Fahim Naim, founder and CEO of eShopportunity said many of those merchants impacted by the change may be better off if they become third-party Amazon sellers.

A dramatic shift that upends the longstanding relationships between Amazon.com Inc. and many of its longtime suppliers may be coming soon, said Fahim Naim, founder and CEO of eShopportunity, a consultancy that helps brands sell via Amazon.com Inc., on Tuesday at the Internet Retailer Conference and Exhibition @ RetailX in Chicago. The move will likely mean that many small merchants that sell in bulk directly to Amazon, will have to shift to selling directly to consumers on Amazon’s marketplace.

The change isn’t necessarily bad news, he said. After all, Amazon’s Seller Central platform for third-party sellers on the Amazon marketplace is better than ever and includes tools that give vendors valuable information and resources not available a few years ago. Naim said nine out of 10 of the vendors likely to be purged would probably choose to sell on Seller Central instead of Vendor Central if they began selling online today.

The first signs of an Amazon vendor purge emerged in early March when Amazon halted orders from thousands of suppliers with no explanation. Weeks later, Amazon resumed the ordering and suggested the pause was part of an effort to weed out counterfeit products.

Then Bloomberg News on May 28 reported that a larger purge is coming as Amazon looks to cut costs and focus wholesale purchasing on major brands like Procter & Gamble, Sony and Lego.

After the Bloomberg story was published, Amazon responded with a tweet that read, “We informed Bloomberg before publication that their sources and story are wrong. We review our selling partner relationships on an individual basis as part of our normal course of business, and any speculation of a large-scale reduction of vendors is incorrect.”

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Don’t buy Amazon’s spin, Naim said. He thinks the purge could happen “very soon” and would likely take place in batches, on terms that could vary by product category. After the purge, most of the affected brands will sell using Fulfillment by Amazon, Amazon’s in-house fulfillment service, Naim said.

With that in mind, small retailers selling to Amazon via Vendor Central should plan for a purge—a strategy that will likely benefit them, even if the herd-thinning of vendors never comes. For retailers already selling on Seller Central, that starts with embracing new tools now available to Amazon sellers, Naim said. Those include:

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  • Brand Analytics, an analytics tool for brand owners launched in February that’s designed to help with product portfolio and marketing/advertising activities.
  • Brand Dashboard, a tool launched in April that helps sellers track price competitiveness, Prime eligibility and receive specific recommendations for improving traffic and conversions.
  • Voice of the Customer, a tool launched by Amazon last fall. Voice of the Customer offers customer feedback for each offer intended to help sellers discover issues affecting customers.

Other strategies he recommends include running promotions to “steal share” from other sellers during the transition, making sure ample inventory is available and boosting ad spending.

For retailers not yet selling on Seller Central, now is the time to set up an account and learn to use it, he said. It can take time to learn to navigate the platform, he said, as a merchant has to learn to list products, figure out how to handle shipments, set up ads, train staff and possibly hire more people.

Accounting and payments processing will be very different for sellers moving from Vendor Central to Seller Central, Naim said. And because customer service is vital to success as an Amazon third-party seller, a greater personnel headcount might be necessary.

“Most of the same rules still apply,” even if the purge never happens, he said. Regardless of what happens, it’s good idea for Vendor Central sellers to evaluate whether the wholesale relationship is the best fit and reduce their dependency on that form of selling, he said.

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