I have a buddy who sells some custom widget on his own personal website and when we were snowboarding in whistler in March of this year, he complained about this. He was saying that if his widget is $5 on Amazon, he can't sell it for $4 on his site or Amazon will take his product down. He also does 2 day shipping, but unless he pays Amazon for a prime badge, he can't advertise that through Amazon.
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(Amazon seller/manufacturer here) What happens is that Amazon suppresses your listing from search so you don't get exposure.
Think about it this way, Amazon is customer-centric, so when it delivers search results it's implicitly saying "hey this is the relevant item at the best price per your search term". If it can't back that up then it'll often give a product substitute that is the best price.
IIRC, they got in trouble for this earlier this year for outright suppressing listings and had to back down a bit from this - instead of suppressing the listing wholesale you just get low traffic instead.
Amazon was built on the backs of 3rd party sellers. Amazon used them and these sellers are finally migrating to their own backends like Shopify or Woocommerce to build their business, not help Amazon build theirs. It's atrocious how Amazon is punishing them for this.
That was the whole game they played though, by design -- 3P sellers were partially meant as a prospecting tool for long tail product coverage in the marketplace, and when they found a product good enough now Amazon dips their toes in the pool and competes with them.
Some of the unfairness lies in that with the same-ish offerings, Amazon's search will favor the Amazon offerings - FBA instead of 3P shipping, Amazon.com as seller vs third party when the price/shipping is same, etc., but otherwise I think a lot of other things people complain about (cloning products and approaching manufacturers to cut off middlemen) are reasonably OK features meant to benefit customers. As a manufacturer and 3P vendor I kinda made my peace with Amazon on that I guess...
Yep, Amazon didn't do anything wrong, but when sellers catch on and want to own their actionable data and build their own operations, Amazon should let them. Locking them in further is not right.
I was one of those sellers and now I'm working on an opensource solution to help sellers migrate and not be dependent on Amazon FBA alone.
Everyone just needs to beat Amazon at their own game and do what many people are doing as 3p sellers and setup their Amazon presence under and different name and possibly even a different LLC.
If your 3p seller account is an "authorized distributor" of your product, then Amazon has no power to require that your website sell the product for the same or more money.
They're not requiring it. They just suppress the buybox if they see a cheaper offer, regardless of who's selling it.
What is 3p?
“Third party”. In this case it just means “not Amazon”.
3p == 3rd Party Seller.
Why is Google allowed to suppress sites, while amazon shouldn't? Or out sites on the third page where no one goes...
Why do 3rd party sellers matter?
They are just middlemen. It is a good thing that they are going away.
It results in power prices for consumers.
Because those middlemen create competition in an online marketplace that is increasingly monopolizing the online market.
And all 3p sellers are not middleman. Some are manufacturers and others are simply willing to take a smaller margin or are even selling used or refurbished products that people like me usually buy when given the opportunity to save a lot of money.
That's not a truism. If manufacturers only sell DTC (direct to consumer) and don't allow third party sellers to compete they do so for two reasons, price control and brand control. The lack of competition between third party sellers allows them to sell at any price the market will bare since they are the only ones you can buy the product from. When third party sellers can distribute/sell the product as well and there is no enforced MAP (minimum allowed price) it leads to a race to who is willing to accept the smallest margins on the sales, which in turn makes it purely a who can do the most volume with the best marketing. This actually results in the lowest prices for consumers.
> allows them to sell at any price the market will bare since
This doesn't make any sense though, as an argument.
If I am selling to 3rd parties, it is also true that I can set whatever price I want.
So, if I set the price to 5$, no 3rd party will be reselling my product below 5$. So I can still set the price...
The marginal price isn't constant. Third party sellers can buy large quantities for cheaper unit prices. It's essentially the manufacturer decentralizing their inventory risk and outsourcing the costs of dealing with a ton of individual consumers.
It’s a good question and it’s a shame you’ve been downvoted for raising it. The other answers don’t really get it to the heart of it. The question is why any company would deal with other companies rather than perform those same functions in-house. It has to do with the transaction costs of doing business with other firms and the efficiencies and inefficiencies of making your company larger and more complicated.
Ronald Coase wrote the paper that first got to the heart of this, one of the most important economics papers ever published: https://en.m.wikipedia.org/wiki/The_Nature_of_the_Firm
It won’t result in lower prices. The middlemen are the ones who are responsible for the low prices.
Exactly. Competition is what leads to lower prices. Getting rid of the middlemen and just having Amazon would lead to them having full control of what the price should be.
It's complicated -
On the plus side, 3p vendors contribute by getting a product from 0->1 or 0->100 units per day. This is what the industry calls "prospecting", and confirming that there is product-market fit for some product, and a lot of times marketing it in a way that causes it to sell. Supporting the customers, troubleshooting the various issues along the supply chain... this is something that a 3P seller usually contributes to (since a lot of times the manufacturer is focused on designing and making large quantities of product and not really focused on the rest of the supply chain).
This up-front work basically gets paid over time till it becomes rent-seeking behavior, at which point it gets disrupted by a direct relation between vendor and manufacturer. And basically the marketplace needs to hash out what's "fair" from prospecting to rent-seeking.
Suggestion: make two technically-different widget models, sell the more expensive one on amazon and the cheaper one on own website. The differences don't have to be much, but as long as they're different products you're compliant with Amazon's terms.
Technically all they really need is different UPCs. Appliance and electronics manufacturers have been doing this for decades so Walmart or Target can have "exclusive" items.
Or different companies selling the exact same UPC. Just don't let Amazon know it's owned by the same company.
But Amazon isn't the only one that does this. Walmart and co have the same rules.Sell at MSRP everywhere or they will drop you like a rock. Only the retailer gets the privilege of discounting.
Sadly nobody will care about breaking up the physical retailers.
Use a shade to list on FBA, give them wholesale pricing on the up and up for what your Amazon juice would be.
That's both not true and not the issue here.
If he sells some custom widget he can do whatever he wants with it. Amazon won't even know and/or care about what happens off Amazon. The Amazon.com Retail team probably won't be interested in buying it and selling it for $5 if he's selling it for $4 on his own site, but the marketplace/FBA side of things doesn't care at all… assuming it's actually a custom widget.
You don't explicitly pay for the Prime badge. You need a Professional account to sign up for Seller Fulfilled Prime, but your eligibility is based on volume and performance.
>Amazon won't even know and/or care about what happens off Amazon
Incorrect. They used to ban it, now it's officially allowed but they will actively monitor and block the buybox if your price is cheaper elsewhere. I've spoken to many sellers caught by this.
> That's both not true and not the issue here.
> The Amazon.com Retail team probably won't be interested in buying it and selling it for $5 if he's selling it for $4 on his own site, but the marketplace/FBA side of things doesn't care at all… assuming it's actually a custom widget.
> You don't explicitly pay for the Prime badge. You need a Professional account to sign up for Seller Fulfilled Prime, but your eligibility is based on volume and performance.
Oh and I used to work at Amazon so these practices are not surprising.
[1] - https://www.inc.com/guadalupe-gonzalez/amazon-removes-price-...
> He doesn't want to be fulfilled by prime, he manages his own shipping pipeline just a good as Amazon's.
As a consumer if I see a prime logo and it's not Fulfilled by Amazon I would feel scammed. Amazon Logistics is the only courier where I live that is reliable and on-time and I have little interest in buying anything on Amazon that is fulfilled a different way.
In that case, enjoy your fraudulent/counterfeit products.
https://www.engadget.com/2018/05/31/fulfilled-by-amazon-coun...