Amazon is the largest internet marketplace in the world. According to the company, its online store has more than 300 million active customer accounts worldwide. And according to research firm Marketplace Pulse, Amazon had 2.3 million active sellers as of 2020. In fact, in 2020 alone, the marketplace added roughly 1.1 million additional retailers—a pace of 3,464 new sellers every day, or 2 sellers joining the marketplace every minute.
All of this commerce taking place on Amazon’s platform generates a mind-boggling amount of revenue. Data compiled by Statista finds that the money earned by third-party sellers on the Amazon marketplace has increased steadily and significantly for years:
- 2016: $ 91 billion in revenue to third-party sellers
- 2017: $129 billion in revenue to third-party sellers
- 2018: $175 billion in revenue to third-party sellers
- 2019: $229 billion in revenue to third-party sellers
What this means, of course, is that with the rare exceptions of a few luxury product makers—whose brand value depends on exclusivity and scarcity—virtually every brand and reseller has good reason to list products on Amazon. The marketplace is the world’s largest retail search engine, making it a source of enormous global consumer reach, exposure, and potential revenue. And for the most part, gaining access to the millions of shoppers on Amazon is a clear benefit for brands and their retail partners.
But the size of this marketplace, and the ease with which a retailer can sell products there, also make Amazon a tempting outlet for rogue retailers looking to sell products without the brand’s permission. These rogue Amazon sellers—we’ll also refer to them as “unauthorized 3Ps” (third parties) throughout this course—can create significant problems for brands.
Even if you haven’t yet faced this problem, if your company sells through a resale channel, you will definitely want to build a plan to help prevent the distribution-chain leaks that can lead to unauthorized 3Ps getting their hands on your inventory and selling it on Amazon. Here at TrackStreet, we find this is one of the most serious challenges facing the many companies that approach us for brand protection help.
What you as a brand owner might find particularly problematic about this is that Amazon is well known for remaining neutral in most manufacturer-retailer disputes. In fact, the company states on its Amazon Seller Central site that more retailers offering the same products to customers is a good thing, as long as those products are genuine, because increased retailer competition represents a win for the customer.
In this course, we’ll discuss the threats posed by these unauthorized Amazon sellers, the common scams they use to acquire your inventory for resale, which measures will and won’t work to stop them, and best practices for preventing these problems in the first place.
In this first lesson, we will introduce you to the unauthorized-3P problem and the threats it can pose:
- The two main approaches unauthorized 3Ps use to sell your products on Amazon.
- Five ways rogue listings can undermine your brand and hurt your bottom line.
The 2 Avenues Unauthorized 3Ps Have to Sell Your Products on Amazon
For any product to be sold on the Amazon marketplace, it first needs an Amazon product detail page. Think of this as the product’s landing page for consumers—with the seller’s name and profile, sales copy, product images, any relevant videos, customer reviews, and the product’s price.
Once this detail page has been created for the product, all sellers offering the identical item will be listed on this page. That includes unauthorized sellers who are somehow able to get their hands on your inventory for resale on Amazon.
For unauthorized 3Ps offering your brand’s products without your permission, they have two choices for getting those products listed on Amazon. Each of these paths creates unique challenges for your brand and requires different prevention strategies. We’ll discuss those details later in this course. But for now, let’s briefly review these two options.
Option 1: Unauthorized 3Ps can sell your products on the official product detail page.
Many rogue retailers will take this path because it is easier. They can simply add their offering to your existing Amazon product detail page and compete head-on with the retailers in your authorized dealer network.
But these rogue sellers have several advantages over your legitimate partners, advantages they can use to steal orders from those honorable retailers.
For example, because they have no relationship with your company, these rogue 3Ps can offer your products for less than the amount specified in your Minimum Advertised Price (MAP) policy.
And because Amazon favors retailers who offer lower prices, these rogue sellers can gain higher rankings on the product detail page. Sometimes, in fact, they can even win the coveted Buy Box: the default seller chosen for a consumer shopping for an item. Digital marketing agency WebFX reports that shoppers choose the Buy Box seller 85% of the time.
Option 2: They can create new, phony product detail pages for your products.
A more sophisticated approach for an unauthorized Amazon seller is to generate a non-authorized, rogue ASIN (Amazon Standard Identification Number) for your product, and use that to build a separate product detail page.
