Amazon has been increasing efforts to prove
According to the outlet, for the past few months, Amazon has been alerting vendors and brand owners that if Amazon can’t sell their wholesale products to consumers at a profit, it won’t allow them to advertise on their website.
According to an email viewed by CNBC, vendors have received emails that say the following: “One or more of your products no longer qualifies for advertising because the sale of this product on Amazon.com currently results in a loss to Amazon.” The email continues with the information that in order to become eligible for advertising again they must “lower the product’s cost.”
The move is representative of a push by the company to bolster bottom lines in what has been a historically low-margin business. The move appears to be working since, in its most recent quarter, Amazon posted $3 billion in net income, the highest in its history and the profits for the year were posted at $10 billion.
The push also shows that the online powerhouse is using some new tactics to control the e-commerce site, pressuring the brands that use it to lower their prices if they want to advertise.
A spokesperson for Amazon told CNC that the company is simply doing what other online retailers have been doing for years.
The spokesperson said, “Like all retailers, Amazon decides which products to market and promote in our stores based on a variety of factors, such as relevancy, availability, profitability and other factors.”
Meanwhile, Joe Hansen, CEO of Buy Box Experts, a firm that helps companies sell on the site, told the outlet, “Amazon is trying to be much more profitable than they were in the past. But this policy shows there’s bias in Amazon’s ad service, even though it says it’s an open advertising platform.”
Internally at Amazon products that don’t turn a profit are called “CRaP,” which stands for “Can’t Realize a Profit.” Those items typically tend to be less than $25 but sometimes go up to $2000 if they are bulky and expensive to store and ship.
The Wall Street Journal reported in December that Amazon has been more active in taking those “CRaP” products off the site.
Amazon is targeting the banning of promotions run by vendors instead of third-party merchants, who are untouched by the crackdown. Third-party merchants account for more than half of the products sold on Amazon.
In other attempts to cut costs, the company also announced the closure of its 87 pop-up stores and introduced “Amazon Day,”intended to reduce Amazon’s shipping costs by allowing customers to get their orders throughout the week on one specific day. Earlier this month, Amazon also stopped ordering products from smaller brands, Bloomberg reported. The move is intended to push brands into using a third-party marketplace so that Amazon can make a profit from storage and shipping fees.
There is concern that this new policy creates a conflict of interest for Amazon, since the company uses ads internally to drive sales, unlike Google and Facebook, and therefore is not an open auction driven by the market.
This new practice could face increased regulatory scrutiny going forward since politicians have recently been focusing their attentions on how tech giants, like Google and Amazon, run their services.
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