Amazon Sellers & FTC troubles
3-min read
I can’t find my favorite cereal anywhere. Empty shelves at every grocery store where Fiber One should be (and I checked Instacart for the next town over). So, I turn to Amazon. A pack of 3 is selling for $48 from Shaz Trading LLC. That’s $16 a box for something that normally costs $7. On Reddit people across the country are up in arms. General Mills says they are having supply chain issues and should be back in stock this month.
This is not Amazon’s fault and just like many of you, Shaz Trading is a third-party seller. They have the unique (and short term) option of raising price due to General Mill’s supply shortage. That doesn’t mean under normal conditions Shaz cannot make money at $7/box on Amazon.
We’ve been reading in the news that the FTC is suing Amazon saying that it illegally over-charges sellers and prevents rivals from fairly competing in online marketplaces, and furthermore that it used secret “Project Nessie” to raise prices.
As a seller, you may feel Amazon is expensive to do business with. Selling on Amazon isn’t easy, but when I talk to founders they say they do want their products to turn up in search — and Amazon is the leader in CPG search. Brands also say they want fast shipping — Amazon is also the logistics leader. But as a brand, you also want to make money.
Is there a way to offer a fair price through Amazon and turn a profit?
The answer does not lie in anticompetitive demagogy. (Brick-and-mortar can also be manipulative btw, pricing-out competitors – just look at big box stores that require the lowest price.)
If you choose to be on Amazon, success lies in understanding their model and how to do business with them. There are tricks – from having an optimized listing to managing ads, to selling unique pack sizes (more on that next week).
Here’s how to win with Amazon if you are frustrated or new to the platform.
Amazon is like internet marketing - it is not another wholesale account.
While there is such a thing as being a wholesaler to Amazon where they are your customer, that option is by invite only. When Amazon was messing with pricing under the alleged Project Nessie, they were doing so on inventory they owned. So, for the foreseeable future, you will not be a vendor to Amazon. This is the distinction between being a Seller on Amazon vs a Vendor to Amazon.
Brands often set themselves up as Sellers on Amazon and then wonder when they will get their first PO…. Amazon is a marketplace not a retailer. Marketplace on Amazon refers to the internal side of selling (Seller Central) where Amazon is simply facilitating the sale between you and the end consumer, which is the definition of Direct-To-Consumer, or D2C.
Once it sinks in that Amazon is not your partner in marketing your products, you’ll realize that Amazon requires management. In setting up your listings, keep in mind that >60% of consumers abandon a product page because of lack of content and product description. Your most important content is that which indexes in search: your title is #1 for indexing.
Once you set up your listings, you have to watch them because for one, you do not have total control over your product pages even once you set them up correctly. That’s because Amazon’s success stems from allowing multiple sellers. The model is one product page and multiple sellers – incentivizing commerce through as may people selling as much as possible – which is why others can contribute to your product pages. You have no way to stop this, only to manage it.
You should have someone dedicated to e-commerce sales on your team (or outsourced) that will keep up with Amazon. There are myriad changing rules on listing, selling, and tracking inventory.
Operations and advertising are not one thing
It’s difficult to be amazing at operations and amazing at pricing and ads at the same time, but that’s exactly what is required to be successful on Amazon. Next week we’ll dig into how to avoid getting delisted by Amazon for having a lower price elsewhere, and we’ll go over their fee structure and ad management. I hope to help you decide if Amazon is right for you.
All my best,
Jennifer
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