Throughout this course, we’ve discussed tips and strategies for spotting unauthorized sellers of your products on Amazon and taking steps to remove their listings. But what steps can you take to reduce the chances of those listings ever making it onto Amazon?
In this final lesson, we will offer you what TrackStreet has found, after working with hundreds of brands over the years, to be the most effective proactive strategies to minimize unauthorized Amazon listings of your products.
1. Establish an Authorized Dealer Program
The only way unauthorized 3Ps can sell your products on Amazon is if they can acquire your inventory in the first place. Often they’re able to get their hands on your products through “leaks” in your distribution channel.
That’s actually just a diplomatic way of saying that they either trick your wholesalers, distributors, or in-house staff into selling inventory to them… or worse, your wholesalers, distributors, or in-house sales reps knowingly sell to these rogue retailers because their own interests are in conflict with the interests of your company.
One way to significantly cut down on these leaks is to establish an Authorized Dealer Program where you vet every retailer interested in selling your products and then inform your staff and distributors that they may sell inventory only to those companies on your authorized dealer list. (To learn more, take our course on Authorized Dealer Programs!)
You can even help your authorized dealers distinguish themselves to customers as legitimate resellers by giving them authorized-dealer badges or trust icons that they can publish online alongside their product listings. This can help further limit unauthorized 3Ps’ ability to list your products on Amazon because consumers will learn quickly how to differentiate the real sellers from the fakes.
2. Make Sure Your Distributor and Wholesaler Agreements Reflect Your Inventory-Resale Rules
Now let’s move a bit upstream in your supply chain. As we stated, unauthorized sellers often acquire your products from either careless (or worse, complicit) distributors and wholesalers who should not be selling to them.
So, as a complement to your Authorized Dealer Program, you’ll want to draft and execute wholesaler and distributor agreements that clearly state these companies are to resell your inventory only to other authorized distributors or to those retailers on your Authorized Dealer list.
Because these agreements will help restrict where each of your distribution partners may sell your products, they will help reduce the leaks in your supply chain that can lead to rogue retailers getting their hands on your inventory to list on Amazon.
Additionally, because these companies want to maintain a good relationship with your brand (because they have something to lose), these agreements will give them incentives to tighten up their resale processes and make sure they are selling your products only to the companies you’ve told them they can.
The added benefit of implementing both an Authorized Dealer Program and agreements with your distribution partners is that, if you do find unauthorized 3Ps selling your products, you will have a much easier time tracing that problem back to its source.
3. Build Brand Protection Into Your Company Culture
Another important best practice to implement is to make sure you are educating your entire company—particularly your in-house sales and eCommerce teams—on both the importance of keeping tight controls on where your products are sold and how to identify rogue retailers using trickery to get their hands on your inventory.
For example, if a retailer tries to order products supposedly for sale in another country—meaning they can buy the same inventory from you for less than if they were planning to sell it in the US—your staff will need to verify that information. If your teams aren’t careful, a clever retailer can buy products at a lower wholesale price, supposedly for sale in a poorer country, but then divert that inventory right back to the US to sell it at a steep discount here.
You’ll also need to train your staff on the importance of selling only to the companies on your approved lists—distributors, wholesalers, and retailers. That means making sure they understand how much these product-distribution leaks and unauthorized retailers can threaten your brand, your relationships with your most important retail partners, and your company’s reputation in the market.
Bottom line: For your company to significantly reduce the chances that rogue sellers will acquire your products and list them on Amazon, you need to make the campaign a companywide effort. That means making it more than just a one-hour training session once a year. You’ll need to build this brand-protection mindset into your company culture.
4. Use Serialization to Prevent (or At Least Trace) Product Leaks
As we’ve pointed out in previous lessons, one of the best strategies to cut down on leaks in your sales channel is to add unique serial numbers or other identifiers to your products. This has both reactive and proactive benefits.
Inventory serialization can be a helpful reactive strategy because it helps you more easily trace your products’ distribution path from your factory all the way to the consumer. This means if you find rogue retailers selling your products, you’ll be more likely to track the problem right to its source so you can deal with it.
But it also has a proactive effect. When your authorized distributors and wholesalers know you are tracking your inventory, and they know they have something to lose if they violate your rules, they are less likely to sell your products to businesses you haven’t approved of.
If you spot an unauthorized 3P on Amazon, you can conduct a test buy of the product, then use the serial number (or whatever unique code you’ve placed on the item) to follow it back to the source of the leak. Because you’re also restricting which distributors and wholesalers you work with, and because you’ve given them a list of approved dealers, you shouldn’t have trouble determining exactly where the leak happened.
