Amazon seeks more third-party price control
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.”
- Amazon is testing a new program that lets it control third-party product prices as its pricing policy draws criticism – CNBC
- Amazon entices some sellers with new price automation – Retail Dive
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?