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> With SBA, Amazon also exerts control over the product’s sale price, by dynamically pricing products to make sure Amazon’s prices are lowest. > Since only bra

> With SBA, Amazon also exerts control over the product’s sale price, by dynamically pricing products to make sure Amazon’s prices are lowest. > Since only brands in Amazon’s Brand Registry can apply for SBA, the pitch is that SBA will guarantee that the brands themselves won’t be priced out of ownership of Amazon’s buy box by other gray market sellers that focus on undermining retail prices. The buy box all but ensures the product listing on Amazon that will get sold over competitors, and sellers “win” the buy box by offering the lowest price. > To ward off concerns over margins, Amazon is offering SBA sellers a minimum gross proceed — which guarantees set profit for sellers based on a set selling price, even if Amazon lowers the price — for each product. The catch: Amazon wrote in its FAQ about SBA that MGP would be revisited “typically once every six months,” and that brands would have seven days to accept the new MGP, or reject it and deactivate a product from SBA. So basically, Amazon always promotes the cheapest products, and they'll automatically lower your product's price to make it cheaper than the knockoffs. You get a guaranteed profit no matter the price, but that can also lower every six months. This strikes me as a bad deal for sellers.

prklmn 7y ago
It’s not only knockoffs. A friend of mine works in CPG and their company’s biggest problem with sales through amazon is that they sell at a loss to compete with grey market sellers who are selling stolen at a much reduced price.
- dpark 7y ago
  You cannot “compete” by selling at a loss, unless you’re competing for the first spot at bankruptcy court. Whenever I hear about someone selling at a loss, I automatically assume that either they’re buying market share as a long bet (e.g. typical new gaming console) or more commonly misrepresenting the actual economics (e.g. car dealers neglecting to mention all the rebates they get off their supposed price).
  - unreal37 7y ago
    There are going to be times (a few days or weeks) where sellers think they can "outlast" the competition in a price war. You're basically betting that the other guy doesn't have the stamina to survive at this price. Of course, if what the OP says is true, if the other seller has a much lower price point than you do, you can't outlast them. They could still be making a profit at $20 while you're losing $5 per unit trying to push them out.
  - kd5bjo 7y ago
    The other common case (not applicable here) is a loss leader: sell something at a loss in the hope that the customers it attracts will buy high-margin items at your store instead of the one they usually frequent.
    - deleted 7y ago
      [deleted]
  - prklmn 7y ago
    Think about inventory holding costs. Not only do you have capital tied up in that product in the warehouse, but you also have the opportunity cost of not being able to stock something else to sell. And to your car dealership point - the way it works for GM at least is that GM sets sales goals for their dealers. Dealer X's monthly sales target is 75 vehicles. They will happily sell lets say vehicles 73, 74, and 75 on August 31st to get their $20k bonus for the month of August. They might not be misrepresenting their supposed price like you think. Also, the same concept of inventory holding costs applies really well for car dealers. It's purely an inventory turnover business. If your lot is full of fusions and you can sell 2 f150s in the time that you can sell 1 fusion at similar profit, you're going to want to get those fusions off the lot potentially at a loss so you can sell more f150s.
- plink 7y ago
  This reminds me of a time I needed a blower fan for my refrigerator and Amazon’s recommended one for next day delivery seemed suspiciously underpriced. I ordered it despite my trepidation that the item was going to be made out of silly putty by a Chinese pirate. Upon receipt, I discovered the serial number was filed off and I rested assured that it was a quality OEM but probably stolen. The motor is still working great which is more than one can say for Amazon.
  - vageli 7y ago
    > This reminds me of a time I needed a blower fan for my refrigerator and Amazon’s recommended one for next day delivery seemed suspiciously underpriced. I ordered it despite my trepidation that the item was going to be made out of silly putty by a Chinese pirate. Upon receipt, I discovered the serial number was filed off and I rested assured that it was a quality OEM but probably stolen. The motor is still working great which is more than one can say for Amazon. Did you notify Amazon or any authorities about this? Would be curious to hear the response.
    - plink 7y ago
      I didn't. My sense of disgust and disillusion was heightened by the fact that it was an Amazon recommended product. Of late, I am more and more spare about shouting into the wind.
- zeroego 7y ago
  I work at a CPG and another issue we have to deal with is an individual having an "in" at a distributor and being able to purchase our products at rock bottom prices. We can usually track these people down, but they can really throw a wrench into an ASINs profitability for a while.
  - ummonk 7y ago
    How does this work? By "our products" you mean products your company produces, right? Are you sending the products to the distributor at a price that is too low to make a profit? Why does it matter to you whether they products are bought directly from you on Amazon or through one of your distributors and resold on Amazon by a third party?
