Counterfeit sellers pose a growing threat to consumers and brands, especially in ecommerce. According to a January 2020 report by the Department of Homeland Security, there were $509 billion worth of counterfeit goods flowing through international trade in 2016. The rise in international counterfeit trade, which was made easier through the growth of ecommerce, is expected to displace over 5 million jobs by 2022. The threat of counterfeits – both to consumer safety and to economic stability – led DHS to recommend that marketplaces be held liable for counterfeit goods sold on their platforms.
Amazon took notice. According to their 2021 Brand Protection Report, Amazon seized over 2 million counterfeit goods from FBA centers in 2021 before they were sent to customers, and Amazon blocked 10 billion suspect listings from publishing on Amazon.
While Amazon’s heightened anti-counterfeit efforts are sincerely appreciated, the threat remains. Brands cannot wait on Amazon to better police the marketplace; they need to take action themselves to create a robust Amazon brand protection strategy.
In that spirit, we’ve written a new eBook containing 10 strategies for protectively and reactively protecting your brand control on Amazon. You can download it for free, or keep reading for an excerpt.
Three Key Areas for Amazon Brand Protection
Legal compliance encompasses the basics: You should file for intellectual property rights (IPR) so you have legal footing if counterfeiters or copycats appear. Your product must also meet all legal criteria for selling the particular product type, which are set by various regulatory agencies, such as the Consumer Product Safety Commission (CPSC), Food & Drug Administration (FDA), Federal Communications Commission (FCC), Department of Energy (DOE), Federal Trade Commission (FTC), Environmental Protection Agency (EPA), National Highway Traffic Safety Administration (NHTSA), and more.
Marketplace compliance largely overlaps legal compliance, but Amazon actually has stricter requirements than many regulatory agencies. You should familiarize yourself with Amazon’s content requirements, otherwise a non-compliant claim could result in your product listing getting suspended for weeks or months.
Supply Chain Control
Unauthorized sellers obtain product through an unsecured distribution network. Counterfeit product enters at fulfillment centers, where it mixes with genuine inventory. Once black market or gray market sellers have inventory and are in your listings, they can add erroneous or misleading content, violate your pricing policy and cause cascading issues with your authorized online and brick and mortar (B&M) retailers, and undermine consumer’s trust in your brand.
Two Types of Unauthorized Sellers
Delving deeper into the supply chain issues, there are two types of unauthorized sellers who present different threats and require different solutions.
Gray Market Sellers
The gray market represents sellers who obtain and sell genuine goods, but they do so on unauthorized channels not approved by the brand. Amazon does not take action to mitigate gray market sellers, as doing so would be antithetical to their goal of offering the most expansive product catalog available.
Black Market Sellers
The black market represents counterfeit goods that are being illegally manufactured, violating the brand owner’s intellectual property rights. Amazon will take action against counterfeit goods (if you can provide proof), although they won’t take action against copycat products that encroach on IPR.
The vast majority of brands send their product to Amazon’s fulfillment centers so they can provide Prime shipping speeds with FBA. Once inventory is at FBA, Amazon prefers to commingle inventory because it is more efficient; however, this practice makes it incredibly easy for counterfeit products to mix with genuine products.
Are All Unauthorized Sellers Bad?
While the dangers of counterfeit products are obvious – their poor quality puts consumers’ safety at risk and they undermine public trust in your brand – you may be wondering if gray market sellers are really that much of an issue. Afterall, doesn’t more sellers mean more sales, and therefore more purchase orders to you as the manufacturer?
Do You Trust Them to Represent You Well?
Unauthorized sellers are problematic because they represent how your brand is represented to consumers, without having a vested interest in representing your brand correctly. Any seller carrying authentic product can update content in your Amazon product listing, including title, bullet points, and imagery. This can lead to inaccurate or misleading information, poor branding, and inconsistencies between your sales channels.
Enrolling in Amazon Brand Registry is a huge help for this issue, as it allows you to designate who has permission to edit listing content.
How Will They Affect Your Pricing Strategy & Business Relationships?
Unauthorized sellers also often drop pricing below MAP to capture sales. Since Amazon and other major marketplaces enforce pricing parity, this can result in rolled buy boxes, which reduces your total sales.
Normal vs Suppressed Buy Box
The break in pricing policy can also harm relationships with authorized sellers, both in online and brick-and-mortar channels. Because there isn’t a direct relationship between your brand and the unauthorized seller, getting them to uphold your pricing policy can be nigh impossible.
How to Protect Your Brand Against Unauthorized Sellers
So, how do you combat these issues? We’ve written an entire eBook about just that. Specifically, the eBook breaks down how to use 10 programs/tactics you can leverage, including:
Filing for IP
Download the eBook
Brand protection goes beyond Amazon. All digital and physical sales channels can affect each other because they all affect your brand’s representation to consumers. As such, a holistic approach is essential for long-term stability and success. Whenever you start planning to launch a new product or expand onto a new sales channel, carefully review how it will impact other channels.
If you want help planning your ecommerce strategy, reach out to Kaspien. We have over 13 years of experience helping brands flourish on the world’s leading online marketplaces.
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For sellers on Amazon, price matching may initially be a confusing subject. In the traditional sense, pricing matching is when shoppers can show a seller that a given product is available for less in another store, and ask the seller to match that price. Amazon does not do this.
However, as sellers, we know that doesn’t quite capture the full story. While Amazon may not offer price matching on a case-by-case level, they effectively try to force price matching through their seller contracts, which can penalize sellers if a product is offered for a lower price somewhere else.
Amazon Pricing Parity Provision
Up until 2019, Amazon had a clause within its third-party contracts requiring sellers to set their Amazon prices at or below prices on other marketplaces. This clause, known as the price parity agreement, helped to ensure that shoppers did not find the products elsewhere for cheaper. Amazon stated that they did this in order to provide consumers with the best user experience and lowest prices.
If sellers did not adhere to pricing parity clause Amazon enforced, their Buy Box would roll up, their ASINs would be suppressed, and their accounts may also be suspended. This change in policy was due to political backlash against the company as many individuals claimed that the section was anti-competitive in nature and violated antitrust laws.
So, if Amazon took out the clause that made this occur in 2019, what has happened since then?
Amazon’s Marketplace Fair Pricing Policy
Amazon replaced the price parity clause with their Marketplace Fair Pricing Policy. While this policy was a change, it didn’t actually make much difference in their pricing model. If a seller does not price its products at a competitively low price, Amazon still has the ability to alter the product’s listing. To abide by the new policy, sellers must:
Set a competitive price for products in relation to other platforms (like eBay, Alibaba, Walmart, etc.)
Set shipping fees that are reasonable
Set reference prices that are not misleading for shoppers
If sellers do not abide by these rules, among others within the policy, they may be subject to Buy Box roll up. This “bait and switch” maneuver of pricing parity with the fair pricing policy laid the grounds for the Washington, D.C. attorney general to announce a lawsuit against Amazon in May 2021. The lawsuit argues that Amazon has created an artificially high price floor through both policies, harming business competition and consumers.
What is a Suppressed Buy Box?
Buy Box suppression refers to a condensed Buy Box in comparison to the regular, full size Buy Box consumers are used to seeing.
Here is what consumers expect to see as they go to purchase a product on an Amazon listing:
When rolled up, the Buy Box does not contain the expected “Add to Cart” or “Buy Now” option like it usually would. Instead, the listing contains an option forcing shoppers to take the extra step to look through all sellers in order to choose which to purchase from.
While this is only one extra step in the buying process, it has real negative consequences. The Buy Box is a very important selling point for consumers as 82% of purchases happen within the Buy Box. To lose this critical part of your listing could be detrimental to product sales.
Do Sellers Still Have to Price Match on Amazon?
While this change in policy does mean that Amazon will no longer require sellers to sell for the lowest amount on their platform or match prices on other platforms, it does mean that sellers still need to take the steps to stay competitive in order to keep their Buy Box open.
Amazon takes numerous factors into account, specifically your product’s pricing, to determine if the Buy Box is open or suppressed. In order to mitigate the possibility of you losing this important portion of your listing, it is absolutely vital you watch your competitor’s pricing on other online marketplaces.
