In their book The Amazon Marketplace Dilemma, authors James Thomson and Joseph Hansen highlight one of the less-discussed risks that brands face when their resellers list their products on Amazon.com.
As Thomson and Hansen point out, manufacturers and brand owners have historically viewed more retail partners carrying their products as a good thing. When it comes to brick-and-mortar stores, having both Target and Walmart devote shelf space to your inventory is better than having just one of these retailers selling your products. And if Costco picks up some of your lines as well, that’s better still.
When it comes to physical stores, the costs of comparison shopping can be high for consumers—not just in terms of money but also in terms of time and effort. As the authors note, a shopper might visit a Target and then a Walmart to comparison shop but probably won’t drive to 20 stores. Target, Walmart, and Costco can all sell the same product in their stores at the same time, and they can all earn revenue doing so.
Amazon.com turns this legacy convention on its head. The marketplace makes it easy for an online shopper to view the same item from 20 different sellers (or 50, for that matter) simultaneously, by putting all of those vendors’ listings on the same product detail page.
This forces all sellers offering the same item on Amazon to compete directly for every sale. And that pressure can lead to seller behaviors that can hurt the brands they’re selling.
Here’s why the authors suggest you limit how many retailers you allow to sell each of your brand’s products on Amazon.
What a Retailer Might Do When Competing with Dozens of Other Sellers
Under Amazon’s policies, every seller offering the identical product (i.e., the same Amazon Standard Identification Number, or ASIN) will be included on that item’s one official product detail page. The more retailers you have selling a given product on Amazon, the greater the competition each of those sellers will face for every sale.
Adding to this pressure, only one seller at a time can have the coveted “buy box” on an Amazon listing. The authors note that their research suggests more than 90% of Amazon sales in most product categories go to the seller who owns the buy box.
Of course, one of the most heavily weighted factors Amazon’s algorithm uses to determine which seller gets the buy box is which one has the lowest price. Knowing this, retailers offering a product with lots of competitors will be tempted to resort to unethical practices to gain an edge. For example:
1. Drop prices below your MAP policy’s allowed level.
Because Amazon favors the lowest-priced offer on any given product, a retailer might often find this the easiest way to stand out from the pack. If everyone else is honoring your MAP policy, and one seller decides to violate it to become the low-price winner, there’s a good chance they’ll win the buy box and snag the sale.
2. Create a fake ASIN to list your product.
Another tactic a retailer might be tempted to engage in is to create a phony ASIN for your product so they can build an entirely separate product detail page for it—one with no other sellers on it competing for the buy box or for shoppers’ attention. One thing these sellers count on is that if your company is policing the Amazon marketplace only by searching for your brand-controlled ASINs, you might never discover what they’re up to.
3. Operate under a phony business name.
Rather than creating a phonyASIN, some unethical retailers will instead set up a new Amazon seller account using a fake business name. This will allow them to violate your MAP policy on the real product detail page—making them the lowest-priced offer, which will often mean winning the buy box and sales. Because the company is using a phony business name for its Amazon listings, and possibly even further obscuring their real identity by setting up a separate PO box, you’ll find it difficult to track them down and cut off their inventory.
Help Yourself: Limit Your Retailers on Amazon
One way to address this challenge is to build clauses into your Authorized Dealer Program that allow you to limit which products each of your dealers may list on Amazon.com at any given time. This can help you keep the competition for each of your products on the Amazon marketplace from getting out of hand, which can help reduce the likelihood that some of your retail partners will feel pressured to engage in the types of unethical practices I described above.
I’d also add that, in conjunction with limiting the number of retailers selling the same item on Amazon.com, you’ll also want to implement an automated brand protection program to monitor the Amazon marketplace—and the rest of the eCommerce landscape—24/7 for retailer shenanigans like these.
If you’d like to learn more about how to protect your brand on Amazon, speak with a TrackStreet solution architect.