    - zeroego 7y ago
      There's a couple reasons it matters. Unauthorized third parties rarely care about representing our brand correctly. When a consumer has a problem with a product they received the first person they blame is the brand, not realizing they bought it from a completely separate entity. The product breaking during shipment, the customer buying at a price just to go back and check days later and see a lower price, the product being expired...All of these things are outside of our control, yet as a brand we take the blame. In my particular case, there is an "anti-FBA" culture at the company I work for. No one can sell our product for as cheap as we can because we make it. However, without access to FBA, it's much more difficult to have complete control over your pricing on amazon. With complete control over pricing you can ensure that your margins will be better than whatever distributor pricing is. Also the competitiveness of our products on the platform against other brands is directly affected by how much the seller (either us or an unauth)can afford to sell the product to the consumer. If a competing brand sells the same thing for cheaper, they will get more sales and thus more market share. I say "my particular case" but in reality I know of several CPG companies where the anti-FBA culture exists, even though it is the most advantageous approach to selling on amazon with regards to pricing. I wrote this kind of fast so I hope it all makes sense.
vorpalhex 7y ago
For an opt-in program, how is that a bad deal? Either being the lowest price seller isn't worth it (and so you don't care to opt in) or it is, and you spend a lot of effort to constantly deal with price fluctuations (at which point you want to opt in and get covered by the minimum profit limit..)
nkrisc 7y ago
Sounds this solution only exists because Amazon allows itself to be flooded with knockoffs in the first place. Funny how that works.
- newguy1234 7y ago
  Amazon is paying dearly for that which is why amazon is getting so strict on sellers these days. Also the overall shopping experience on amazon is going to hell. Just look up something like a USB battery pack. You'll see dozens if not hundreds of dubious weird sounding packs for sale. I'm convinced that half of them don't even hold the amount of energy they claim to hold.
  - nkrisc 7y ago
    That's absolutely been my experience as well. I used to shop a lot on Amazon around 2007. I've seen the decline firsthand. These days I treat it like a (somewhat) American Alibaba when I'm looking for cheap stuff where the idea of "knockoff" almost doesn't even really apply. Last thing I bought was some connector pins and what I expect to be harbor freight quality crimping pliers. If I'm spending serious money, it's not going to be with Amazon.
hammock 7y ago
It's literally what every mass retailer does. CVS, Walmart, etc will use their power to decide your shelfspace/merchandising, combined with private label products and a pipeline of new branded products in your category (e.g. ever wonder why so many new jerky brands pop up and disappear overnight?), to put downward price pressure on you until your margins are razor-thin. This isn't that different. Anyone who has worked in/adjacent to retail understands how cutthroat the industry can be. Retailers also force suppliers to buy advertising in their owned media channels (e.g. in-store and online) as another way to squeeze them. Amazon is doing/will do the same.
- mooreds 7y ago
  > ...put downward price pressure on you until your margins are razor-thin And consumers benefit. This is the power and peril of the free market. Everyone loves competition as a consumer and hates it as a seller. I include folks that sell labor aka employees.
  - pytester 7y ago
    I don't feel like I benefit from a new brand of jerky brand with razor thin profit margins every week. It makes me wonder about what kind of crap is in the jerky, in fact. Consumers might benefit if mass retailer accumulates liability when it does this but the mass retailer shoves it right on to the party with the razor thin margins.
    - SpicyLemonZest 7y ago
      There are plenty of retailers that go out of their way to fight against the race to the bottom, charging a bit more and taking a bit more care to ensure they only stock good stuff. Amazon even owns one such store, Whole Foods. If other people would prefer to buy dirt-cheap jerky from whoever can offer the lowest price this week, I don't see why it's bad to have stores catering to them too.
      - jcoffland 7y ago
pravda 7y ago
> This strikes me as a bad deal for sellers. ...but a good deal for buyers!
femto113 7y ago
It's common for people outside of retail to focus on margins and ignore turns/sales velocity when considering retail issues, but it misses a lot of the reasoning. Obviously consistently making a loss on a product is a bad idea, but making $1 per sale and selling one per day produces more income than making $5 per sale and selling once per week. On Amazon if you don't "win the buy box" your stuff doesn't sell, or doesn't sell as frequently. What Amazon is trying to do for sellers is ensure that doesn't happen to them, and ultimately is likely to increase their income even if it reduces their margins. Fixing a minimum margin for six months actually seems quite reasonable to me, it gives sellers a chance to make inventory plans on a practical time scale while also ensuring that Amazon doesn't have to absorb any losses indefinitely.

