Yes, you read it right Amazon is open to doing business with third-party suppliers but there is a stumbling block, Amazon demands 30% of the supplier’s company at a fixed rate which is lower than the market costing. Amazon has added these types of preconditions to agreement with the companies which provide it with different services.
According to Walnut Journal, the prerequisite to be an official supplier for Amazon is that the company must have supplied the Amazon at the minimum 75 times in the past decade before they can be an official Amazon supplier. The monetary invoice of Amazon claims to be costed $3 billion.
This deal being offered by Amazon is called a “warrant” and it works in a similar manner as the stock options given to the employees of the country.
Amazon has the recourse to purchase the stock of its supplier’s company at a particular price and set it on the market before the announcement of the deal. When the price rises, Amazon have the option to either hold the warrant for a long-term or dispose of for a lucrative deal.
Many of the deals are accidental on Amazon giving a chance to its clients to earn a profit in a limited time.
For instance, the day Amazon purchased the stocks for SpartanNash’s their stock registered an increase of 23.6 percent while Amazon only had to take 15 percent of the profit. However, it is fortuitous and the many companies may not feel very good about the condition of giving 30 percent of the profit to Amazon.
In spite of the optimal effects of the deal, it is said that Amazon pressurize companies to agree on the un-heard of terms and conditions.
One of the companies is ATSG which made a negotiation with Amazon to lease 20 Boeings 767s to Amazon but the it could not be concluded because Amazon wanted warrants but ATSG was not willing to give warrants as a part of the deal. Amazon tried hard to make negotiations with them and conclude a deal. Thus, finally in 2016 ATSG agreed to the terms and Amazon used 19.5 percent of ATSG stocks using its warrants.
Amazon have similar contracts with other companies such as Cargo jet, Atlas Air and Startek. However, the e-tech giant has made a valuable offer for those who are willing to give their warrants.