Which Marketplaces does Amazon Fair Pricing Monitor?
Specifically, Amazon watches Walmart, Target, Alibaba, and eBay. There’s also reason to believe that Amazon monitors category-specific websites, such as Chewy.com for pet products, and larger direct websites, although no official list of monitored sites has ever been publicly shared.
Amazon’s Marketplace Fair Pricing Policy page keeps the details vague, stating that Amazon can “remove the Buy Box, remove the offer, suspend the ship option, or, in serious or repeated cases, suspending or terminating selling privileges” when sellers offer products for “significantly” (another ambiguous term) anywhere on or off Amazon.
How to Craft an Effective Pricing Strategy for eCommerce
With Amazon holding the lion’s share of U.S. ecommerce market share, most consumer goods brands cannot afford to ignore the sales channel. If you want to take a multi-channel approach to ecommerce – selling on Amazon, Target, Walmart, eBay, direct websites, and more – you should know that Amazon isn’t alone in enforcing pricing parity either: Target and Walmart both have similar fair pricing policies for their online marketplaces.
The natural conclusion, then, is that your pricing strategy should feature a consistent retail price for all sales channels (remember the D.C. AG’s argument about an artificially high price floor?).
The easiest way to ensure consistent pricing is to limit the number of sellers you work with. The fewer sellers carrying your product, the easier and quicker it is to communicate and enforce your pricing strategy. You can take this all the way to working with just a single third-party seller across all online sales channels and/or being your own seller across all online sales channels.
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On Amazon, third-party sellers (commonly referred to as “3P sellers”) are any company selling on Amazon’s marketplace other than Amazon itself. Amazon owns its marketplace, so Amazon is a “first-party” seller, while everyone else is a “third-party.”
You can divide Amazon third-party sellers into two main subcategories: private label sellers and retailers. By private label, we mean that the seller is also the manufacturer; the same company manufactures and sells the product. Retailers, on the other hand, buy the product from manufacturers at wholesale cost, then resell it for the retail price on Amazon. There are over 6 million of third-party sellers on Amazon as of 2021.
Amazon is both a private label seller and a retailer because they sell original products, such as their Amazon Basics line, while also retailing products of major companies. Kaspien operates similar, retailing products for hundreds of brands, while also curating several private label brands as well, which we use as guinea pigs to test new strategies and marketplaces. We then apply our findings to retail partners’ strategies.
Many brands choose to work with a third-party retailer to sell their products on Amazon because of the work it requires. Producing a product is one thing. Selling it on Amazon is another. Both require a great deal of expertise and infrastructure, so oftentimes brands will focus on product creation and partner with another company to handle logistics, marketing, sales, and customer service.
If you’re shopping for third-party sellers, discerning which is the best fit for your brand can be quite difficult. To help you narrow down the third-party sellers worth your time and your business, here are 3 questions we recommend asking to quickly identify the top candidates.
1 – How Much Does It Cost to Have You Retail My Products?
If you partner with an Amazon third-party seller solely to retail your products, there are no upfront costs. Instead, third-party sellers typically purchase from you at wholesale cost and retail your product for a thin margin. Costs enter the equation only if you choose to utilize other services they offer.
These services will vary in cost. Payment structures range from a flat fee, hourly rate, discounts on purchase orders, and so on. Usually, these services are optional, although in some select cases, brands may be asked to pay a retainer upfront. Retainers are usually charged when the margins on a product are low, such as when launching a new product and investing heavily in marketing to spread the word.
It’s important to be aware of these costs before you sign on to work with a third-party seller. When you approach a potential third-party seller, ask them a few questions about their cost structure, such as:
What are your upfront costs?
What is the payment structure for your services?
Will we have to pay a retainer?
2 – What are the Benefits of Working with You as Our Amazon Third-Party Seller?
One of the main benefits of partnering with a third-party seller is that they can leverage economies of scale. The economics of scale are cost advantages that companies reap as they combine volume with heightened efficiency. As companies produce more goods, the cost per good generally decreases. This is one reason why you can find better rates when buying in bulk. When third-party sellers work with many brands and/or products, they enjoy a similar situation, facing a higher total price, but better rates. They can pass on these better rates to the brands they partner with in the form of better margins
Some third-party sellers also offer a variety of different products and services that their partners can leverage to improve results. As previously mentioned, many 3P sellers offer digital marketing services, creative services, brand protection services, and logistics & supply chain services. These areas of specialty are important for growth and scaling your brand, and you can outsource them to your third-party seller instead of taking on the expense of an Amazon agency or full-time employee.
There is also the financial situation to consider when planning your online strategy. By working with a third-party seller and employing their additional services, you save on the costs of hiring new staff, building out new processes, purchasing software, and a host of other costs. These actions might not be feasible for your organization, especially during the COVID-19 pandemic.
For many brands, leveraging a third-party seller is much simpler and more affordable than developing in-house capabilities.
3 – What Expertise/Tools Do You Have and How Will They Grow My Brand?
In addition to asking what a third-party seller could do for you, you should also reflect on what you can do for yourself.
What capabilities, expertise, and core competencies do you have in house?
What capabilities couldn’t you develop in-house?
What software and services does your potential third-party seller have and how will they supplement your business?
By asking these questions, you can identify the gaps that could be filled with a third-party seller. For example, many newer brands have a limited understanding of selling on the Amazon marketplace, how to optimize their online channels (which differs significantly from brick and mortar), and the overall impact of scaling on Amazon. For a newer brand like this, it would make sense to find a 3P seller who has a long history selling on the Amazon platform.
Focus on Your Brand
There’s a lot to deal with in the world of ecommerce. Climbing marketing costs, low visibility, a saturated marketplace, and more create challenges for established and emerging brands. Working with a third-party seller may be the best way to gain the kind of traction your brand is looking for, freeing your time to focus on developing great products that consumers want.
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Update:In June 2021, Amazon started allowing sellers with Brand Registry to send direct, templated messages to buyers that left a critical review. To learn more about this update and its implications, check out this blog post.
In December 2020, Amazon announced that it was disabling product review comments, the feature that allowed shoppers and sellers to post text replies to product reviews. As a co-founder of SellerSmile, an e-commerce customer service agency, commenting on reviews was a vital opportunity to build the brands we represented.
Despite losing the ability to comment, there’s still extraordinary value stored in the details of your reviews. That’s why we developed a simple, four-step approach to convert Amazon product reviews into insights: 1) collect, 2) categorize, 3) report, and 4) improve.
I’d like to share that approach so you can apply it to your own brand, but first, a brief overview of product reviews on Amazon leading up to this change.
Growing Concerns About Product Reviews
Around 2015, the “private label” selling strategy was one of the best and biggest trends on Amazon. Instead of re-selling another brand’s products, sellers everywhere were creating their own products, brands, and intellectual property, and using FBA for distribution.
Since the number and average rating of reviews were highly correlated with the success of an FBA product on Amazon, this created an environment where sellers would go to great lengths to outcompete one another to the highest rating with the most reviews.
Starting in 2016, the authenticity and legitimacy of product reviews on Amazon became subject of greater attention and scrutiny. Amazon banned seller-incentivized reviews and released Amazon Vine and the Early Reviewer Program (now discontinued). Both of these programs were intended to offer sellers a legitimate way to gain their first authentic reviews on new products.
Review Management Before Comments were Disabled
When we started SellerSmile in 2017, we strove to embody Amazon’s first Leadership Principle, “Customer Obsession” in all of our services. For example, we’d complete the following tasks, nearly every day, for each listing:
Search for new product reviews and post a customized, assistive comment
Search for the reviewer’s order to reach out in a direct message to offer a resolution
Record the number and location of review comments.
Using the comment feature according to Amazon’s Community Guidelines, we could offer helpful public support, boosting our brand’s perceived helpfulness, which would increase shopper trust.
If we could assist a customer with a swift resolution, the reviewer might modify or even remove their negative review altogether. When that happened, we felt justified in all of our efforts.
