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Amazon is seeking significant discounts from its suppliers and has set strict conditions to protect its margins. This is because the tech giant is working to limit US President Donald Trump’s tariffs.
The Seattle-based group was seeking double-digit price cuts from sellers of items ranging from home goods to household goods to appliances, according to three vendor consultants negotiating on behalf of multiple brands and suppliers.
The world’s largest e-commerce platform has become more aggressive with suppliers sourced from China after the White House imposed a tariff of up to 145%.
“Amazon is a £800 gorilla in the room,” said Scott Miller, consultant and former Amazon vendor manager. “Brands are growing on platforms and have few options.”
The $20 company relies on a playbook that has been familiar from Trump’s first term when the US president imposed tariffs on Chinese imports.
Amazon has leaned on suppliers to reach this year’s profits, following rivals like Costco and Walmart. Analysts at Goldman Sachs said they could knock between $5 billion and $10 billion from Amazon’s operating profit this year, depending on how the collection war is being played.
Amazon said: “We work with a wide range of diverse sales partners in our stores to help our customers adapt to developing environments while maintaining low prices.”
Several logistics providers and analysts told the Financial Times that Amazon filed shipments after Trump took office in anticipation of tariff hikes.
Also, according to two consultants, Amazon cancelled a number of direct imports from China and pivoted to buy goods from suppliers along with US stocks.
Amazon CEO Andy Jassy told CNBC in an interview earlier this month that online marketplace sellers are likely to raise prices, but the company was trapped in negotiations with its own suppliers to keep prices down.
“There may be transactions that customers have negotiated when they have not renegotiated terms to facilitate low prices,” Jassy said.
With shares falling 14.8% this year, Amazon announced its first quarter earnings on Thursday, providing financial forecasts for the next three months.
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The first customs freight from China landed in US ports on Monday, with stock for the summer season. Analysts hope that if measures continue, price increases will emerge for consumers in the mid-term this year.
Amazon has taken a less aggressive stance elsewhere, offering to engulf a third of the tariffs on non-China imports, which were 10% during the 90-day suspension period, several consultants said.
“Because of their credibility, they were willing to absorb some of the increased costs,” Miller said.
The consultant informs the client that it will accept an increase in costs for non-Chinese imports, but only if the manufacturer agrees to a fixed margin for the e-commerce group, meaning that the supplier will be hit if there is a selling price for the item in Amazon Falls.
Goldman Sachs analyst Eric Sheridan said he also pays close attention to Amazon’s third quarter when he traditionally runs a 48-hour “Prime Day” sales event to members of the subscription service.
Prime Day takes place twice a year in July and October. According to Adobe Analytics, the summer edition generated $14.2 billion last year. However, this year’s event is expected to see a shorter discount.
“There are some costs that we have to incur (due to customs duties). The extent to which goes to consumers,” Sheridan said.
