As Amazon.com Inc.’s (AMZN) influence across industries from delivery to cloud computing and brick-and-mortar retail expands, its suppliers are quickly losing their negotiating power. (See also: Amazon’s Apparel Biz to Hit $85B by 2020: Instinet.)
Data from FactSet suggests that least 21 public companies generated more than 10% of their revenue from Amazon in their most recent fiscal year. Among these include data center equipment vendor Optoelectronics, also an Amazon Web Services (AWS) supplier, which attributed nearly 60% of its sales to Amazon’s site, while freight company Air Transport Services Group generated 29% of its sales from the online retail platform. Consumer electronics makers GoPro Inc. (GPRO), Roku Inc. (ROKU) and FitBit Inc. (FIT), along with Whole Foods supplier United Natural Foods Inc. (UNFI) also made the list.
While Amazon has helped smaller companies get into the e-commerce game with bulk orders on its platform, the Seattle-based retailer’s growing supplier list, including even large public companies, shows just how vast its platform -- and influence -- has become.
By comparison, Target Inc. (TGT) has just eight suppliers that passed the 10% revenue threshold for disclosure, while e-commerce pioneer EBay Inc. (EBAY) lists two. Amazon still trails the world’s largest retailer, Wal-Mart Stories Inc. (WMT) and Silicon Valley tech titan Apple Inc. (AAPL) in terms of its quantity of large suppliers.
Amazon’s accelerating market influence has provided it with a much greater deal of leverage over its suppliers. Citing an anonymous source, CNBC reported that a supplier said Amazon reviews its contract every year and “plays hardball” to get it to do things such as take on more of the freight cost between warehouses or buy more ads on its site.
As Amazon maintains its direct relationship with consumers and compiles massive amounts of consumer data, it poses the risk of going off and making products in-house if suppliers don’t meet its toughening standards.
BuyBox Experts, a company that aids suppliers in navigating Amazon, calls the tech giant the “toughest negotiator” in online and retail combined due to the platform’s extremely high visibility and its power to drive sales for suppliers of all types. This growing market influence, along with Amazon’s ability to shield companies’ access to their consumers’ data is a “major concern and has the potential to hurt almost every brand long term,” according to BuyBox’s Co-Founder Joe Hansen. (See also: Amazon’s Next Step: Reduce Reliance on UPS, FedEx?)