prklmn 7y ago

It’s not only knockoffs. A friend of mine works in CPG and their company’s biggest problem with sales through amazon is that they sell at a loss to compete with grey market sellers who are selling stolen at a much reduced price.

dpark 7y ago
You cannot “compete” by selling at a loss, unless you’re competing for the first spot at bankruptcy court. Whenever I hear about someone selling at a loss, I automatically assume that either they’re buying market share as a long bet (e.g. typical new gaming console) or more commonly misrepresenting the actual economics (e.g. car dealers neglecting to mention all the rebates they get off their supposed price).
- unreal37 7y ago
  There are going to be times (a few days or weeks) where sellers think they can "outlast" the competition in a price war. You're basically betting that the other guy doesn't have the stamina to survive at this price. Of course, if what the OP says is true, if the other seller has a much lower price point than you do, you can't outlast them. They could still be making a profit at $20 while you're losing $5 per unit trying to push them out.
- kd5bjo 7y ago
  The other common case (not applicable here) is a loss leader: sell something at a loss in the hope that the customers it attracts will buy high-margin items at your store instead of the one they usually frequent.
  - deleted 7y ago
    [deleted]
- prklmn 7y ago
  Think about inventory holding costs. Not only do you have capital tied up in that product in the warehouse, but you also have the opportunity cost of not being able to stock something else to sell. And to your car dealership point - the way it works for GM at least is that GM sets sales goals for their dealers. Dealer X's monthly sales target is 75 vehicles. They will happily sell lets say vehicles 73, 74, and 75 on August 31st to get their $20k bonus for the month of August. They might not be misrepresenting their supposed price like you think. Also, the same concept of inventory holding costs applies really well for car dealers. It's purely an inventory turnover business. If your lot is full of fusions and you can sell 2 f150s in the time that you can sell 1 fusion at similar profit, you're going to want to get those fusions off the lot potentially at a loss so you can sell more f150s.
plink 7y ago
This reminds me of a time I needed a blower fan for my refrigerator and Amazon’s recommended one for next day delivery seemed suspiciously underpriced. I ordered it despite my trepidation that the item was going to be made out of silly putty by a Chinese pirate. Upon receipt, I discovered the serial number was filed off and I rested assured that it was a quality OEM but probably stolen. The motor is still working great which is more than one can say for Amazon.
- vageli 7y ago
  > This reminds me of a time I needed a blower fan for my refrigerator and Amazon’s recommended one for next day delivery seemed suspiciously underpriced. I ordered it despite my trepidation that the item was going to be made out of silly putty by a Chinese pirate. Upon receipt, I discovered the serial number was filed off and I rested assured that it was a quality OEM but probably stolen. The motor is still working great which is more than one can say for Amazon. Did you notify Amazon or any authorities about this? Would be curious to hear the response.
  - plink 7y ago
    I didn't. My sense of disgust and disillusion was heightened by the fact that it was an Amazon recommended product. Of late, I am more and more spare about shouting into the wind.
zeroego 7y ago
I work at a CPG and another issue we have to deal with is an individual having an "in" at a distributor and being able to purchase our products at rock bottom prices. We can usually track these people down, but they can really throw a wrench into an ASINs profitability for a while.
- ummonk 7y ago
  How does this work? By "our products" you mean products your company produces, right? Are you sending the products to the distributor at a price that is too low to make a profit? Why does it matter to you whether they products are bought directly from you on Amazon or through one of your distributors and resold on Amazon by a third party?
  - zeroego 7y ago
    There's a couple reasons it matters. Unauthorized third parties rarely care about representing our brand correctly. When a consumer has a problem with a product they received the first person they blame is the brand, not realizing they bought it from a completely separate entity. The product breaking during shipment, the customer buying at a price just to go back and check days later and see a lower price, the product being expired...All of these things are outside of our control, yet as a brand we take the blame. In my particular case, there is an "anti-FBA" culture at the company I work for. No one can sell our product for as cheap as we can because we make it. However, without access to FBA, it's much more difficult to have complete control over your pricing on amazon. With complete control over pricing you can ensure that your margins will be better than whatever distributor pricing is. Also the competitiveness of our products on the platform against other brands is directly affected by how much the seller (either us or an unauth)can afford to sell the product to the consumer. If a competing brand sells the same thing for cheaper, they will get more sales and thus more market share. I say "my particular case" but in reality I know of several CPG companies where the anti-FBA culture exists, even though it is the most advantageous approach to selling on amazon with regards to pricing. I wrote this kind of fast so I hope it all makes sense.

