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Ikea Ditches Amazon: Why the E-Commerce Giant Needs to Show 3rd-Party Sellers More Love

Another brand has followed Nike's lead and severed its official selling ties with Amazon.com (NASDAQ: AMZN). Chic, low-cost furniture designer Ikea will no longer directly supply the e-commerce platform with inventory. Although Ikea goods will still be available at the site through third-party vendors that have stock from a wholesale supplier, the move will measurably mute the exposure of the Ikea brand on Amazon.

Ikea hasn't yet explained its reason for the decision, though it's not a stretch to broadly suggest it just wasn't worth maintaining the relationship. For Nike, the website never really staved off the counterfeit goods the athletic apparel company said ultimately damaged its brand image. Ikea hasn't voiced an identical complaint, but furniture competitor Williams-Sonoma sued Amazon in 2018, claiming Amazon's private-label furniture line copied one of its designs. In a similar vein, Ikea's short-lived partnership may have led management to decide their name was being used to lead consumers to a competitor's similar products, including those manufactured by Amazon.

In a bigger sense though, interpret the decision as an early skirmish of a conflict that's quickly coming to a head.

A little less self-serving, for now

It's a maddening conflict. A recent Wunderman Thompson poll of e-commerce professionals found that 67% felt compelled to work with Amazon.com, yet more than half of this same crowd also felt Amazon hampered their organization's growth. It's a frustration that's grown in step with Amazon's foray into selling its own private-label merchandise, which often competes head-to-head with its third-party sellers.

Photograph of business team putting their hands together, like a sports team starts a game.

Image source: Getty Images.

The company finally, tacitly appears to know it's been alienating its sellers. Last week, e-commerce intelligence firm MarketPlace Pulse reported that Amazon recently -- for the time being anyway -- stopped featuring its own private-label goods at the top of the page when a shopper searches for a certain product on the site. Instead, Amazon's own goods are now featured as if they're just another option from its collection of sellers.

But take the move with a grain of salt, as it may only be a temporary change in strategy. Amazon dramatically reduced the promotion of their own goods in early 2019 too, yielding to pressure from politicians as well as complaints from sellers. By the latter half of last year, Amazon was once again heavily pushing its own wares in a "similar item to consider" box that appeared just above the button shoppers would click to add an item to their shopping cart.

In the meantime, MarketPlace Pulse's discovery indicates that perhaps Amazon is finally listening to the chorus of complaints. Only time will tell how, or if, it chooses to remember what it hears.

Forcing Amazon to make a decision

Amazon still competes with its own sellers in a myriad of ways and will continue to do so. It has to -- as long as the company has any private-label ambitions. The temptation of the higher margins associated with selling your own brands is just too great, and if nothing else, selling simple consumer staples at bargain prices serves to draw shoppers to the site.

To that end, don't be surprised if Amazon only ends up shifting its featuring strategy -- again -- as a means of keeping its own goods front and center for shoppers, rather than dialing it back. Likewise, don't be surprised if other sellers decide to no longer put up with it.

Once a few more direct suppliers follow Ikea and Nike out the door, however, look for Amazon to more decidedly move to one side of this fence, rather than straddling it. Intuition suggests the company will side with third-party sellers, and even brands themselves, just because its private label business still only accounts for about 1% of its total revenue. It desperately needs third parties for almost all if its e-commerce business, as it has learned that starting a brand from scratch is tough. A doubling-down on its private-label effort isn't out of the question though.

Whatever's in the cards, a few more high-profile exits like Ikea's could bring the site and its sellers to a standoff fast -- even as soon as this year.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Nike. The Motley Fool recommends Williams-Sonoma. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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