On Wednesday there were reports that Amazon had begun canceling some direct import orders for products imported from Chinese vendors. This action is intended to offset the harmful impact of the recently announced tariffs by President Donald Trump. Industry consultants informed CNBC that this decision reflects the company’s ongoing efforts to manage its supply chain amid escalating costs.
Amazon, for one, has seen indications that consumers are stockpiling goods to avoid future costs from tariffs. Not unsurprisingly, this has led them to cancel orders. As of now, it is unclear just how pervasive this consumer behavior is, leaving analysts to guess at its long-term effects.
Amazon’s CEO Andy Jassy stated that the company is still assessing the implications of Trump’s sweeping tariffs. He continued, “I get it, right? I get why, I really do… you’re lucky if you have an extra 50% margin in your country to play with. This observation by one comment reflects both the tightrope current retailers are walking to keep profit margins positive despite rising costs.
It could put a dent in the company’s vast network of third-party sellers. Jassy cautioned that these sellers would be forced to pass additional costs to consumers. This possible shift of burdensome costs could result in increased prices at the pump for consumers in the immediate future.
Amazon isn’t just sitting by as this unfold. In an effort to beat or maintain competitive prices on their platform, they are beginning to make aggressive strategic forward inventory buys. Further, the company has attempted to change the terms on a number of purchase orders retroactively. Many suppliers, particularly home goods and kitchen accessory vendors, packaged their items for shipment to cargo ports. Only to then wake up every morning to notice through Amazon’s Vendor Central that their orders had all been canceled by the company.
Vendors were understandably dismayed to receive these notifications only days before they were set to ship their products. It is easy to overlook how abrupt Amazon’s decision actually is given this context. The internal system, Vendor Central, is used by Amazon to control vendor relationships and order visibility.
Though Amazon is facing a variety of challenges, the retail behemoth remains ever ambitious and intent to watch these issues closely and adapt. This week, the company’s actions provide a timely reminder of the complex dynamics at play in global trade. These dynamics have a direct impact on the ability for retail to operate and ultimately pass through appropriate consumer pricing.