Amazon Disables “Comment” Feature on Product Reviews
In December 2020, from the Customer Reviews dashboard inside Seller Central, Amazon revealed they were removing comments from reviews,
“Please note that commenting on reviews has been disabled. There were many gaps in the comments feature as it existed, it was subject to abuse, and it did not provide sufficient value to our customers. In order to innovate faster and provide a great shopping experience, we are retiring this feature to make way for future innovation for customers in our store.”
This change was especially surprising since Amazon had recently launched Customer Reviews on the Brand Dashboard, which conveniently aggregated reviews into a feed, encouraging sellers enrolled in Brand Registry to manage and reply to them from inside Seller Central.
How to Manage Product Reviews Without Commenting
Every day, people share true and vivid experiences they have with the brands they choose, in the form of public product reviews. Sellers can tap into this feedback to validate assumptions about their products and practices.
Follow these four steps to manage your Amazon product reviews:
Step 1) Collect
Decide how you’ll record and store your product review data. We use the built-in reporting Help Scout offers, but the easiest way to start is with a simple spreadsheet, such as an Excel or Google spreadsheet.
How to find your most recent Amazon product reviews:
Navigate to one of your Amazon listings
Find the “Customer Reviews” section
Sort by “Most recent” in the list picker
Record each new review as a new entry in your records
Will you monitor your full catalog or a limited list of products? Some sellers manage catalogs of millions of ASINs while most work with far fewer. In either case, a smaller fraction of products tends to receive a larger share of sales and reviews.
Step 2) Categorize
Record the ASIN, rating, and marketplace of each review. Assign one or more “categories” (see below) that describe the main theme or topic of the review and record notable reviewer comments. These entries will allow you to create helpful reports in Step 3.
We recommend tracking at least these five data points for each review:
ASIN and/or SKU
Star rating (e.g., 1 to 5)
Marketplace (e.g., US, CA, UK, DE, etc.)
No response needed/SPAM
Notable comment (Text paraphrase, keyword, or snippet of the review)
Step 3) Report
Create charts, graphs, and tables that visualize the information. A few useful reports include:
Marketplaces. Show reviews by marketplace over time to see where more marketing efforts may be needed.
Categories. Create a pie chart of the review categories you see each month then compare to see trends and changes over time.
Top Sellers. Show all the review details of your best-selling products (ratings, marketplaces, categories, etc.).
Read your reports periodically, looking for patterns, anomalies, and anything else confusing or fascinating. Is a certain category or issue recurring?
The best place to start is in the negative reviews. Brainstorm, then implement and measure tests that would prevent those poor experiences from happening in the first place. When you see signs of joy and satisfaction, understand why and make a plan to deliver that positivity with greater consistency.
Examples of common insights from product reviews:
Ways to improve existing products
Which new products to introduce next
What information to include in the listing images, bullets, title, FAQ, keywords, etc.
When to make a change to product packaging
Where in the customer journey do pain points exist
As you monitor your reviews over time, you might see the content and ratings shift in response to the changes you make in your business. By enhancing awareness of the content in the reviews, we can more readily see the root causes of both negative and positive experiences surrounding a brand. Harnessing this knowledge can lead to brilliant and repeatable successes.
Why We Miss Review Commenting
Sometimes, when an Amazon customer requires assistance the first and only place they go to is the reviews page to share their experience with the community. We used to meet customers there, offering comments as assistance or informing them how to contact us directly for a resolution. Today, there may be an even greater advantage in designing easy-to-use products, since your support team’s ability to educate customers in the reviews has been reduced.
Rarely, Amazon reviewers will publish descriptions and images of injuries or harm that a product has caused them. Examples include allergic reactions, cuts, bruises, burns, or safety complaints. In cases like these, the reviewer may require immediate, white-glove support, but with commenting gone, the only chance for the seller to reach out to the customer has been taken away.
Product reviews used to be more like a forum, an open room with many voices and threaded responses. Now, it feels more like a public wall with privileged access for reviewers only. As stewards of our clients’ brands, we feel like we have the responsibility to contribute to conversations about them, wherever they occur.
The Future of Reviews and Customer Service on Amazon
We’ve seen a wider trend of limiting access to Amazon’s customers. We know that they’re working to “make way for future innovation…”, but that might mean less freedom of expression for brands trying to make a special connection.
We recommend a multi-channel approach so unforeseen changes to Amazon’s features or guidelines are less disruptive to your business plan.
SellerSmile is a team of experts in e-commerce customer service. Schedule a call and let’s discuss how we can help improve your store’s product reviews to win more of the hearts and minds of your customers.
If there’s one thing people will always have an appetite for, it’s entertainment. 2020 saw that appetite grow even stronger as COVID-19 forced millions to adapt to virtual learning, remote work, and social distancing.
Whether it was to alleviate boredom, reduce anxiety, or just have fun, the Toys & Games category on Amazon boomed in the historic year. Nearly every major Toys & Games brand also experienced notable growth in 2020, including Lego, Hasbro, and Mattel. In 2021, the global Toys & Games industry is expected to surpass $330 billion in revenue.
It wasn’t just multibillion-dollar brands that grew either. Kaspien partners with hundreds of Toys & Games brands of all sizes. In 2020, we saw Amazon sales increase 30% year-over-year. Ad costs were also down, with our advertising cost of sale (ACOS) decreasing 29% year-over-year.
As we move through 2021, the Toys & Games category continues to enjoy strong performance. Comparing January through April 2021 to 2020, Kaspien’s partners in the Toys & Games have grown Amazon sales by 18%, on average. Even with Amazon’s strong category presence and the ubiquity of the top toy brands, the constant desire for fresh entertainment means new opportunities for growth continue to emerge for brands of all sizes.
One of the Largest Categories
Amazon has one of the largest selections of toys in the world, making it a popular destination for shoppers and sellers alike. As a result, brands operating in the Toys & Games category face tough competition, including household name brands like Lego, Hasbro, and Mattel. To succeed in this space, brands need dedicated Amazon expertise, whether they hire for that internally or acquire it through a partnership.
High Competition, but Niches Create Opportunity
While Toys & Games as a whole is a saturated category, there are dozens of subcategories and niches that offer ample opportunity. Toys & Games can differ immensely by factors such as price, complexity, target age range, target gender, genre, trends, type, and more. Products and marketing aren’t competing with each other at a category level, but on a niche level.
Amazon Retail (1P) has a Strong Presence
Speaking of larger brands, Amazon Retail (Amazon first party or 1P) partners with many of the biggest players in this space. According to documents provided by Amazon to the U.S. Congress, Amazon Retail holds 9% of toy listings on Amazon while capturing 42% of toy sales on the marketplace. Over 99% of Amazon Retail’s toy sales come from brands sold through Amazon Retail, rather than Amazon’s private label brands.
Toys represents Amazon’s second largest category presence by share of listings, coming in after books. Toys also represent Amazon’s third largest category presence by share of sales, coming in after books and consumer electronics.
Amazon’s large presence in this space can make it challenging to capture top placements when selling in the same subcategory. If you are considering launching a new product in the Toys & Games category, it’s worth researching if you’ll be competing with Amazon Retail.
An Abundance of Digitally Native Brands
The Toys & Games category is also home to many digitally native brands. Over 26,000 games have been funded through Kickstarter, raising over $233.8 million. The success of digitally native brands in this space can be at least partially attributed to shoppers’ hunger for new experiences. While some games endure literal centuries, such as the Game of Life (whose origins date back to 1860) or Monopoly (tracing back to 1903), they are the exceptions to the norm, especially in an age of near instantaneous global communication.
For brands in this industry, this reality is both a blessing and a curse. New opportunities constantly present themselves, but so too do new competitors.
Copycats & Counterfeits Abound
Just as the hunger for something new makes Toys & Games fertile ground for digitally native brands, it also makes it prime hunting territory for copycats. It’s easy to metaphorically (or literally) slap a new coat of paint on a toy or game, then market it as something new. This also makes the category vulnerable to counterfeits. The Department of Homeland Security’s 2020 report on counterfeits listed Toys as the 9th most common counterfeit product seized in 2018.
