This week delivered a huge surprise to many marketplace sellers. Those trying to list new products to their Amazon stores found they were restricted and prevented from listing specific brands like Lego, Microsoft and many others.
Amazon rolled out a new program called Brand Gating. Now resellers who want to offer products from participating brands must be pre-approved to sell those items.
There are steep requirements to gain permission to sell participating brands
- there’s a fee of $1000 to $1500 per brand. Existing sellers are exempted from this fee.
- you have to provide invoices showing that at least 30 products were purchased directly from the brand. No mention has been made yet of products that have to be purchased through distribution.
- you must obtain written permission from the brand to sell their products.
Small resellers will be hurt
Many smaller resellers will find this to be too great a bar to hit, especially if several of their existing brands are part of the program. Those who buy off clearance racks for resale (retail arbitrage) at a profit are likely to migrate off Amazon. Also hurt will be those who purchase hot, new products such as Target’s designer lines, new video games with the goal of profiting via a hefty markup.
For now other marketplaces have not instituted similar programs. Ebay, Walmart, Sears, New Egg and Rakuten are alternatives. I suspect that the head of these companies will be watching Amazon closely to see what happens. The benefit to Amazon is the protection of their reputation, fewer lawsuits for not policing their marketplace and happy relationships with bigger brands. If it works out well, other marketplaces may follow their lead.
Brands should be happy
I’ve been the brand before and Amazon was less than helpful when it came to managing how our brand was presented onsite. Enforcing MAP policies and ensuring the quality of merchandise being sold with our label was challenging. For brands things just got a lot better. Plus the marketplace for their approved resellers will get less competitive so price erosion should be reduced.
Still with no information available on the Amazon website yet, it’s hard to gauge cost to participate or even what it takes to qualify. Will smaller brands be able to participate? That’s still to be determined.
Is this good for shoppers?
Amazon’s goal is to eliminate counterfeits and to remain a trusted source for brand name goods for consumers. Will this be good for consumers? It is when a guarantee of authenticity is important but it will likely mean higher prices for consumers.
It will be a lot easier for brands to enforce strict Minimum Advertised Pricing (MAP) policies as they can revoke permission for resellers who violate policy. This will result in fewer price wars.
Those resellers who exist by hunting down great deals then reselling product will disappear off the marketplace so some items may be harder to find and below MAP prices close to non-existent.
Grey market resellers won’t pass muster. Grey market products are usually genuine, branded product but are purchased outside of the U.S. for resale here at a lower price. It is not uncommon to find grey market cameras and other consumer electronics.
Full information on the Amazon Brand Gating program
I find it rather spectacular that Amazon has begun to enforce its new program without any prior notice or posting of information on their website. At the moment, there is limited information available via the Amazon Seller Forums. All I can recommend is that current sellers and brands contact their Amazon representative to see what impact it has on the way you are conducting business.