This gives the rogue seller several advantages. First, they will have no competition on this product page until other sellers find it—because all of the legitimate sellers offering the item will be listed on the real Amazon product detail page. For any shopper who lands on this phony product page, the unauthorized 3P will own the Buy Box—giving them 100% of the sales.
Second, an unethical retailer can use their phony product detail page to make exaggerated or outright fictitious claims in the product description, use misleading product imagery, and find other ways to trick consumers into buying from them. And of course, this unauthorized seller will have no qualms about offering the product for less than the brand MAP policy asks its legitimate sellers to list the product. That means shoppers will often find this offer the most attractive—because the rogue seller designed it specifically to unfairly undercut all legitimate sellers.
Unfortunately, unless you’re on top of this from the beginning, and shut these duplicate product pages down, you can find that your Amazon catalog can spiral out of control; with some products having many product pages, each with different product information, price points, and sellers. What a mess!
Five Ways Rogue Amazon Listings Can Undermine Your brand and Hurt Your Bottom Line
Now let’s briefly review the many ways that unauthorized retailers can hurt your company when they sell your products on Amazon.
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Online price erosion
When your authorized dealers find an unauthorized 3P offering your products on Amazon at prices below what your MAP policy allows, they might feel the need to do the same thing.
If they don’t respond in kind, your authorized dealers know they could find themselves stuck with inventory they can’t sell—because they’re honoring your policy by keeping your product’s prices above a certain amount, while a rogue retailer is getting away with unfairly undercutting them.
Over time, the effect of this will be downward pressure on your products’ pricing—a terrible trend for your brand.
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Loss of key retailers
Imagine your authorized dealers notice a sudden, inexplicable drop in their Amazon sales of your products. When they review the product detail pages, they find the same seller repeatedly winning sales by offering your products below your MAP-approved levels.
As we noted above, your authorized dealers’ first reaction might be to lower their own prices on that product detail page. After all, they can’t compete with a rogue retailer who’s willing to violate your policy unless they can match or beat that seller’s price.
But as bad as this trend will be—likely leading to price erosion—the next move your authorized dealers make will cause the real, long-term damage. Some of them will likely decide to stop doing business with your brand. If they can’t trust your company to protect their interests and their profit margins, these retailers might choose to find another brand to sell.
Over time, this will result in another terrible trend for your brand: Many of your most reputable and most lucrative retail partners will walk away from your Authorized Dealer Network. That could leave you with no choice but to lower your standards and bring in lesser-quality sellers to retail your products.
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Wasted resources chasing down rogue sellers.
Another threat you’ll face if you don’t take proactive measures to prevent unauthorized 3Ps on Amazon is that your team could find itself diverting time, personnel, and budget fighting these sellers on a regular basis.
Keep in mind, these rogue retailers are sophisticated and resilient. You can spend a lot of time and effort mounting a legal case against a seller and get that seller shut down on Amazon. We’ll discuss later in this course how that process works. But it’s also possible that the rogue retail company will simply reestablish itself under a new seller’s name on Amazon and use new methods to sell your products and avoid your company finding them.
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Poor buying experiences with your products.
Unauthorized 3Ps have no relationship with your company to protect. This is why they won’t think twice about listing your products on Amazon below your MAP-approved prices. You can’t threaten to remove a seller from your Authorized Dealer Network if they aren’t in that program in the first place.
The fact that they have no relationship with your company is also why unauthorized 3Ps won’t hesitate to make unrealistic promises to shoppers in order to secure the sale—even knowing the customer will be disappointed, even furious, when they realize they’ve been tricked.
Over time, of course, this will lead to an erosion of your brand’s reputation in the market.
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Negative customer reviews.
Consider these two statistics:
- According to marketing-software maker Moz, 54% of all product searches now take place on Amazon.
- Shopify’s research finds that 93% of online shoppers’ buying decisions are influenced by customer reviews.
Amazon has become the most popular site for product searches, and an overwhelming majority of those searches include reading what other customers have to say about various products.
This means that an increasingly significant aspect of brand protection is making sure your products are enjoying as many positive online reviews as possible—and as few negative ones as possible, too.
When unauthorized 3Ps are allowed to use their trickery and unethical methods to sell your products on Amazon, your brand increases its chances of amassing poor product reviews and damage to your brand’s reputation over time.
Conclusion
As all of these reasons make clear, preventing unauthorized sellers from offering your products on Amazon should be a top priority for your brand. In the lessons that follow, we’ll discuss how to stop them.
First, though, please take this short quiz to see how much you’ve learned so far.