COVID-19 Impact on Toys & Games
On the consumer side, COVID-19 led more shoppers to invest in at-home entertainment. Many children shifted to online school while some parents also shifted to working remotely. Having both child and parent at home during the work week quickly highlighted the need for having entertainment options that didn’t require adult assistance.
On the seller side, nearly every brand faced delays in manufacturing and supply shortages, especially those dependent on supplies and production from overseas. In the Toys & Games industry, that represents a significant portion of the field, as China dominates production for this industry. In 2019, China led global toy exports, exporting nearly $63 billion worth of toys, including 80% of US imports.
Rules & Regulations
Along with the Baby and Health & Personal Care categories, Toys & Games is one of the most regulated categories on Amazon. At Kaspien, we highly recommend working with a specialist to help when launching new products in this space, as failing to prepare the required documents in advance or submitting information incorrectly can delay or interrupt sales for weeks to months.
Download the eBook to Read this Section
Shoppers Search by Many Variables
Toys & Games is an incredibly diverse product category. To make it easier to find the products for the end user, shoppers often narrow their search by multiple factors, including but not limited to:
Material quality / durability
Number of players
Low Brand Loyalty
When it comes to games, shoppers demonstrate little brand loyalty. By the time they go to Amazon, they are interested in buying either a particular game or a particular type of game. Who the creator is matters less than finding something with the right combination of age range, gender, duration, genre, number of players, and price. The exception to this rule is when shoppers seek expansion packs to games they already own.
For example, one of our partners runs Sponsored Brand Ads. Over the ads’ lifetime, 86.5% of attributable orders have been new-to-brand. Now, Sponsored Brand Ads are known to attract new-to-brand customers, but even so, the metric is indicative of the low brand loyalty seen among board game shoppers.
Toys, on the other hand, are a mixed bag. Many toy brands create product lines of complimentary toys to boost brand loyalty. For example, a line of superhero toys is incomplete without buying each hero. The same is true of any movie, show, or comic that features multiple characters. In this case, shoppers care less about the brand selling the toy and more about the product line the toy is part of. For sellers, this affects their marketing strategies.
The general exception to the rule of low brand loyalty is when safety or education is involved. Since children (and adults, for that matter) learn in different ways, parents may be more apt to buy from the same game company if they find an educational game that works well for their child. Likewise, in the case of outdoors toys that could risk a serious injury if misused or broken, parents may pay more mind to the brands they patronize.
Gifts for Friends and Family
Many shoppers in this category are purchasing gifts for their children, their children’s friends, family members, and so on. The gift should demonstrate their care for the recipient, so these shoppers care greatly about the product’s safety and quality. This assessment is most often made by reading other customer reviews. If the product has few reviews or low ratings, shoppers are far less likely to take the risk of getting an unsafe or low-quality product.
Children Make Wish Lists Too
Adults aren’t the only ones adding products to Amazon wish lists. It is becoming increasingly common for children to browse Amazon and add products to their Amazon list, especially in preparation for birthdays and holidays. When optimizing listing content, sellers should keep in mind that they are marketing to two audiences.
Online & In Store are Equally Important
According to Statista, 29% of consumers state they prefer to buy toys entirely or mainly online. Another 40% of consumers stated they are equally willing to buy toys online as they are in stores. That puts the percentage of shoppers who prefer to buy online at roughly the same size as those who prefer to buy in stores, meaning that Toys & Games brands cannot afford to ignore either sales channel.
This is only a small taste of what our eBook has to offer. Download the free eBook to learn how to actionize this information about the category landscape and shopper psychographics.
Kaspien is a proven expert in this field. Since 2008, we ‘ve served over 400 Toys & Games brands. In 2020, we delivered the following results for our partners in this category:
42% avg. increase in orders YOY
4.5% avg. ACOS
29% avg. decrease in ACOS YOY
50% increase in ad sales YOY
Download the eBook
Amazon fees have steadily climbed over the years, eating into profit margins. Many of these costs rose even higher in 2020 as the pandemic triggered supply shortages and shipping delays across industries.
If you’re finding that your profit margins are narrowing, you’re not alone. But while misery loves company, we’d rather leave that particular crowd behind. So, in this post, we’re reviewing which factors drive up costs the most, then we’ll delve into several tools and tricks you can use to minimize your costs and Amazon seller fees.
What Factors Affect Amazon Net Profit Margins the Most?
Material costs have risen dramatically across industries since the start of 2020.The global pandemic resulted in lay offs and furloughs, so sourcing and production slowed or even stopped. When production resumed, fewer workers were able to return working due to companies’ financial uncertainty, health and safety regulations, fear, or a number of other factors. Meanwhile, demand rebounded relatively quickly or even increased. With limited supply and high demand, prices have gone up.
Amazon has steadily increased its requirements for safety testing, sometimes asking brands to go above and beyond government requirements. At Kaspien, we’ve seen numerous cases of brands being asked to conduct safety tests that aren’t legally required for their product. If brands don’t comply, Amazon can suspend their listing, cutting off Amazon sales for that product. As such, most brands find it easier in the end to pay for the additional testing, although it remains an intensely frustrating experience that chips away at the brand’s revenue.
Supply Chain Costs
Once a product is manufactured and has passed all the required certifications, there’s still the matter of transporting the product from the factory to the end consumer. That may involve freight, shipping, and storage fees.Supply chain management is complex and dynamic, so much so that it deserves an entire blog post. And, oh, would you look at that! Here it is.
Amazon FBA Fees
Over 85% of top Amazon sellers use Fulfillment by Amazon, and with good reason. It’s simple, convenient, and provides increasingly faster delivery times. Of course, it’s not free. Sellers must pay fulfillment fees for product that pass through their centers. The fee is based on product size and shipping location.
Small Standard (10 oz or less)
Small Standard (10 to 16 oz)
Large Standard (10 oz or less)
Large Standard (10 to 16 oz)
Large Standard (1 to 2 lb)
Large Standard (2 to 3 lb)
Large Standard (3 to 20 lb)
Amazon Storage Fees
Amazon also charges monthly storage fees for products as well as long-term storage fees. Like fulfillment fees, storage fees also change periodically, typically once per year. Before are the fees per cubic foot.
January – September
October – December
January – September
October – December
Amazon Referral Fees
Amazon’s not done yet! They also charge Amazon sellers referral fees – essentially, a commission for transactions that occur on the Amazon marketplace. Amazon referral fees are based on MSRP and product category.
Arts, Crafts, & Sewing
If total sales price is under $10, referral is 8%
Base Equipment Power Tools
If total sales price is under $10, referral is 8%
Camera & Photo
Cell Phone Device
Clothing & Accessories
For any portion of the total sales price that exceeds $100, referral is 8%
Furniture & Decor
For any portion of the total sales price that exceeds $200, referral is 10%
Grocery & Gourmet Food
If total sales price is under $15, referral is 8%
Health & Personal Care
If total sales price is under $10, referral is 8%
Home & Garden
Industrial & Scientific
For any portion of the total sales price that exceeds $250, referral is 5%
For any portion of the total sales price that exceeds $300, referral is 8%
Patio, Lawn, & Garden
Shoes, Handbags, Sunglasses
Sports & Outdoors
Tires & Wheels
Tools & Home Improvement
Toys & Games
Video & DVD
For any portion of the total sales price that exceeds $1,500, referral is 3%
Amazon is known for offering the lowest prices available online. One way that it enforces that reality is by requiring pricing parity. Pricing parity means that any product sold on Amazon must be offered for the same or lower price as products offered elsewhere online. If the product price on Amazon is higher, Amazon will roll up the Buy Box.
When the Buy Box is rolled, shoppers have to click several more times to see prices and sellers for the given product. The abnormal experience is enough to make shoppers bounce from the listing, costing you sales. This penalty is simple but effective.
Pricing parity can affect net profit margin because it forces brands to price products the same across online marketplaces (or suffer the consequences), regardless of each ecommerce platform’s unique fees. While not always the case, this can impact a brand’s wholesale costs or retail price.
