Amazon has decided to cut ties with European distributors in order to further reduce its operational costs. The e-commerce titan has now decided to eliminate the middleman figure of distributors from the equation of its business model, so that those who sell directly to Amazon stores will no longer be able to do so, unless they have exclusive rights to distribute a brand.
According to a document accessed by CNBC, Amazon will cut its relationship with European distributors as of next April, when the deadline granted by the company for distributors to adapt to this new model ends.
This is a major decision for distributors, who will no longer be able to sell products directly to Amazon.
The only alternatives will be to become third-party merchants, i.e., acting as sellers selling on the platform but bearing all the associated costs, including logistics, or to continue as distributors of a brand in case they have exclusive rights.
"As is common for all companies, we regularly review our approach to product sourcing as we try to control our costs and keep prices low for customers," an Amazon spokesperson said in a statement as reported by CNBC. "With this in mind, we have decided to focus on sourcing certain products for our European stores directly from brand owners," the spokesperson added.
In short, this move by Amazon in Europe involves, on the one hand, directly controlling the brands operating within the company and, on the other hand, having greater influence over pricing and product selection.
In early January, the company announced the layoff of some 18,000 employees. Amazon began by laying off 10,000 employees in November, but in the end the adjustment will be larger than expected.
The layoffs have mostly affected the store divisions (Amazon Stores) and PXT, which is the human resources area of the company. The cuts amount to 6% of the roughly 300,000-strong workforce and represent a quick turnaround for an entity that recently doubled its base salary cap.
Amazon also closed 2022 in the red. The U.S. company has been weathering losses and closing at a profit since about 2015 thanks to its cloud business. However, last fiscal year it posted a loss of $2.722 billion.
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