Amazon has announced a new 30-day guarantee to stop suppliers being hit with controversial automatic deductions over delivery issues.
The online giant has been at the centre of controversy over its treatment of suppliers, which heightened after it was included under those companies policed by the Groceries Supply Code of Practice (GSCOP), from March last year.
Among one of the biggest concerns facing suppliers has been Amazon’s policy of making immediate reductions in the case of alleged shipment variances.
This week Amazon told The Grocer it was introducing major changes to its policies, which would include notifying suppliers of issues within 10 days of a shipment receipt and also giving suppliers 30 days to raise a dispute.
It said it was upgrading its system to provide suppliers with real-time data and automatically alert them when shipment variances occur, enabling them to resolve disputes faster.
The Grocer has previously revealed concerns over Amazon’s track record of refusing to pay invoices, after its systems detected a problem with the quantity of product on an invoice compared to the assumed quantity received in its warehouses.
Frequent financial deductions from suppliers is believed to have contributed to its shocking performance in the Groceries Code Adjudicator’s YouGov poll, based on suppliers’ views of how retailers adhered to GSCOP. The survey in June last year found nearly 12% of suppliers who responded said Amazon “never” complied with the code. A further 30% said it rarely did.
It is not the first time Amazon has tried to clean up its act.
A year ago almost to the day, it introduced changes to how its algorithm-based systems were leading to companies being delisted with as little as 24 hours’ notice.
It included a new commitment to provide “reasonable written notice” when products were red-flagged by its system, known internally as CRAP (cannot realise a profit).
The Grocer also revealed last month Amazon had written to some suppliers warning they faced being delisted unless they paid large lump sums running into tens of thousands of pounds, to help prop up profitability of sales.
Experts said the move, co-ordinated from an office based in India called a ‘retail success team’, was a blatant breach of GSCOP, although it was put down to a “mistake” by Amazon.
Amazon told The Grocer this week it had now tracked down all 30 suppliers contacted and the requests had all been withdrawn.
Amazon said its new commitment over order disputes would mean its army of suppliers would receive greater financial certainty in dealing with the company.
Previously, suppliers had to receive confirmation of payment before they were made aware of differences in shipment records.
It has now announced automated checks for common issues, which it said will enable some disputes to be resolved instantly.
Shipment variances will be listed alongside financial information, making it easier for suppliers to pinpoint issues.
The new process will be managed using a single dashboard throughout the dispute process, which it said would eliminate barriers including having to navigate multiple systems to find relevant documentation.
“We’re committed to helping our grocery suppliers reach more customers in the UK, and this change is just one of many we have put in place to improve their experience of working with us every day,” said Amazon EU grocery director James Bate.
“This update makes working with Amazon faster and easier, and gives suppliers greater financial certainty so they can focus on what matters for their business and for customers.”
Martin Heubel, an e-commerce strategy consultant, former Amazon senior category manager and founder of Consulterce, welcomed the move. He said the issue of Amazon’s policy over shipment variances and shortages had been cited by almost 20% of Amazon suppliers as their number one concern in a recent poll conducted by his company.
“The announcement goes to show GSCOP is finally leading to substantial change in the way the online grocer is dealing with its suppliers,” he said.
“Financial disputes between vendors and Amazon can come in many different forms. They are often caused by catalogue errors where the case pack size and the number of inner pack items are not stated correctly, leading to so-called shortages.
“As a result, Amazon may think there are fewer products in each package delivered by the vendor than is actually the case, causing the online retailer to reject invoices for goods that were actually shipped by the supplier. This has previously led to lengthy dispute resolution processes, with brands often facing long payment delays or no payments at all.”
However, Heubel said despite the changes in Amazon’s policy, suppliers still had major concerns over the issue.
“Whilst it’s certainly an improvement that brands are now proactively notified of problems with a delivery, realistically little changes to the rest of the resolution process,” he said.
“Yes, vendors won’t face deductions within 30 days of Amazon notifying them of a problem. But that doesn’t mean the causes of these problems will be addressed or resolved any faster.
“If anything, more and more grocery brands are left with no direct vendor manager contact following the recent round of layoffs, so brands often have only irregular or no contact at all to a buyer to help them address the root causes.
“Will Amazon’s process automation come to the rescue? We’ll have to wait and see how this change plays out in the real world.”
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