by Rachel Greer, Cascadia Seller Solutions
Many brand owners are selling on Amazon as a vendor and assume this is the end of the story for their Amazon channel. However, these owners don't realize they may be leaving a lot of money on the table by not fully utilizing all of Amazon's platform. We'll outline here various ways to protect your brand on Amazon by using a seller account, how a seller account may be more profitable for some products or the entire brand, and when costs are broken down for each channel.
What is retail arbitrage?
Retail arbitrage refers to the practice of small internet middlemen who go on "sourcing trips" to local stores and use scanners or their smart phones to find products heavily discounted that can be resold online for significant profits. This is often done with discontinued items or slow moving items that the brand owner tried to get off their books. These sellers will create their own detail pages for the brand owner's products and, sometimes, these are not authentic products. They make money because Amazon takes care of the entire fulfillment and customer service process for them, through Fulfillment by Amazon (FBA), a program that allows sellers to ship in boxes and boxes of purchased retail goods to Amazon's fulfillment centers and Amazon takes care of the rest. While there are storage fees and pick-and-pack fees associated with this, the sellers can still make money by moving enough volume through the system.
What can a brand owner do?
By signing up for a seller account and getting brand registered, a brand owner gains full control of these pages and can request they be merged with the correct pages or deleted from the catalog. They can also report violations of their intellectual property and report counterfeit goods, if that is an issue. Brand protection is a major reason for opening a new seller account and setting up monitoring on Amazon. Additionally, by using FBA themselves, a brand owner gets the same benefit of direct to customer fulfillment that Amazon offers a vendor, but with a different pricing structure as the seller gets to set the price at which their product will sell.
What other reasons are there to expand a seller account?
Retail arbitrage sellers are making a living doing this work – there are thousands and thousands of sellers who make enough money reselling items they've found in stores to do only that for their income. This is a huge volume of sales that brand owners are leaving on the table! By transferring discontinued or slow moving products to your seller account instead of doing small PO's with Amazon Vendor Central or selling the remainder of the item off at a discount, the brand owner can continue to make full profit on that product. This is obviously only one part of your overall strategy and approaching it in a data driven manner comparing costs for doing business on Vendor Central and Seller Central is essential, but there is certainly room for improvement for many brand owners.
Why does Amazon allow violations of rules and counterfeit items?
Amazon is a very large platform and it would be impossible in the current business model to evaluate everything before it goes live. As such, Amazon relies on brand owners to police their own products through test buys and reports, and expects that customers will complain about bad detail pages or counterfeit products. Because the platform is explicitly set up expecting you to own your own brand, it's essential to set up a process for monitoring and managing this brand risk.
How does this work in other marketplaces?
Perhaps a vendor relationship makes the most sense for you in the U.S., but a seller account makes the most sense for you in Canada or in Europe, where you can manage the compliance and pricing for the product without interference from Amazon. Amazon has high expectations of documentation if they act as the importer of record. Obviously, you should ensure compliance, but it is one less hurdle to selling in Europe by simply setting up an FBA account and having Amazon directly fulfill the products. This is especially true in China and Japan, where Amazon has struggled to grow a solid import presence. In some cases, the only way to ensure your legitimate product – compliant with local regulations – is sold on the platform is to import it yourself and sell on FBA.
So, how do you get started?
Go to sellercentral.amazon.com and sign up for a seller account using an e-mail that is shared by multiple people at your company (something like support@ or info@) and ensure it's regularly monitored. Often, notifications are only sent to the primary e-mail address. Sign up for brand registry and then start cleaning up the listings listed under your brand. Have your inventory planning team map out different scenarios for products, factoring in chargebacks, fees, and marketing costs on the Vendor Central platform as well as factoring in pick-and-pack fees, referral fees, and storage fees on the FBA Seller side. Make smart, data-driven, informed choices about what makes the most sense for YOUR business.
Rachel Greer has over seven years of Amazon experience, most recently in the Product Compliance team at Amazon, managing audits, product testing, and inspections for the global retail and private label compliance programs. Rachel is also experienced with product recalls, product safety/Andon Cords, and restricted/prohibited products at Amazon. She is focused on simplifying complex global regulations to help small and medium vendors expand their selection or go global with minimal recall/port seizure risks or product defects. Rachel holds an MA from the University of Oregon in Early Modern European History and an MBA from Seattle University with a focus in operations and international business.
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