Amazon Retail (1P) Fees
If your brand sells through Vendor Central and Amazon Retailserves as your online reseller, you’ll pay percentage-based fees for services such as marketing co-op, damage allowance, early payment, chargebacks, and shipping. If you use optional services like marketing, you’ll also be responsible for the bill. These fees are typically dependent on how vendors negotiate their contracts with Amazon, and larger vendors have greater negotiation power.
Many brands choose to sell on Amazon through third-party sellers like Kaspien. In these cases, the third-party seller pays Amazon’s fees instead of the brand. However, these fees do affect the seller’s margins, which can lead to negotiations about wholesale cost, but not always. Besides possible discussions about wholesale costs, most third-party sellers don’t charge any type of fee since they are buying product from the brand.
Instead of selling their product wholesale to Amazon Retail or third-party sellers, some brands prefer to sell their product on Amazon themselves with the assistance of an Amazon agency. In this situation, a brand hires an agency to manage the day-to-day of running their Amazon seller account, and the agency charges either a percentage-based commission or a flat monthly fee. If you’re curious about this model, check out our post, “How to Decide If You Should Work with an Amazon Agency.”
Finally, we come to Amazon marketing. With millions of sellers and tens of millions of products on the Amazon marketplace, marketing has truly become a requirement for Amazon success. And, marketing requires a budget.
Now, that said, Amazon marketing should NOT affect your net profit margins. Marketing is meant to increase sales, and if isn’t generating a profitable return on investment, then whoever is running your marketing is not doing a great job. Marketing is a cost, certainly, but it is one that should pay for itself and more.
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In this free eBook, we explore the costs associated to selling on Amazon through Amazon Retail (1P), third-party sellers (3P), and direct-to-consumer (DTC). Download now to learn which option makes the most sense for your business needs!
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How to Minimize Costs & Amazon Seller Fees
Now that we’ve covered what factors can decrease your net profit margins for Amazon, let’s delve into how you can minimize any of those expenses to maximize your profitability. You’ll note that most of the below tips are based around supply chain management.
If we’re trying to minimize costs, let’s start at the beginning. Our GM of Private Label, Denise Abraham, wrote a fantastic blog post about international product sourcing, including how to do so cost-effectively. She goes more in depth about the process, so we’ll just summarize a few key points here:
Get multiple quotes and samples. You need to find the right balance of costs and quality.
Know your product specs intimately. When sourcing internationally, it’s easy for vendors to take advantage of you and use cheaper materials or skip testing. Those issues will bleed into sales to consumers and future fees, so don’t let yourself fall into that position. By knowing your product front, back, and center, you’re able to spot potential issues earlier.
Research and understand your purchasing options, including ex-works (EXW), freight on board (FOB), and landed duty paid (LDP) / delivery duty paid (DDP). Each purchasing option has significant implications that can effect your costs.
To avoid long-term storage fees at FBA centers, you must strike a balance between sending in enough inventory, but never too much. To do so effectively, you need to understand how long each piece of the supply chain takes, which as we all know, has changed quite dramatically since COVID-19. Our Purchase Order Manager, Emily Spokas, wrote a handy blog post about inventory forecasting, which you can read here.
You can break your forecasted lead time into smaller pieces, including how long it takes you to prepare a shipping order after receiving a purchase order from a retailer and how long it takes to then ship that order from your factory to the fulfillment center. If you sell your products yourself, you could even factor production time into the calculation.
The marketplace is dynamic, so your inventory forecasting model should be too. Your lead times will likely fluctuate with seasonality, environmental factors, inventory quantity limits, and other external factors, so carefully monitor and update your forecasts accordingly.
Efficient Product Packaging
Amazon FBA has specific criteria for product packaging requirements. If products do not have the required labels and compliant packaging, Amazon may refuse, return, or repackage the inventory. In each of these cases, the seller is losing money, either in processing returns or paying fees for repackaging. To minimize these fees, make sure that your products are prepped in accordance with Amazon’s policies.
As for storage fees at FBA, Amazon charged fees based on cubic feet or number units. This issue is partially mitigated through inventory forecasting, but it can be further mitigated by using the most space-efficient packaging for your product. Going down a box size or using an envelope can help reduce volume and thereby fees. Of course, do not reduce packaging size at the expense of product survival. If product is damaged during transit or storage because of smaller packaging, the savings of the packaging won’t justify the loss of the product.
Amazon Small and Light Program
Speaking of optimized product packaging, we’d be remiss if we didn’t talk about Amazon’s Small and Light program. Small and Light is an FBA that reduces fulfillment costs for products under a certain size or weight threshold. To enroll in the program, products must be sold via FBA, be priced under $7, and sell at least 25 units per month. If your products are eligible, Small and Light is a no brainer.
One of our partners met every eligibility requirement for Small and Light except for product price. Due to margin considerations, their product was priced just over $7. We found that if we lowered the priceso that the product could enroll in Small and Light, the savings from the lower fulfillment fee actually increased the product’s net profit margin. Thanks to Small and Light, the product was more affordable for consumers (which boosted sales) and margins were greater.
FBA Seller Reimbursements
FBA centers make mistakes, and Amazon doesn’t always fully reimburse sellers for inventory that is lost, damaged, or otherwise mishandled. Over time, these un-reimbursed or under-reimbursed inventory errorsadd up, eroding your bottom line.
That’s neither tolerable nor necessary. To correct this issue and get back what you’re owed, you’ll need to file FBA reimbursement cases with Amazon. This process can be done manually or partially automated through software (Amazon policies forbid fully automating the process).
At Kaspien, we’ve successfully reimbursed over $5 million to FBA sellers that they would have otherwise lost. On average, we see FBA sellers recover the equivalent of 2% of topline sales when they use ourFBA reimbursement software. That adds up, especially as your sales volume climbs.
Dropship Products Not Suited for FBA
Let’s say you’re selling oversized products or your sales velocity is still low. In such cases, using FBA may not be the most cost-effective choice. Instead, you may consider usingdropship to fulfill orders yourself instead of relying on Amazon.
By dropshipping, you avoid Amazon’s storage fees, packaging requirements, IPI threshold requirements, and inventory quantity limits. The downside is that you may not be able to providefast shipping, which is now a key component of a good customer experience.
Amazon’s algorithm also tends to favor sellers who fulfill products via FBA, so if you’re in a listing with multiple FBA sellers, your chance at winning the Buy Box goes down. If you are the only seller in the listing, this issue matters a bit less, though you are still contending with competitor products.
Amazon Global Logistics
Amazon Global Logistics (AGL) is an Amazon program that allows sellers to direct-import from China into different markets. Typically, importing from overseas requires multiple checkpoints and multiple service providers, creating a lengthy and costly supply chain. Amazon Global Logistics streamlines the process, reducing touch points and costs for sellers.
At Kaspien, we’ve seen Amazon Global Logistics reduce lead times by 20 days! By its nature, Amazon Global Logistics is most cost effective when transporting large volume, which is one of the perks of working with a large third-party seller like Kaspien. Because we have hundreds of partners that import from overseas, we can combine orders under a single account, thereby reducing costs and lead times for each involved brand.
To learn more about Amazon Global Logistics, check out ourpodcast episode with our Chief Operating Officer, Director of Retail Operations, and Director of Purchase Order Management. They discuss best practices for Amazon Global Logistics, including which product types benefit the most from the service, how to leverage economies of scale, and how to navigate Amazon’s quantity limits.
Find the Right Partner
Last but not least, finding the right partner for your Amazon business can play a huge role in your profitability. Amazon is a massive market in and of itself, creating a whole industry of third-party sellers, Amazon agencies, third-party logistics providers, software providers, and more. As a result, you have plenty of options in finding the right partner and/or tools to grow your Amazon business.
Do your research. Find the partner or tool that will give you the capabilities, attention, resources, and expertise you deserve. Their efficacy (or lack of) can have a major impact on your brand integrity, stability, and profitability.
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Are you ready to improve search rankings and increase sales for your Amazon products? Getting more reviews is an important piece of any Amazon growth strategy.
