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800lb Gorilla: The Dangers of Selling on Amazon

By Travis Romine

There are some significant risks to using Amazon as your main or only selling channel. Here are some ways to beat the 800lb gorilla.

800lb Gorilla: The Dangers of Selling on Amazon

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Julius Oliveti

Selling at a lower price – Amazon requires you to sell at the same price you do on your webstore. Amazon will suspend you for offering better deals on your webstore.

This is NOT applicable in Europe as anti competition bodies launched an investigation into this practice of price parity 3 years ago. Please ignore that paragraph.

Mark Hetherington

Replying to Julius Oliveti

As far as I am aware Amazon have ignored the EU ruling as it hasn’t actually been enforced as such. Japan are also currently investigating Amazon for the same reason.

Frankly I would take the line that if Amazon find you undercutting your Amazon prices with, say, your website prices they will find a way to suspend you anyway. Remember it’s their site so they don’t really need a reason to kick you off. If they want you gone, you’re gone. I know of a business with over £2 million Amazon turnover in the UK who got kicked off and they’re not even sure why.

Mark Hetherington

I have mentioned this in the past but I think it is always worth highlighting. Amazon’s FBA, Fulfilment By Amazon, is a system where you send your bulk stock to Amazon’s warehouses then they ship your items for you at much reduced rates when they sell.

It has lots of benefits, including genuinely increasing your sales as you can offer a lower price based on the shipping savings and you get the Buy Box a lot more often, which puts your listing at the top of the pile.

However one very little known fact is that if you get kicked off Amazon you will be charged PER ITEM to get your stock back. I lost my Amazon account and had nearly 2,000 small, low value items to recall and it cost me almost £1,400 (around $1000) at the time. Worse, I didn’t get everything back, almost £300 ($500) worth of stock was missing and my claims fell on deaf ears.

There is virtually no way you can get anywhere with them if you have a problem. I have heard many stories of sellers losing their accounts and not even getting paid the money Amazon hold from sales, although I did get paid minis those fees for returning my property.

Incidentally it took almost three months to get back the stuff I did get. And the reason I lost my account? I was repeatedly targeted by competitors who constantly reported me for selling fake goods, leaving negative feedback and filing A-z claims for items not received. I was selling GENUINE mobile phone batteries, gave proof of my source and even had a letter from a major company confirming the samples sent to them were genuine. A large UK police department were among my regular customers. But all to no avail. I battled for almost 9 months and although I got a little help from Amazon eventually, after constantly pushing them to accept I was being deliberately targeted, I can only assume they eventually gave up having to deal with the constant reports I was filing and no doubt it was using up a lot of their staff time. So beware, you might think it’s bad when sales are poor but I eventually lost because my sales were among the best in the sector and was targeted for that reason.

I also noted that Amazon started to sell a lot of the products I was doing well with, and often concocted a reason to “suspend” my products if I tried to undercut them. It’s extremely difficult (but not totally impossible) to get bank on Amon, though not with the same business and suspensions are rarely overturned so use Amazon with caution, not as a way to build a long-term sustainable business, and concentrate on building your own site. You will eventually make more profit for much less outlay anyway and as long as you keep Google’s search algos happy there is a lot less risk and stress.

TEDDY JONES

This was quite a useful post. As a fairly new seller here I know very well the pain of losing selling privileges and I want to do all I can to avoid that here. Thanks Travis.

Vin

The entire purpose of the Marketplace is so Amazon can find which products sell well and sell it themselves. They’re simply using 3rd party sellers as market research for expanding their very own catalog. We’ve had manufacturers that we sold customized goods for call us repeatedly about the constant phone calls from Amazon asking about our store in particular and trying to work out deals to take the product line from us. It was impossible to grow on that marketplace because within 1-2 months of finding a great selling item, Amazon WILL contact the manufacturer and sell it themselves. They’ll even sell each item at near break even just to suffocate their own sellers. And forget about adding NEW items to their catalog, their search engine will prevent your goods from even showing up unless you do you own offsite marketing to direct traffic to Amazon to get sales.

Vin

Replying to Vin

Btw, our store was bringing in 7 mill the previous year, on track for 10 mill then we started seeing Amazon get really aggressive with undercutting our best selling products and eventually we were kicked for “counterfeit goods”, we didn’t FBA anything, shipped directly from manufacturer, but as we were listing on a product listing where someone else was selling counterfeit goods, they count a strike against every seller on that listing. So while we had proof we had legit products, sell on the wrong listing where someone else is selling garbage and they’ll tally those strikes against you as well… This caused everything to become unstable and our store collapsed.

Chris Lawrence

Great article Travis!

Putting too many eggs in Amazon’s basket can be a dangerous strategy!

We always urge our clients and partners to have a diversified multi-channel strategy, with a strong e-Commerce presence to help build the brand, cast a wide net, and win the second order.

It’s easy enough to connect all of the major channels together, once you find good partners (shameless plug here) for the strategy and technology integrations.

seller10137

Amazon is not the place to build a sustainable brand for your company. It is the place to build Amazon’s brand. You are paying to provide them with inventory and fulfillment logistics, market research, customer service manpower,… You can make a quick buck from exposure to their traffic, but there is no long game with them

Sasha

I completely agree. I never rely just on Amazon, I spread my sales around. But Amazon seems to have some top traffic. Once I was banned, it completely killed my income. I had contacted Auction Essistance to see if they were able to get me reinstated, but turns out my account was an indefinite one. They were however, able to set me up with a new account, but there is no telling if Amazon will ban this one too.

lynette cano

Selling at lower price? I thought this was ruled to be against the law by the FTC or something similar. They then resorted to suppressing listings anytime they saw it lower anywhere else. Especially on Ebay, Chewy, Jet, etc…

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