This post is by Leah McHugh, an ecommerce consultant for ecommerceChris.com.
Last week Amazon began restricting many major brands, also known as brand “gating”. In order to sell those brands you must now submit 3 official invoices and/or a letter from the brand owner, and new sellers to the brand must pay a non-refundable “approval fee” as part of the approval process.
This is not the first time we have seen Amazon restricting brands, nor is it the first time we have seen them charge an ungating fee. They’ve already been doing this as part of the Fine Jewelry category approval process.
But, this is the first time we’ve seen them do this on such a large scale.
There has been a lot of guessing, a lot of misinformation, and a lot of emotion flying around the seller community, and understandably so. We’ve been given very little information about a change that will have a huge impact on the marketplace, and on its third-party sellers.
So, let’s take a look at the implications.
Why is Amazon now restricting brands?
A spokesman told the Seattle Times:
We want our customers to be able to shop with confidence on Amazon. We consider several factors when determining qualifications and criteria to sell certain products. For certain products and categories, Amazon requires additional performance checks, other qualification requirements, and fees.
Everything we’ve seen Amazon do over the last year has indicated that they’re tightening control over their catalog and scaling product quality efforts.
Last year we began to see Product Quality (PQ) teams reject retail and online receipts as proof of authenticity, requesting invoices that contained specific, verifiable supplier information. Earlier this year we saw a change to their UPC policy indicating that Amazon would be checking UPCs against the GS1 database.
Rather than waiting for buyers to report inauthentic item complaints and having to dedicate countless investigator hours, restricting brands allows Amazon to enforce supply chain requirements before there are issues. They are combating inauthentic complaints by addressing the problem before it is a problem.
So, what does all this mean?
It means your supply chain and your relationship with your suppliers is more important than ever. Do you really know your suppliers? Have you taken the time to investigate their operation and build a relationship?
Who does brand gating affect?
Potentially, this affects all third party sellers, who make up 49% of Amazon sales (as of the second quarter of 2016). To clarify, a third party seller is anyone selling items on Amazon that is not Amazon. So this includes private label sellers and the many different kinds of resellers (regardless of how they are sourcing their product).
If you are selling large brands, chances are one or some of them are restricted. If you are sourcing from retail arbitrage, online arbitrage or dropshipping from other retailers, it’s unlikely you’re going to be able to get the documentation required to get approval.
If you are sourcing from authorized resellers or direct from the manufacturer, you will likely already have invoices that meet with Amazon’s approval. However, some brands require a letter of authorization from the brand owner. Certain brands, such as Nike, explicitly prohibit their resellers from selling on Amazon. It’s important that you speak to your suppliers and review your wholesale agreements.
Requirements differ by brand, so it is best to check Seller Central for the specific requirements. Depending on the brand you may be asked to provide invoices or a letter from the brand owner. Some brands require that brand contact Amazon directly on your behalf. And some are not open to applications.
The good news is that if you were selling a brand prior to it being gated, you do not have to pay the application fee. Amazon told CNBC:
If a seller is already selling brands on Amazon that are now subject to a fee, they are not required to pay the fee to continue selling those brands. The fee only applies to new sellers of particular brands. Sellers can see whether a product requires a fee to sell when they search for that product using the “Add a Product” tool on Seller Central.
Private label sellers & manufacturers
You may have better control of who can and can not sell your items. However, we haven’t heard of any brand owner involvement in Amazon’s move to gate brands.
Should you be lucky enough for Amazon to restrict your brand with a letter of authorization requirement, you’ll be able to pick and choose who may sell your product on Amazon.
What should you do about restricted brands?
- DON’T assume that just because you haven’t received a restricted brand notification it means you are exempt. Amazon often sends out their notifications/takes action in waves. They have a lot of sellers – they need to be able to scale these changes.
- DON’T try to list your “new” items as “used” or “collectible” to try to get around brand gating.
- DON’T bundle restricted brands with non-restricted brands to try to get around brand gating.
- DON’T try to list restricted brands without authorization by omitting the brand name from the listing.
- DON’T buy inventory from other Amazon sellers who have been gated out of selling with the intention of selling it on Amazon. If there isn’t adequate documentation to get approval, Amazon does not want that inventory for sale.
- DO do your due diligence with your suppliers. Are they an authorized reseller? Will your documentation hold up to Amazon scrutiny?
- DO check your wholesale agreements to see if you are authorized to sell on Amazon.
- DO speak to your suppliers about getting a letter of authorization from the brand owner to sell on Amazon.
- DO look into selling your inventory on other platforms such as Jet, Walmart, eBay or your own website. Diversification is always a good idea.
- DO register with Brand Registry if you haven’t already (if you’re a brand owner).
2016 is the year of catalog cleanup for Amazon. It’s in their interest and it’s in their customer’s interest to maintain the integrity of their product listings. As always, third-party sellers are the ones who have to adapt.
Leah McHugh can be contacted via ecommerceChris.com. ecommerceChris shows sellers how to keep their accounts healthy, or, if the worst should happen, how to get their account back from a suspension.