vorpalhex 7y ago

For an opt-in program, how is that a bad deal? Either being the lowest price seller isn't worth it (and so you don't care to opt in) or it is, and you spend a lot of effort to constantly deal with price fluctuations (at which point you want to opt in and get covered by the minimum profit limit..)

nkrisc 7y ago

Sounds this solution only exists because Amazon allows itself to be flooded with knockoffs in the first place. Funny how that works.

newguy1234 7y ago
Amazon is paying dearly for that which is why amazon is getting so strict on sellers these days. Also the overall shopping experience on amazon is going to hell. Just look up something like a USB battery pack. You'll see dozens if not hundreds of dubious weird sounding packs for sale. I'm convinced that half of them don't even hold the amount of energy they claim to hold.
- nkrisc 7y ago
  That's absolutely been my experience as well. I used to shop a lot on Amazon around 2007. I've seen the decline firsthand. These days I treat it like a (somewhat) American Alibaba when I'm looking for cheap stuff where the idea of "knockoff" almost doesn't even really apply. Last thing I bought was some connector pins and what I expect to be harbor freight quality crimping pliers. If I'm spending serious money, it's not going to be with Amazon.

hammock 7y ago

It's literally what every mass retailer does. CVS, Walmart, etc will use their power to decide your shelfspace/merchandising, combined with private label products and a pipeline of new branded products in your category (e.g. ever wonder why so many new jerky brands pop up and disappear overnight?), to put downward price pressure on you until your margins are razor-thin. This isn't that different. Anyone who has worked in/adjacent to retail understands how cutthroat the industry can be. Retailers also force suppliers to buy advertising in their owned media channels (e.g. in-store and online) as another way to squeeze them. Amazon is doing/will do the same.

mooreds 7y ago
> ...put downward price pressure on you until your margins are razor-thin And consumers benefit. This is the power and peril of the free market. Everyone loves competition as a consumer and hates it as a seller. I include folks that sell labor aka employees.
- pytester 7y ago
  I don't feel like I benefit from a new brand of jerky brand with razor thin profit margins every week. It makes me wonder about what kind of crap is in the jerky, in fact. Consumers might benefit if mass retailer accumulates liability when it does this but the mass retailer shoves it right on to the party with the razor thin margins.
  - SpicyLemonZest 7y ago
    There are plenty of retailers that go out of their way to fight against the race to the bottom, charging a bit more and taking a bit more care to ensure they only stock good stuff. Amazon even owns one such store, Whole Foods. If other people would prefer to buy dirt-cheap jerky from whoever can offer the lowest price this week, I don't see why it's bad to have stores catering to them too.
    - jcoffland 7y ago

pravda 7y ago

> This strikes me as a bad deal for sellers. ...but a good deal for buyers!

femto113 7y ago

It's common for people outside of retail to focus on margins and ignore turns/sales velocity when considering retail issues, but it misses a lot of the reasoning. Obviously consistently making a loss on a product is a bad idea, but making $1 per sale and selling one per day produces more income than making $5 per sale and selling once per week. On Amazon if you don't "win the buy box" your stuff doesn't sell, or doesn't sell as frequently. What Amazon is trying to do for sellers is ensure that doesn't happen to them, and ultimately is likely to increase their income even if it reduces their margins. Fixing a minimum margin for six months actually seems quite reasonable to me, it gives sellers a chance to make inventory plans on a practical time scale while also ensuring that Amazon doesn't have to absorb any losses indefinitely.