After all, the recency and relevancy of your reviews impact your Amazon rankings. Shoppers look to reviews for social proof. Reviews also let you know exactly how your products are perceived, helping you make sure your items are delighting customers.
Verified purchase reviews, which are reviews left by customers who purchased your product from Amazon, carry the most weight in the search algorithm. Reviews are not shared across child ASINs within a product set. If you create a bundle or use Amazon’s virtual bundling program, the bundle has a separate ASIN from the products that make up the bundle. If you’re selling internationally, reviews are not shared globally, but may be highlighted as ratings from other countries.
In other words, you need reviews, and ideally you want those reviews to come from shoppers who bought your products on Amazon. In this article, we’ll explain where to find Amazon review policies and share five ways to get reviews on Amazon.
Amazon Review Guidelines
Getting reviews on Amazon doesn’t have to be complicated, but you do need to understand Amazon’s guidelines. Amazon takes customer reviews very seriously and has many rules in place to prevent abuse of the review system.
You should get familiar with all Amazon review policies, but here is a brief overview of what you need to know about requesting reviews:
You cannot offer any type of compensation in exchange for a review. This includes free products, coupons, and discounts. Do not participate in social media review groups.
You should only send one request for a review or seller feedback per order.
Never ask for a positive review. Your request should use neutral language. Avoid if/then statements that divert buyers with a negative experience to contact customer service instead of leaving a review.
You, your family, and your employees are not allowed to review your own products or your competitor’s products.
Do not include marketing messages, promotions, or links to sites other than Amazon in your review request.
Here are the Seller Central pages you should be familiar with:
Feeling overwhelmed? Don’t worry, requesting reviews is easy when you know what not to do. Keep reading to learn about five ways to ask for reviews while operating within Amazon’s review policies.
5 Ways to Ask for Reviews on Amazon
Request a Review
Amazon introduced the Request a Review messaging system in late 2019. This message is sent to the buyer on your behalf, directly from Amazon. Since Amazon controls the messaging, this is a foolproof way to request reviews without violating any of the policies mentioned above.
The message is instantly translated into the buyer’s preferred language. It includes a seller feedback request in addition to a product review request, along with an image of your product. You can send this message manually by clicking the “Request a Review” button on the order details page in your Seller Central account. You can also schedule automation for this message with Amazon review software such asFeedbackFive, which we’ll explore later in this article.
You can send review requests through Buyer-Seller Messaging in Seller Central. You’ll need to create your own message, so this is where you need to make sure you are following all of Amazon’s guidelines related to reviews and communicating with buyers.
Sending messages directly from Seller Central requires you to go to each order you’d like to send a request for and click on the buyer’s name to compose your message. You can also create a message template to automate with software, saving you time so you can focus on other tasks.
Automated Review Requests
eComEngine’s FeedbackFive software makes it easy to send review requests, whether you want to send Request a Review messages or customized requests via Buyer-Seller Messaging. Either way, you simply set up the message you’d like to send, choose your preferred message timing, and enjoy the results! You can exclude orders (such as refunded orders), send requests that are specific to each of your products, control the timing of your messages, and much more.
You can also see the impact of your review requests with detailed campaign analytics. This graph shows your order volume, emails sent, and reviews received so you have a clear understanding of how your requests impact your reviews.
You can also see how many written product reviews you receive compared to the number of one-tap ratings received along with your positive feedback percentage, average review rating, and other details.
The Amazon Vine program is another way to request reviews. You’ll need to enroll in the program and provide free products for review. (This is the only exception to Amazon’s incentivized review policy; you can feel confident about participating because this program is managed by Amazon.)
Amazon Vine Voices are among the most trusted reviewers on Amazon. Participating in Vine can be a great way to jumpstart reviews for a new product.
Some sellers and vendors report great results with the Amazon Vine program, while others are not impressed. It might work well for your product, but there are no guarantees that your products will be reviewed. Participating in the program can be costly, so you’ll definitely want to do your research to get an idea of whether this makes sense for your business.
As with any communication with buyers, you’ll need to follow Amazon’s Communication Guidelines if you plan to include a product insert in your packaging. Some sellers have seen good results from including a review request in this format.
If you regularly shop on Amazon, you’ve almost certainly received at least one product review request that blatantly violates Amazon policies. Don’t risk it! If you plan to include a review request with your product, check outthis guide to see what not to do.
Getting Reviews the Right Way
Amazon reviews are integral to the continued growth and success of your business. Although there are many social media groups and “gurus” who may tempt you with black hat tactics, you’re now armed with knowledge and resources to get reviews without risking your seller account.
As with everything associated with your Amazon business, you’ll want to exercise caution and do your own research to make sure that any action you are considering won’t lead to account suspension or other issues. Automating review requests is a smart way to save time while continuing to build your Amazon reputation. Working with unverified software could put your account at risk. Be sure to look for software that is in the Amazon Appstore, like FeedbackFive!
If you found this helpful, subscribe to Kaspien’s weekly blog newsletter to learn about Amazon strategies from other ecommerce experts, like eComEngine!
Marketplace Pulse reported that Amazon has suspended over a dozen Chinese sellers for using banned review generation tactics. The act is particularly notable due to the brands’ size: Together, their annual sales on Amazon exceed $1 billion.
These brands operated in multiple Amazon marketplaces and were sold by multiple sellers. Marketplace Pulse reports that some sellers were authorized third-parties, some were owned by the brands themselves, and others had unknown connections to the brands.
Amazon banned all the sellers, making this crack down much more serious for the affected brands. If a single seller were banned, others could take their place. By banning all sellers from selling the above brands, Amazon has effectively dammed their revenue source.
This news comes around the same time as Amazon’s first ever Brand Protection Report, which states that last year, Amazon blocked over 10 billion product listings suspected of being counterfeit.
Amazon Banned Brands for Fake Reviews
Some of the above brands had tens of thousands of customer reviews. At the end of April, Mpow had nearly 70,000 customer reviews for one of their headphones. As of May 11th, Amazon had removed nearly 60,000 of those reviews for being fraudulent.
Amazon has extended this practice to all the banned brands. If these brands are ever permitted to return to the marketplace, they will likely struggle to achieve the same sales velocity that they left off on.
This act may be intended to signal that Amazon will no longer tolerate fake review schemes. Amazon chose to act against large brands, some of whom are Amazon-native brands.
Megan Lauterbach, Kaspien’s General Manager of Retail, sees it as a pointed message: “This tells me that, regardless of how big you are on Amazon, if you violate their terms and manipulate ranks or reviews (which hurts the customer experience), Amazon is willing to remove you from the marketplace.”
How Prevalent is Review Manipulation on Amazon?
Unfortunately, fake customer reviews pervade Amazon, and have seemed to grow only more rampant as the years go on.
“Review manipulation is one of the most common black hat tactics on Amazon,” said Lauterbach. “It is a key way to gain more traction on the SERP. The amount and rating of the reviews gives customers confidence to purchase, even if your product is actually not great.”
Amazon also recently retired the Amazon Early Reviewer Program, one of its few approved programs for review generation. When the news was announced, there was widespread speculation it would only lead more brands to engage in black hat tactics.
This crack down by Amazon will hopefully deter other brands from engaging in unscrupulous practices, but given the importance of customer reviews for discoverability and conversions, brands are desperate for ways to wrack them up.
If you’re interested in learning how to spot fake Amazon reviews, check outthis blog post.
How Does this Ban Help Stop Fake Customer Reviews?
For one, the impacted brands are losing sales every hour that they are unavailable on Amazon. Some of them have been banned since late April.
This suspension is also potentially disastrous from a cashflow perspective, as Kaspien’s General Manager of Dropship, Evan Durrant, points out: “If the account is banned/remains suspended, Amazon will hold funds for at least 90 days to recoup any returned product or claims made against the previous sales. In some cases (usually with IP issues), funds have been held indefinitely. All of these larger players are likely floating containers upon containers full of goods over the ocean right now, which means they now have cash tied up in inventory that they’ll additionally have to offload at-or-below cost if their suspension sticks.”
