New Amazon Agreements Could Threaten Third Party Sellers

New Amazon Agreements Could Threaten Third Party Sellers

Big brands like Levi’s or Ralph Lauren that sell on Amazon would love to limit the number of retail sellers who offer their brands on Amazon too. That’s why in the case of Levi’s, for example, a recent study found the company has a special arrangement with the online seller that limits the number of third party sellers that can offer its merchandise.

But that’s bad news for small online merchants who offer brand names on Amazon. And this will only get worse if more and more big brands enter special arrangements with Amazon squeezing smaller merchants out.

L2, a subscription-based business intelligence service, has released an Amazon intelligence study. It looks at, among other things, how these agreements might affect third party sellers, including many small businesses.

The L2 study scanned more than 30,000 Amazon product listings from more than 300 brands. In the process, it found that when Levi Strauss had a deal in place with Amazon, a product search on Amazon found that no Levi’s products were available from third-party re-sellers.

In fact, Bloomberg reports that L2 tried to create a merchant account on Amazon as part of the study to sell Levi’s brand products only to be denied.

By contrast, in the case of Ralph Lauren, which has no such arrangement with Amazon, there were 9,000 of the brand’s products available to consumers from third-party retailers.

The L2 study was prompted by questions raised by other brands like Coach Inc., Nordstrom, and Oakley Inc. And it focuses on the concern larger brands have that Amazon has set up a pay-to-play system for brands seeking more exclusivity and better positioning on the site.

But the bigger question is this. What if more and more big brands enter special arrangements with Amazon? Smaller third party merchants (including brick and mortar retailers who also sell on Amazon) might no longer be able to sell merchandise from big brands.

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And L2 has found yet another place where Amazon is selling big brands premium advantages on its platform that make it difficult for some smaller merchants to compete. In a recent post on the official L2 blog The Daily, L2 Editorial Director Homa Zaryouni writes:

“As a result P&G brands appear in Amazon result for 41% of long-tail searchers in Beauty, Personal Care, and Home Care, higher than any other CPG brand. Other Beauty and CPG Brands L’Oréal, Unilever, and Johnson & Johnson follow closely behind, appearing in 30%, 24%, and 21% of first page Amazon search results respectively.”

Images: L2

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Joshua Sophy Joshua Sophy is the Editor for Small Business Trends and the Head of Content Partnerships. A journalist with 20 years of experience in traditional and online media, he is a member of the Society of Professional Journalists. He founded his own local newspaper, the Pottsville Free Press, covering his hometown.

6 Reactions
  1. Yes. Because that will practically limit the number of sellers – which is beneficial to those sellers who tied up with them and good for them because it allows them to have more control on their sellers but it is not good for other potential sellers who don’t have the money to tie up with the brand.

  2. Martin Lindeskog

    Isn’t up to the (big) brands to decide how they want to distribute their goods? If they have allowed a reseller to sell their products, shouldn’t be stated how they could sell the stuff?

  3. Wow. Very interesting.

  4. Amazon as a whole bothers me. They seem to be a monopolizing the market. We need more competition in the marketplace to rival Amazon. I would LOVE to see KOBO take a more active role in the USA selling their ereaders as well as other various overseas ereader companies introducing their devices in the USA and actively advertising and promoting their product. I want to have more choices than Amazon and B&N.

  5. Great topic!

    Here’s my $0.02…

    Amazon is a marketplace. It’s not a tool to help you specifically make more money.

    If that last sentence gave you a headache, you’re not alone. As a performance marketing agency who specializes in ecommerce brands of all sizes, we’ve had to medicate that headache many times. For ourselves and our clients.

    Whatever kind of ecommerce business you run, you will probably have to deal with third party resellers at some point. Most companies who sell on Amazon are struggling with this issue.

    Amazon is growing faster than almost any other company in the world. Maybe ever.

    But the threat of thirty party sellers doesn’t have to be a headache. Or a heartbreak.

    It’s merely an opportunity for your company to double down on your pricing strategy and brand credibility, and build a foundation for scale.

    Anyway, we have some tips around pricing that might help you:

    Good luck!