Amazon Europe Rumored to Terminate 1P Distributor Contracts

Amazon has been around for over a quarter of a century, yet everyone from manufacturers to resellers are all still learning how best to leverage the platform, as it evolves.

Rumors are circulating this week that Amazon Europe will terminate contracts with 1P distributors starting January 15, 2024. Their goal is to go direct to manufacturers and cut out the “middle” margin takers.

Last week, we also saw the news that Amazon takes 50% of the revenue on average, from someone selling on its platform. Up from 40% five years ago. This was always going to happen as more brands go online, the costs of ‘being seen’ increases, margins go down and profitability has to be sought from innovative means.

Highlands have been forward thinking in this area and offer a unique range of services to help manufacturers achieve harmonised physical and digital sales. Our team track and provide insight into the latest trends and developments that impact our clients.

Our experience is that there is no single solution that suits all businesses. A large project we’re currently undertaking is to transition a global manufacturer from 1P to 3P due to considerations such as price points and channel conflicts.

One solution open to distributors and manufacturers is to find alternative platforms. Walmart is outpacing the growth of Amazon and arguably has a better fulfilment structure with its utilisation of its stores. Mirakl is rapidly growing marketplaces for key retailers and social commence is happening at pace.

Other considerations are how to optimise marketing across channels and send that traffic to Amazon, website or where the preferred point of transaction is desired.

As Amazon advertising increases, channels such as TikTok or Instagram can provide cheaper customer acquisition costs of even sending that traffic to Amazon landing pages.

Optimisation of fulfilment and technology automation, also now carry far greater weight, as part of an overall strategy of increasing profits.

Product portfolio analysis, pricing strategy and channel management are key parts of how we ease the transition, whilst maximising revenue for our clients, as the world evolves.

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