Amazon seeks more third-party price control

Discussion
Photo: @daphneemarie via Twenty20
Aug 29, 2019
Tom Ryan

Amazon has launched Sold by Amazon (SBA), currently in beta, a program that lets Amazon control the prices on enrolled FBA (Fulfillment by Amazon) products in exchange for a guaranteed minimum payout to sellers.

Sellers who sign up to the program give Amazon permission to reduce the price of their products at will. In exchange, they are guaranteed a payout called Minimum Gross Proceed (MGP). Amazon told sellers, “You will be paid based on the sales price, or the Minimum Gross Proceeds (MGP), whichever is greater.”

An Amazon spokesperson told CNBC the SBA program is designed to “save time and increase sales by automating prices so they can consistently and effortlessly offer customers great prices.” It’s also meant to provide sellers “peace of mind that they will never receive less than the agreed upon amount for that product.”

In a RetailWire interview, Kiri Masters, founder and CEO of Amazon agency Bobsled Marketing, said only sellers who are Brand Registered can use the program, underscoring Amazon’s increasing focus on relationships with brands, rather than with resellers.

“It helps Amazon know that they can have the most competitive prices online — and get merchants to agree explicitly on this point,” said Ms. Masters.

She said brands that are having trouble maintaining control of the “buy box” over unauthorized sellers may want to explore the program, since SBA guarantees that the brand won’t lose the buy box due to price. 

The major downside of this program is that sellers can’t run PPC (pay-per-click,) advertising on enrolled products, nor “Lightning deals,” a promotion offered in a limited quantity for a short period of time. 

Brands that have a specific pricing strategy should also stay away. Said Ms. Masters, “While Amazon is an expert re-pricer (apparently repricing items up to 2.5M times per day), they don’t understand the potential channel conflict that pricing can produce. Amazon will be looking to reprice your products in comparison to other sales channels and offer the best price.”

DISCUSSION QUESTIONS: Do you see more benefits than drawbacks of Sold by Amazon for third-party sellers on the platform? What is Amazon trying to achieve?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Amazon can help create pricing based on supply, demand and competition. AI-based pricing strategies that the seller doesn’t have to pay for — I think it’s a great opportunity."
"Perhaps this move highlights the challenges for any retail brand seeking to extend their long-tail assortments via digital marketplaces."
"Brands must demand more control from Amazon as they are taking the hit once products end up in the consumer’s hands."

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6 Comments on "Amazon seeks more third-party price control"


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Shep Hyken
BrainTrust

The third-party seller has a choice. They don’t have to participate in the new pricing program. But why wouldn’t they? Amazon can help create pricing based on supply, demand and competition. AI-infused pricing strategies that the seller doesn’t have to pay for — I think it’s a great opportunity.

LAURA RAMIREZ
Guest

As someone who works with/for a SAM, I can assure you that 1) SBA is ONLY helpful to resellers 2) Want to hear how Amazon would actually ” guarantee that the brand won’t lose the buy box due to price” and 3) the last paragraph is essential reading for brands who sell online and b&m; the channel conflict is real and brands do themselves a disservice by allowing resellers.

Zel Bianco
BrainTrust

This will help but will not resolve Amazon’s Wild, Wild West ecosystem of sellers and pricing. If it is focused on brands more than resellers it must do more to control the practices of resellers and I am at a loss as to how they do that without completely re-vamping their model. Brands must demand more control from Amazon as they are taking the hit once products end up in the consumer’s hands. That goes for pricing as well as quality of product delivered.

David Katz
BrainTrust
It’s a matter of trust, mistrust and anti-trust. Price optimization is a powerful tool for third-party sellers, a double-sided tool providing increases in data, consumer loyalty, and market control for Amazon. Amazon can, and will, use this tool to leverage vendors and create competitive brands and products. Amazon is also offering independent merchants additional marketing support, product reviews and prominent display. With a catch. In exchange for providing these tools, Amazon gains the right to purchase a merchant’s brand at any time for a fixed price. The program — “Accelerator” — which allows brand rights to be bought for a fixed price on 60 days’ notice, it is part of a push by Amazon to obtain a stable of exclusive brands for the platform. It is the first selling program that allows Amazon to obtain direct control over independent brands that sell on its website. One contract, reviewed by the Wall Street Journal, marked confidential, grants Amazon the irrevocable right “to acquire all of the right, title, and interest in and to each of the… Read more »
Brent Biddulph
BrainTrust

Perhaps this move highlights the challenges for any retail brand seeking to extend their long-tail assortments via digital marketplaces. Then again, I couldn’t imagine any traditional retailer not making that (control of pricing) a requirement up front. For me, this demonstrates that Amazon.com is continuing to learn, willing to adapt and capable of evolving their business model somewhat seamlessly along the way.

Scott Benedict
Guest

Amazon is pioneering new ground here in the relationship between 3rd party sellers and their platform. Telling someone else what they can sell a product for would have previously crossed a red line legally; this approach feels like influence and collaboration based on data that could serve as a breakthrough in our industry. I’ll be watching with interest….

wpDiscuz
Braintrust
"Amazon can help create pricing based on supply, demand and competition. AI-based pricing strategies that the seller doesn’t have to pay for — I think it’s a great opportunity."
"Perhaps this move highlights the challenges for any retail brand seeking to extend their long-tail assortments via digital marketplaces."
"Brands must demand more control from Amazon as they are taking the hit once products end up in the consumer’s hands."

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