Amazon Takes Heat Over Unauthorized Low Prices

Discussion
Oct 24, 2012

Consumers who shop on Amazon.com go there looking to get a good price on whatever they purchase. Sometimes purchases are made directly from Amazon and other times through third-party sellers. It’s the 3P (third-party) deals that are causing Jeff Bezos and company some grief as manufacturers, whose products are also sold by Amazon, are complaining that unauthorized sellers on the site are low-balling goods and devaluing brands in the process.

As Reuters, points out, this is an issue that eBay has faced for a long time, but is relatively new for Amazon. For sure, the issue of unauthorized sellers extends beyond e-commerce to the brick and mortar world, as well. Gray market goods and other "holes in the supply chain" result in legitimate products finding a way into the hands of people and companies not approved by manufacturers.

Gray market goods alone, according to a 2009 analysis by Deloitte, cost manufacturers $63 billion a year. Conversely, the sale of unauthorized merchandise also saves consumers quite a bit in the process, which is why the practice continues.

Amazon, which gets 40 percent of its revenues from it cuts of 3P sales, has taken a laissez-faire approach to issue even as companies such as Guess, Hugo Boss and Ralph Lauren complain. Others have threatened to pull products from Amazon if the e-tailer doesn’t address the 3P issue.

"Amazon has to work this out with its suppliers," Scott Tilghman, an analyst at Caris & Co., told Reuters. "They will say, ‘We recognize third-party sellers violate rules, but we can only police it so much.’"

What is your take on the danger/benefit of unauthorized sellers in the marketplace? What do you think Amazon should be doing, if anything, about unauthorized 3P sellers of brand merchandise on its site?

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13 Comments on "Amazon Takes Heat Over Unauthorized Low Prices"


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Joan Treistman
Guest
9 years 6 months ago

It’s time to review how products find their way on the site and to what extent seller reviews are accurate and prominent. That’s what consumers expect and evidently what Amazon had to examine.

Gene Detroyer
Guest
9 years 6 months ago

As long as these products are not counterfeit, what is the problem? No matter if the 3P retailers are acquiring the merchandise through “leaks in the supply chain” or through more direct means, they own the merchandise and can sell it for whatever price they want. Isn’t that free enterprise?

If manufacturers want to control their pricing better, it is up to them, not up to any retailer. It is not Amazon’s problem.

The manufacturer sold the merchandise at whatever price they wanted. Deal done. Case closed.

Anne Howe
Guest
9 years 6 months ago

It’s a little suspect when manufacturers unload goods “wherever” to make a quarter and then complain when those goods show up on the “gray market” of retailing. What goes around comes around. That said, Amazon’s glow will fade if this practice goes unchecked for too long.

I personally rarely buy from the 3rd party sellers on Amazon. The level of trust in the whole gray supply chain doesn’t work for me as a consumer. I’m guessing I’m in the minority on this ‘ethics of the deal’ discussion.

Cathy Hotka
Guest
9 years 6 months ago

This is a multifaceted problem. A consumer purchasing from a 3P vendor on Amazon (and other online sites) doesn’t really know whether that Louis Vuitton bag is real or fake. Issues like this have been a continual problem with Amazon but they’ve proven adept at addressing these challenges.

Ian Weinkselbaum
Guest
Ian Weinkselbaum
9 years 6 months ago

3P sellers are only part of the issue. Direct selling by Amazon, often at prices below brick & mortar retailers and certainly lower when you factor in no sales tax, can cause friction between manufacturers and their brick & mortar customers, especially those that fancy themselves as providing their shoppers with the lowest possible price.

Liz Crawford
Guest
9 years 6 months ago

Amazon is not only a retailer, it is a marketplace, where buyers and sellers meet. The question is — can one portal be both?

Nikki Baird
Guest
Nikki Baird
9 years 6 months ago

I think Liz’s question is a good one — especially because sometimes you really have to check to figure out who you’re actually buying from on Amazon. I find myself more and more wary of the sellers who have a bizarre assortment of goods for sale that doesn’t really make sense. That says to me they’re not in it for retailing, their in it for something else and the buyer should beware. Amazon has taken some steps to make it a little more obvious when you’re buying from a marketplace seller, but they do need to be careful that others’ reputations don’t have an impact on their own as a seller.

Doug Fleener
Guest
9 years 6 months ago

This is going to be an even bigger problem as more and more companies are turning to Unilateral Pricing. It does put Amazon in a challenging situation as they are not setting the 3P seller’s pricing.

I don’t see this as a major issue for the brands listed here, but for some consumer electronic brands it puts them in an extremely difficult position. They need to be on Amazon, but gray goods undermines their own pricing approach.

I also wonder if Amazon tried to stop those sales if it wouldn’t be opening the door to the government reexamining these pricing policies. Not a good place for Amazon or the brands.

Craig Sundstrom
Guest
9 years 6 months ago

“Gray market goods alone, according to a 2009 analysis by Deloitte, cost manufacturers $63 billion a year.”

Pray tell, gentlemen, how someone’s goods being sold on Amazon (or anywhere else) somehow “costs” them something. They haven’t been stolen — at least that’s not claimed — so presumably they’ve (first) been sold in the normal way to some reseller…and isn’t that how people make (or lose) money?

But regardless of the semantics, what Amazon should or shouldn’t do depends on who has more leverage. If they are hellbent on carrying a certain company’s products, they ultimately they must accede to that company’s requirements; OTOH, if the manufacturer really wants to be on Amazon, they should be prepared to suck-it up and be quiet.

Lee Peterson
Guest
9 years 6 months ago

Totally agree with Gene on this issue … what’s the problem and how is this any different than what retail has faced for centuries?

I think it’s up to the manufacturer to stop or control the “leaks in the system.” The smaller the leak, the smaller the problem. Who on their side is creating the holes and where are they? Amazon can’t do that.

Amazon is just a tool that any manufacturer not only uses, but NEEDS to use. And considering the fact that Amazon is projected to be the largest retailer in the world in a few years, you’d think Ralph Lauren and the lot would turn to them and say, “Don’t worry, we got this.”

Ed Rosenbaum
Guest
9 years 6 months ago

I agree with many of the comments that we can’t have it both ways. If manufacturers are unloading product, how can they complain they don’t like the way it gets sold on the open market we live in? Who out there is not looking for a bargain? Bargain yes, counterfeit, no.

John Crossman
Guest
John Crossman
9 years 6 months ago

I think Amazon needs to push into this to a point. It’s needs to be addressed. but they do receive benefit from it.

koey waters
Guest
koey waters
7 years 11 days ago
Unauthorized? What do you call a leak in the supply chain? Buying from Black Friday sales, liquidations and retail blowouts? Finding brand new, unopened DVDs in pawn shops, thrift stores and garage sales? I don’t know how many times this needs to be said…If you create something in this country and sell it to someone, it is no longer your business if that person keeps or sells that single item to someone else (within our borders at least), without your initial warranty (if applicable). If the original creator or manufacturer stops production and there is still demand, the 3p market will ripen and cover that demand until the manufacturer makes a choice of whether or not to produce more. If the brand/manufacturer saturates the market with their product instead, the supply lines get backed up and prices drop. 3p sellers swoop in and save the day, or at least keep the money in this country flowing/moving from consumers/3p sellers/brick businesses. I’m sick of brands and manufacturers crying like spoiled teenagers to (what used to be)… Read more »
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