Amazon: The Tail that Wags the Dog
Let’s face it. If you’re not selling your product on Amazon, someone else is. If you have an approved trademark, you can register your brand in the Amazon Brand Registry and submit trademark violations to have unauthorized sellers who can’t provide proof of purchase removed. There will always be sellers who purchase your product at retail and re-sell it on Amazon. Because of the First Sale Doctrine, any seller with proof of purchase, can re-sell products on Amazon. These small-time sellers are unlikely to have a major impact on your business.
However, if you’re a brand owner or manufacturer and you’re not controlling your distribution channel right from the beginning of the product life-cycle, you’ll always be running a step behind. Without rock-solid agreements in place with distributors or other wholesalers, preventing them from selling on Amazon (or selling to other wholesalers who will sell your products on Amazon), large-scale unauthorized sellers can eventually destroy not only your MAPP but negatively affect your wholesale pricing, relationships with retailers, not to mention your bottom line.
Amazon has become the tail that wags the dog. When your product pricing on Amazon is undercutting your retailers and other distributors – even if you, as the brand owner, aren’t the ones offering the product – you will eventually see a degradation of your wholesale pricing. This is because all major retailers and e-tailers have sophisticated price matching programs running in the background. Most everyone is concerned about prices on Amazon.
If you’ve been selling your $19.99 MSRP product to Wal-Mart for $8.50 per unit and they see the product offered on Amazon for $16.99, they will drop their price to maintain their sell-through. Over time, if this becomes a pattern (and it will!), they will offer you a lesser wholesale price for similar products so they’re not cutting into their margins when inevitably dropping their pricing to compete with Amazon.
Controlling your distribution channel to prevent distributors and wholesalers from selling your products on Amazon is crucial to your business. If you have questions on how to take control of your distribution channel and protect your brand on Amazon, contact us for a Free Evaluation!