Additionally these brands may struggle to reach the same sales velocity that they enjoyed before the ban (assuming Amazon un-bans them). If the majority of the removed reviews were 5 stars, then the products may suddenly find themselves with a much lower star rating, making it harder to compete in an already intensely competitive space.
Of course, as the image above shows, that won’t always be the case. Mpow’s headphones still have favorable ratings, despite tens of thousands of customer reviews being removed.
What Does This Crack Down Indicate?
“Amazon will continue to ratchet up enforcement,” said Jed Nelsen, Kaspien’s Director of Compliance.
Nelsen also believes that this enforcement will extend to Amazon brand aggregators, which has raised over $4 billion for acquiring Amazon-focused brands since the start of 2020. “I wouldn’t be surprised if some of the brand aggregators who are violating Amazon rules – like operating the accounts of thebrands they bought – will face some consequences this year.”
As for Kaspien’s partner brands, Lauterbach said, “This may benefit our partners if Amazon continues to take action. Many legitimate brands are getting beaten by competitors that are playing unfairly.”
And there’s the crux of it: Is this Amazon grand standing after facing a 16-month congressional reviewover the last two years, or does it truly signal a change in Amazon’s policy enforcement?
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Unauthorized and counterfeit sellers are one of the most damaging and challenging issues brands face when selling on Amazon. This problem has become so great that the Department of Homeland Security (DHS) even published a 54-page report about the issue in January 2020.
The report states that between 2005 and 2016, international trade of counterfeit goods rose from $200 billion to $509 billion. At the U.S. border, DHS reported seizures of infringing goods rose from 3,244 to 33,810 per year. The rise of counterfeit goods represents a growing threat to market integrity, with DHS stating, “global employment losses due to counterfeit goods were between 2 million and 2.6 million jobs in 2013, with job displacement expected to double by 2022.”
Clearly, there is a serious problem, but what can you do about it? That’s exactly what we’ll cover in our upcoming webinar, “How to Stop Counterfeit and Unauthorized Sellers from Stealing Your Profits.”
5Reasons to Attend our Webinar
1 – It is Co-Hosted by VantageBP and Kaspien
VantageBP co-founder Derick Manlapeg will join Kaspien to co-host this webinar! VantageBPhelps brands identify and remove unauthorized sellers across 160+ online marketplaces, social media platforms, third-party websites, and search engines. They’ve removed over 3 million infringements across gray and black market retailers, restoring brand control to their rightful owners.
In short, you’ll get to hear from one of the leading experts in brand protection for ecommerce.
2 – Learn How Products End Up on the Gray and Black Market in the First Place
Not sure how a seller got ahold of your product? There are a few likely sources, some obvious and some far less so. Learn how unauthorized sellers acquire product and how you can plug the leaks.
3 – Learn What Brands are Legally Allowed to Do
You may feel fired up and ready to fire away cease & desist letters and IPR complaints against sellers you don’t recognize, but that can actually cause even more trouble. Some of those sellers may have acquired inventory through perfectly legal means, and filing IPR complaints against them can land you in hot water.
Our expert hosts will guide you through what legal options are available to brands and when you might need to call in outside help.
4 – Learn what Amazon Policies Apply to Your Situation
Amazon offers several programs and tools to help brands maintain or reclaim control of their online representation, but some of these tools work better than others. Attend the webinar to learn which tool should be used for which job.
5 – Review Case Studies and Learn What Tricks have Worked for Others
Over 25 years since Amazon’s inception, it’s unlikely that your brand is the first to experience these challenges. We’ll review examples of how other brands have tackled these challenges to reassert control over their brand’s future.
Ready to Sign Up?
Register for the webinar and bring some questions! Even if you can’t attend, register and we’ll email you a recording of the webinar!
Brands selling on Amazon can choose to sell wholesale to Amazon’s first-party seller division, Amazon Retail (1P).At first glance, the prospect of working directly with Amazon sounds ideal. They own the platform, so they’ll provide the most value. As is often the case, the reality is a bit different.
Too often, the vendor experience is frustrating one as Amazon makes unilateral decisions that go against the brand’s wishes. With a mammoth $490 billion GMV in 2020, $300 billion of which comes through the third-party seller marketplace, Amazon isn’t afraid to throw its weight around. It’s not an equal partnership.
Pricing, in particular, is a common pain point we hear frombrands selling through Vendor Central. Amazon Retail either drops their prices or even raises their prices against the brand’s wish. While Amazon is one making the decision, it’s the brand that suffers the consequences.
Why Does Amazon Retail Lower Pricing Against Vendor Wishes?
Amazon Enforces Pricing Parity
Amazon is committed to offering consumers the lowest price available, and it takes quick action to live up to that promise. If your product is offered for a lower price by another seller on Amazon or ecommerce site, Amazon Retail will drop their price to match, even if that means dropping below your MAP or MSRP.
This is an issue that can be largely avoided by integrating Amazon into your overall brand strategy, making sure that your brand and products are represented consistently across all sales channels. Doing this effectively requires a secure distribution network – if unauthorized sellers can easily obtain your product, it becomes far more difficult to enforce consistent pricing. If a rogue seller drops their price, Amazon Retail will follow suit.
Why Does Amazon Retail Increase Pricing Against Vendor Wishes?
Amazon is the Sole Seller
While Amazon Retail has earned a reputation for price slashing, there are times that it increases prices, even to the point of price gouging.
Amazon does this by taking advantage of a technicality: Offering the lowest price availabledoesn’t necessarily translate to the lowest price possible. When Amazon is the only seller in a listing, they sometimes take advantage of the situation and increaseprices to increase their margin. If the price is higher than MAP or MSRP but you’re the only one selling it, it’s still offered at the lowest price available.
Some brands are frustrated by Amazon’s unilateral decision making, especially because it is their brand that receives the brunt of shoppers’ frustration at higher prices.
How to Make Amazon Retail Stop Price Gouging
Brands who want Amazon Retail to lower their product price have limited power, but there is one way to take back control. Amazon Retail’s ability to raise prices is based on them be the sole seller. Brands can remove that power by partnering with a trusted distributor and third-party seller, ideally one that has Seller-Fulfilled Prime (SFP) so they can continue offering the same delivery speeds.
When Amazon Retail raises their prices and refuses to heed the brand’s request to lower them, the brand can ask their distributor to send a set amount of inventory to the third-party seller. The third-party seller will then list the product at the price that the brand desires, and Amazon Retail will be forced tofollow suit to uphold their promise.
In this model, the brand reclaims control of their pricing policy and the third-party seller enjoys sales from the limited purchase order. Of course, this strategy requires partnering with a trustworthy distributor and third-party seller. Without shared trust (perhaps reinforced by signed agreements), this strategy could cause new problems.
Additional Benefits of Using a Third-Party Seller while Selling via Vendor Central
In addition to restoring a brand’s control over their pricing, strategically partnering with a distributor and third-party seller has several other notable benefits.
It Protects Against Out of Stocks
If Amazon Retail runs out of stock at FBA, the third-party seller can step in to start fulfilling orders from their inventory. Some sellers can also integratedropship order management systems with a brand’s warehouse, so they can fulfill orders even if they do not have inventory at FBA.
As 2020 showed us, it’s best practice to have multiple fulfillment methods available, in the event that FBA experiences category restrictions, IPI increases, or other issues that jeopardize your ability to store and fulfill orders. Diversification is a proven risk-mitigation tactic, and that extends to ecommerce.
It Protects Against Amazon Retail Not Renewing their Purchase Order
Amazon Retail is not obligated to place new purchase orders, and they may decline to replenish inventory for a number of reasons. This notably occurred in 2019, when Amazon Retail stopped placing purchase orders with vendors who sold less than $10M annually on Amazon. Thousands of vendors were reportedly blindsided by the move, and while Amazon resumed placing purchase orders for many of them a week later, some vendors never received a new purchase order.
Partnering with a third-party seller while still using Vendor Centralprovides a safety net, allowing brands to continue selling on Amazon uninterrupted even if Amazon Retail stops buying their product.
