The latest Groceries Code Adjudicator (GCA) survey has once again confirmed what we already knew: Amazon remains by far the worst offender on code breaches.
Minor improvements in certain areas shouldn’t be allowed to excuse the persistent, systemic issues that continue in Amazon’s grocery operations. In some cases as much as 20% of suppliers’ administration cost is attributed to the retailer, despite the fact that it represents just 3% of the customer base. Amazon is the highest cost-to-serve retailer, yet its default response is to blame the supplier for “poor inputs”.
The GCA’s investigation focuses on payment issues where there is clear, documented evidence to overcome Amazon’s poised legal team. However, this limited scope misses many of Amazon’s breaches.
Major issues will remain, such as changes to supply chain procedures without notice, poor forecasts without compensation, delisting obligations being ignored, suppliers being expected to predominantly fund promotion and marketing costs, variation on terms, payments for shrinkage and wastage, and fines for issues caused by Amazon’s own preferred delivery agents.
Amazon neglects the supplier experience
Amazon has invested billions in customer experience but neglected the backend. Too many systems don’t talk to each other, causing chaos. Its ‘received’ dashboard system generates thousands of queries, unlike other retailers who have moved to good faith receipts (GFR).
Amazon was in discussions about GFR three years ago, but nothing happened. It has avoided responsibility and failed to solve the problem. Suppliers struggle to secure delivery slots, even when Amazon’s own ordering systems demand product.
Getting a listing with Amazon is typically straightforward, but maintaining that listing is not. Its ‘follower’ pricing model means whenever a product is on price promotion anywhere in the country, Amazon will match it. This leads to a dip in margin and Amazon temporarily suppresses core grocery items, removing the buy button.
Sales data then becomes unreliable, making forecasting almost impossible and leaving suppliers in a permanent state of uncertainty.
Amazon fails to recognise the human side of buying and selling, treating all categories, from tinned fruit to air fryers, with the same rigid process. With only about 14 vendor managers (VMs) on major grocery, sometimes based in another country, resolving issues is another problem. An obsession with growth and efficiency means resources are only allocated in response to a crisis, while routine problems are ignored.
Morale is low among VMs who know it is all unsatisfactory. Escalation is only possible if a problem is deemed pan-European and local process changes are resisted – everything must be global or regional – which doesn’t help the GCA, given GSCOP is a local initiative.Despite promises that all suppliers will get a vendor manager, many still don’t. Suppliers are forced to invest in marketing and prove their compliance, with no proof Amazon has completed its side of the bargain.
Amazon is not fit to supply. Nevertheless, brands feel compelled to persevere because it is the way of the future. We need to push the efficiency pause button for Amazon – it needs to think UK, provide resource to enable compliance, and only then should it return to building efficiency.
The industry demands it, and the GCA should demand it too.
David Sables is CEO of Sentinel Management Consultants
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