Amazon has been accused of “driving a coach and horses through GSCOP” after writing to suppliers warning they face being delisted unless they pay large lump sums to help prop up profitability of sales.
The Grocer has seen evidence of demands for one-off payments as well as large cost price reductions to UK companies from an office based in India called a ‘retail success team’.
Suppliers said they had been given just 48 hours to pay sums running into tens of thousands of pounds, with a threat that otherwise their products would face possible delisting.
A leading GSCOP expert said he had been contacted by at least half a dozen companies angry at being given a similar threat, suggesting the policy was widespread.
The Grocer spoke to one UK-based independent company who said they were “shocked and angry” at the actions of Amazon, which represented the company’s only UK-wide listing.
“Amazon contacted us with an ask of more than €50,000 to plug a profit gap, which we were given two days to respond to,” said the supplier.
“A subsequent video call with the account manager from the team in India resulted in very confrontational and hostile behaviour which we had to diffuse.
“We raised with her that it was a big ask, at which point she suggested we ‘make her an offer.’”
The Grocer has seen letters and similar demands sent to other suppliers, which Amazon claims were a “mistake” despite repeated approaches from different members of its company using identical tactics.
“We are writing in regards to recent profitability challenges with your account,” says the letter, adding: “The selection flagged below are uneconomical for Amazon to continue to sell in their current state. Without a change in ASIN (Amazon’s unique product code) economics, Amazon may not be able to continue to list this selection.
“If you are willing to evaluate an investment to provide Amazon with ad hoc support of xxx [more than €50,000, The Grocer has withheld the exact figure for confidentiality], reduce the cost price(s), the positive impact would support product sales and attractive product conditions for customers.
“We would appreciate if you could please review the above proposal and respond within the next two business days.”
The supplier said within days of receiving the demand Amazon sent a round robin email stressing the importance of GSCOP, and how it was determined to “build a better experience” with its suppliers.
An Amazon spokesperson told The Grocer: “Amazon takes the groceries code very seriously and we strive to ensure we meet our obligations at all times.
“We are aware some grocery suppliers received a notification in error, and we are working to reassure them of our commitments under the GSCOP principles.
“We encourage any grocery suppliers who received this notification to contact Amazon’s code compliance officer.”
Yet the incidents are just the latest controversy surrounding Amazon’s treatment of suppliers.
Amazon was added to the list of grocery retailers policed by the Groceries Code Adjudicator in March last year. It had a history of using short notice delists and its notorious CRAP (‘cannot realise a profit’) algorithm, which often delisted suppliers at short notice.
In January Amazon told The Grocer it had introduced major changes to its procedures, including a new commitment to provide “reasonable written notice” when products are red-flagged by its system.
However, in June Amazon came bottom of the GCA table on its annual poll of suppliers’ views on code compliance, with what was described by experts as a “shocking“ record.
Nearly 12% of suppliers who responded said Amazon “never” complied with the code, while a further 30% said it rarely did.
Its overall score of less than 60% compliance compared with an average of 77% among supermarkets when the survey began in 2014, since when there have been major improvements by supermarkets across the board.
At the time, Adjudicator Mark White said there was “no excuse” for Amazon’s poor showing and said he was willing to use “everything in his power” to ensure it improved its dealings with suppliers.
The new accusations have echoes of the GCA probe into Morrisons in 2015, when the Adjudicator trawled through 66,000 emails after suppliers reported a flood of demands from the supermarket for lump sum payments to boost its profits. Whilst Morrisons escaped a major fine, it was forced to issue an apology to suppliers and committed to new training, with the Adjudicator releasing new guidance warning against further instances.
“This behaviour from Amazon is exactly the same sort of activity as Morrisons carried out back then,” said Ged Futter, GSCOP expert and founder of The Retail Mind.
“I have been contacted by half a dozen suppliers who have all received this letter, from across a wide range of different sectors of the food and drink market. The only thing that differs is the name of the person writing it and the amount of money they are after.
“This is a blatant attempt by Amazon to exact retrospective lump sum payments from suppliers to increase their profitability, and it drives a coach and horse through GSCOP, which quite clearly does not allow retailers to demand such retrospective payments.
“The money is for nothing other than to fill a hole in Amazon’s P&L. I would assume they are doing this on a global scale – doing it outside of the UK is not an issue legally but the UK is clearly governed by GSCOP.”
No comments yet