It Protects Against Amazon Retail Dropping Prices
We mentioned earlier that Amazon Retail will slash prices to match those offered anywhere else on the internet. This is problematic for brands that struggle with rogue sellers and retail arbitrage. If an unauthorized seller lists a product for well below MAP, Amazon will also drop below MAP. This can harm brands’ relationships with their brick & mortar sellers and creates a risk of smaller purchase orders due to lower profits.
If a brand is partnered with a trusted third-party seller, they can stop selling to Amazon while Amazon Retail refuses to abide by MAP. Once Amazon Retail sells through inventory, the brand will reclaim control over their pricing, at least through their authorized sellers.
Partnering with a third-party seller doesn’t solve the unauthorized seller problem, though. Unauthorized sellers typically arise from leaks in the distribution network, when distributors sell inventory to anyone who comes asking. The best way to plug these holes is to sign new agreements with distributors that limit to whom theyare allowed to sell product.
Throughout this post, we keep returning to trust. Brands need to be able to trust their distributors and sellers to act in their best interest. That trust is built easiest when the partnership is mutually beneficial between parties that both wield power.
In the case of Amazon Retail, that’s rarely the case. Amazon is a $490 billion gorilla, and they make unilateral decisions that harm your brand if they think it will entice consumers.
While Amazon Retail may be too rich an opportunity to pass up now, it‘s far too great a risk to be overly-dependent on them. Seek complementary and supplementary ways to capture sales on Amazon, whether that’s through a third-party seller or equipping your brand to fulfill direct-to-consumer.
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Competition among Amazon sellers may become more intense as Amazon escalates enforcement of their Marketplace Fair Pricing Policy. Where once sellers faced rolled Buy Boxes, they now risk seller account suspensions or even account shutdowns.
Pricing Flags Now Impact Seller Account Health
Amazon recently changed their system so that products flagged as being priced too high will now appear under “Account Health Issues” instead of “Pricing Alerts” within Seller Central. This change is noteworthy because seller accounts are much more readily suspended by Amazon for having account health issues than for pricing alerts. In other words, Amazon is becoming more stringent in their enforcement of products they deem overpriced.
Rolled Buy Boxes and Account Suspensions
Before this update, Amazon typically removed the Buy Box from the product detail page. Sometimes referred to as a “rolled” Buy Box, this practice replaces the “Add to Cart” and “Buy Now” buttons with a “See All Buying Options” button. Rolling the Buy Box effectively requires shoppers to click at least once more before they can buy. While small, this disruption in the typical Amazon shopping experience (and the plethora of similar competitor offerings) is enough that sales can take a significant hit when the Buy Box is rolled.
Amazon Recommends New Prices
Products flagged by Amazon as being priced too high will display a suggested minimum price and maximum price in Seller Central. These prices would effectively serve as the thresholds for any sellers using Amazon repricer tools. Amazon also suggests what price to set for the product currently, which in some cases undercuts the price currently featured in the Buy Box.
How Does Amazon Determine if Products are Overpriced?
Amazon’s Fair Pricing Policy states that they will penalize sellers for pricing practices that harm customer trust, which includes suspending or terminating selling privileges. Amazon states one such harmful practice is “setting a price on a product or service that is significantly higher than recent prices offered on or off Amazon.”
While this policy sounds reasonably straightforward, Kaspien has seen Amazon suppress listings offering a product for $31 when another seller in the listing offers it for $29. At this time, it is unclear if this degree of severity is widespread or limited.
Ultimately, this update in enforcement practices is a win for consumers, but a complication for Amazon sellers, especially for those with already tight margins.
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The Sports & Outdoors category experienced tremendous growth in 2020.As the pandemic forced gyms to close and social gatherings became smaller and less frequent, consumers invested in home gyms and outdoor recreation. Kaspien’s data shows Amazon sales in the Sports & Outdoors category grew 80% year-over-year!
While category sales are expected to grow at humbler rates in 2021, consumer buying behavior has permanently shifted. More consumers are comfortable exercising away from the gym, at-home equipment providers like Peloton are encouraging the shift, and outdoor enthusiasts new and old have taken advantage of Amazon to supply their adventure gear.
This shifting landscape presents immense opportunities for brands in the Sports & Outdoors category. Historically, many of these brands have treated Amazon as a secondary sales channel, and it’s under-optimized as a result. 2020 made ecommerce a more important sales channel, and those who optimize their Amazon channel and integrate it into their overall brand strategy firstwill be best positioned to increase their market share in the coming years.
The Sports & Outdoors category on Amazon saw significant sales growth year-on-year spurred by the global pandemic. When health clubs closed, consumers brought the gym home. When social gatherings became limited, more consumers spent their leisure time (and money) on outdoor recreation.
As demonstrated by the next three graphs, COVID-19 drove significant sales growth for multiple product types in this category, from sports to defense to survival gear.
Even outside of Amazon, we saw examples of at-home Sports & Fitness booming, with Peloton taking the spotlight. Peloton’s earnings show total revenue reach $1.8 billion in 2020, a 100% increase year-on-year, and their subscription revenue reached $121.2 million, a 99% increase year-on-year.
According to the International Health, Racquet & Sportsclub Association (IHRSA), the fitness industry lost $20 billionin 2020.At least 8 national gym networks filed for bankruptcy in 2020.
The Outdoor Recreation industry fared far better, with the NPD Group reporting strong growth in multiple outdoor activities:
Dollar sales of bicycles increased 63% in June 2020 versus the same time the previous year.
Dollar sales of paddle sports increased 56% in June 2020 versus the same time the previous year.
Dollar sales of golf equipment increased 51% in June 2020 versus the same time the previous year.
Dollar sales of camping equipment increased 31% in June 2020 versus the same time the previous year.
Products in the Sports & Outdoors category vary greatly in quality and price, which results in multiple, distinct audiences. As such, it’s helpful to think of Sports & Outdoors shoppers as three tiers: Entry level, middle, and luxury.
Entry level shoppers are those trying out a new activity for the first time and have not yet established brand loyalty. They seek the best deal, as they need to validate their interest before spending more dollars.
Middle level shoppers have an established interest in the Sports & Outdoors category. They’ve found brands and products they like, but balance that interest with a fixed budget. They are knowledgeable about some technical details for their given product interest.
Luxury level shoppers have a strong interest in the Sports & Outdoors category and demonstrate a mixture of brand loyalty and experimentation. They have preferred brands, but if an innovative new product is released, they may be willing to try it. These shoppers tend to be (or think they are) very knowledgeable about their area of interest and are willing to pay for premium products.
For brands selling in this space, it’s important to identify which tier your products aim to appease. These tiers are very basic and shoppers can fluctuate between them over time and for different products. However, they can be expanded upon to buildmarketing personas for your brand, making them even more actionable.
Improvement & Recreation
While shoppers in this category vary greatly in their product knowledge and budget, they do share an important commonality: an interest in competition, self-improvement, and recreation.
The products in this category, whether it’s dumbbells, basketballs, or tents, all relate to at least one of the three interests and oftentimes all three. Shoppers want to get better at something and enjoy that task (or the results of it!). The brands that speak to all three interests in their marketing and branding will be best positioned to engage their target audience.
Loyalty Increases with Technicality
Brand loyalty in this space will differ due to a number of factors, including the shopper tiers, but one of the most telling factors is product technicality. Shoppers are more likely to patronize the same brand for products that are complex or require compatibility. Simple, more generic products like elastic bands or weights, tend to have lower brand loyalty as the differentiating factors are more limited.
That said, shoppers will readily depart from a brand if an innovative new product breaks into the market or the brand has a limited product catalog.
Both Sports & Fitness brands and Outdoor Recreation brands have a history of cultivating engaged communities. In some aspects, this can be traced back to category shoppers’ interest in competition, self-improvement, and recreation.
Ambitions around sports, fitness, hiking, climbing, etc.arereadily fueled by a sense of community, motivating each other throughcamaraderie and rivalry. Many of these activities also require dedicated practice and skill, which leads to specialized knowledge that is shared through tips and training.
Brands in this space can and should actively contribute to community building to earn brand loyalty and support growth.
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