Armed with this information, you can then issue whatever consequences you’ve specified in your distribution agreement, including removing the offending distributor or wholesaler from your approved partner list.
Remember: Stopping (or at least scaring into compliance) a rogue distributor can prevent a lot of downstream unauthorized 3P problems from ever happening.
5. Build Elements Into Your Products That Make Them “Materially Different” From Those the Rogue 3Ps Are Selling
Remember, one of the problems with unauthorized Amazon 3Ps is that if they’re selling your authentic products, as opposed to counterfeits, Amazon doesn’t treat this as a problem.
In fact, when they’re confronted for selling products without the brand’s approval, one of the unauthorized seller’s favorite tactics is to hide behind the legal principle called the First Sale Doctrine. This is an element of federal trademark law that states a person who buys a product has the legal right to resell it without violating the rights of the trademark owner.
This is why it is legal for people (or even bookstores) to sell copies of used books on Amazon. Intellectual property law obviously prevents people from making copies of published books they’ve bought and then reselling those copies. But as the owner of a specific copy of a book, the law allows us to dispose of that copy any way we choose—by giving it away, renting it out, or selling it.
However, the First Sale Doctrine has exceptions, each designed to protect the interests of consumers. The good news is that you can also use them to protect your brand against unauthorized Amazon 3Ps.
The “Material Difference” Exception
One principle working in favor of manufacturers and brand owners when it comes to unauthorized sellers is that the First Sale Doctrine applies only if a product being resold is not “materially different” from the original product.
Although the law does not give a precise definition of what constitutes a material difference in a product, courts have interpreted this principle broadly.
A material difference could be a physical change made to the product, such as if the seller has removed original bar codes or other tracking information from the original packaging to conceal its sale from the manufacturer. Or the difference could include nonphysical characteristics, such as the lack of a service that is part of the authentic product sold through legitimate retailers. The most common example is a warranty or customer support that is available only for products purchased through authorized dealers.
How to use this exception:
The material difference exception can help you make a legal case that a rogue retailer is selling your products in violation of trademark law—and that retailer won’t have the legal protection of the First Sale Doctrine.
Knowing this, you should build into your product physical and/or service-related elements that would by definition mean anyone selling your goods without your permission would be in violation of trademark law. A great place to start: Include a warranty and/or offer customer service to customers who can verify they’ve bought your product through an authorized dealer.
The “Quality Control” Exception
In some jurisdictions, brand owners can also leverage the “quality control exception” to the First Sale Doctrine, to demonstrate that a rogue reseller is using quality-assurance standards that are lower than the brand owner demands of its authorized resellers.
In one real-world example of this exception, a retailer was found selling expired cosmetic products, in violation of the manufacturer’s quality-control standards for its authorized sales partners to resell their inventory by a certain date.
How to use this exception:
As part of your reseller policy, you should include written language stating your minimum standards for quality controls in terms of how retailers may handle and maintain your products. This way, if you catch a rogue retailer selling your inventory, you can pierce the First Sale Doctrine shield by demonstrating that they are not abiding by your written policies for quality controls
6. Deploy an Automated Brand Protection Platform to Monitor Amazon At All Times for Unauthorized Sellers
Finally, it’s important to understand just how massive an undertaking it will be to police the enormous Amazon marketplace at all hours of every day—let alone the rest of the Internet—which is what your company will have to do to quickly spot unauthorized 3Ps in the first place.
For that reason alone (not to mention to protect your brand’s reputation), you should consider implementing an automated program to monitor your product on Amazon—and to help you deal quickly and aggressively with violations.
But you will need to investigate the market for the right automated monitoring and enforcement platform. To get the highest levels of protection against unauthorized Amazon 3Ps, you’ll want to select a software solution that:
- Uses sophisticated AI and analytics tools to monitor Amazon 24/7/365 for your content according to a wide range of criteria (images, sales copy, keywords, etc.)
- Auto-generates and sends your team daily or weekly “do not sell” lists
- Helps you identify those 3Ps who are hiding behind phony names or who are using multiple seller accounts
- Allows you to customize your team’s workflow to automate or streamline even the most complex policy enforcement steps
- Helps automate the process of pursuing unauthorized 3Ps, including issuing warning notices, documenting the offending listing for potential IP violations, and contacting Amazon to register complaints
Time for your last quiz of the course.