 2019, the program was shut down entirely. Though Amazon gave a vague explanation to the media and its vendors, the actual reasons required a bit of investigation.

Disadvantages

One of the major x-factors, the bad kind, was the number of counterfeiters that would flood the program, with the result that regardless of Amazon’s efforts some would slip by. These counterfeits would begin to damage Amazon’s brand and reputation, something which has a significant amount of financial goodwill. As an example, who would you rather buy a product from, all things being equal – Amazon or Walmart? An added problem the counterfeiters brought to Amazon was increased demand on customer service. For many vendors, this was an important advantage but came at a cost to Amazon. The counterfeiters were only in it for the money, Amazon and the customers be damned.

While it seems like this is a win-win for the vendors, there were a number of profit problems that went largely unseen at the beginning of the program. Selling a product with the Amazon “approval” was great, but vendors were not going to have complete control of the process or pricing. Often this resulted in a vendor selling more product but not seeing that translate into a higher profit margin. They may not have lost money but the overall result of becoming a part of the program was barely noticed on their bottom line. Yet another money angle was to be a barrier for the program. Many companies manage their cash flow based on 14 day payment cycles, yet in many cases Amazon ran on a 60 day payment cycle. Waiting another month and a half to see your profit will play havoc with most companies’ accounting.

Why it Ended

We can return to the counterfeiters who presented yet another problem for the program. If you were a company with an established reputation and goodwill, would you choose to be associated with a program that also was known to sell counterfeit goods? In most cases the answer would be no, only because you didn’t want your brand to be perceived as questionable to your customer base. The term “guilt by association” is useful here, as the presence of the Vendor Express counterfeiters kept away much of the higher end vendors whose products were not only pricier, but also more likely to be counterfeited. Counterfeiting a pair of Goodwill blue jeans is not likely to be as profitable as counterfeiting a pair of Gucci blue jeans. The smart move for Gucci would be to stay far away from Vendor Express to keep its reputation.

With high end products staying away from the Vendor Express program so would the high end markups that could give the program a financial and reputation boost both to consumers and to other potential vendors. The reputation of the program as a whole could be enhanced, benefiting everyone. But there was an elephant in the room that was apparently overlooked during the planning process of Vendor Express.

The Amazon Marketplace accounts for about 50 percent of all products sold on Amazon. Half. The Marketplace is primarily made up of smaller companies, which was the intended target of the Vendor Express program. Based on the popularity of the Marketplace, which has seen impressive growth over the last few years, it is the preferred choice by the very businesses that the Express program was intended to lure. Being able to control your own prices and payments was a more palatable solution even without the “Sold by Amazon” incentive.

One reason for the failure of the program that was heard from users was its “test” element. When a vendor had a new product it had developed and wanted to put on Vendor Express, Amazon would require the business to undergo a test phase to determine its demand and marketability among its existing customers.  Any orders to be filled were put on hold until Amazon approved the product for sale. Vendors complained that this significantly slowed the introduction of new products to the market.

But this is one perspective that seems blatantly unfair to Amazon. The vendors were getting the opportunity to market their products on a global scale using Amazon’s brand, marketing services, advertising, and customer service support. This had the potential to reduce a company’s overhead by a substantial margin. Requiring that any new product allowed on the Vendor Express platform be determined to be marketable seems more than reasonable from a business perspective. It’s easy to see the advantages connected with having the Amazon brand behind your product, something that apparently was ignored by the users. But Amazon is no fool.

These are the major reasons the program failed according to business and trade publications. The critics noted that the program lasted only three years, implying that perhaps Amazon did not give it enough of a chance to be successful. Clearly there are obstacles in the way of its success, and based on the history many of those obstacles could not be hurdled. This leads us to the original question: “Will We Ever See Amazon’s Vendor Express Again?” It is important to remember that Amazon is not run by committee, so there are several considerations that need to be taken into account. The issue is whether an agreement can be reached that will work for both the vendors and Amazon.

The first consideration is to read what Amazon had sent its vendors upon deciding to discontinue the program. The phrase “transition the customers” was used in moving existing Vendor Express members to another program. This seems to mean that this is a one way street with not much possibility of returning. So Amazon appears to be set in its ways about any possibility of the program being reignited.

Earlier it was mentioned that the Amazon Marketplace was responsible for about half of the total sales. This group, largely populated by small businesses, is where the former Vendor Express malcontents ended up and are happy where they are at. The larger Amazon website is used by major brand manufacturers, so there is no room there for most smaller businesses. But as the Marketplace grows and becomes even more competitive it is likely that Amazon will have to give serious consideration to rebooting Vendor Express.

Will We Ever See it Again?

From both the Amazon and small business sides, what might be holding up putting together a workable solution to make Vendor Express a viable alternative is stubbornness. One thing that is clear is that group of vendors who have been politely transitioned to other vendor program solutions wanted to stay at Express. For Amazon’s part, they thought the program simply wasn’t profitable enough to make it worth their while. A potential solution may not happen this year, but it is definitely possible in 2020.

Why? One key sticking point was the vendors getting paid in a timely manner. This is a reasonable request from a business perspective and something that is easily within Amazon’s reach to resolve. One vendor said it could take as long as 6 months, far beyond the earlier reported number of 60 days, to get their money from Amazon. That is insane.

Where the vendors could compromise is on the issue of new products. As was discussed earlier, it is unreasonable for a company to make the debut of a new product a condition of a program whose primary reason for existence is to make money for their own company. Given the problems Vendor Express had with counterfeiters, this is an issue that should be understood as asking Amazon to take an unreasonable risk by vendors.

Counterfeiters have not been forgotten about in the discussion. Not only do they have the potential to damage the reputation of the Amazon brand, they also create a wall that has higher quality products fleeing into the woods. The vetting process is something that needed to be addressed throughout the duration of the program. The presence of counterfeiters negatively impacts virtually every process of the Vendor Express program. However, the solution to the problem being a more intensive vetting process will require more people involved in the process, increasing the overall cost of the program.

At the end of the program, Amazon claimed that Vendor Express was simply not as profitable as a program as they initially thought it would be. What troubled some analysts about the Amazon response was there were many questions left unanswered. For the vendors left in limbo with the closure of the program, there is no place to go. Amazon Marketplace is already crowded, while the program Vendor Express was created to enhance it by invitation only. There does seem to be a definite lack of interest for Amazon to give the program another go.

Regardless of the number of arguments that can be made in favor of restoring the Express program, the final decision rests in the hands of Amazon. Three years seems like a sufficient amount of time to determine if a business model will work. While Vendor Express was intended to help smaller businesses gain access to the Amazon brand, the bottom line profit was not enough to convince the company the program was worth keeping. Counterfeiters will not come from the large businesses but from the smaller ones, complicating Amazon’s problem of maintaining its brand reputation. Reopening a program that had a certain number of defectors does not increase one’s confidence level, and there are likely to be even more counterfeiters who will try to take advantage. In the end, it’s hard to find a compelling reason why Amazon should begin a second experiment that has a minimal upside to it. Perhaps that is why they prefer to remain silent and just let the memory of Vendor Express fade.


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