Amazon Fights Counterfeiters with New Brand Policies
by Liz Adamson, on October 20, 2016
By now you have likely heard about Amazon's new brand-gating policies that rolled out in late August. For certain major brands, Amazon.com, Inc. ("Amazon") now requires that sellers submit three invoices and, in some cases, a letter from the brand owner authorizing the seller to sell their product on the Amazon marketplace. For sellers new to the brand, some brands require a fee ranging between $1,000 and $1,500 per brand.
While Amazon has restricted sellers from selling certain brands in the past and even charged fees for ungating, this most recent update has affected a much larger list of brands and third-party sellers. There have been many questions from sellers regarding this new policy and how it affects them.
Why is Amazon Gating Brands?
While Amazon does not explain all the reasons for policies like this, this appears to be one step towards controlling a growing counterfeit problem. This received a lot of attention in July when Birkenstock announced that they will no longer allow their products to be sold on the Amazon marketplace. Their reasons included the fact that counterfeiters and unauthorized sellers on the marketplace have caused problems for their brand and distrust from customers. And it’s not just the big brands. Counterfeiting is a growing problem throughout the Amazon marketplace. Many smaller brand owners have shown me page after page of counterfeiters selling knock-offs of their own products.
Brand gating is one step to address this problem and calm the fears of brand owners as well as customers. Specifically Amazon wants customers to be able to trust the marketplace as a source for brand-name products. The Seattle Times quoted an Amazon spokesman as stating, “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.”
How Does This Affect Sellers?
If you are are currently selling one of the gated brands, you’ve likely already been asked to show documentation. Current sellers are not required to pay the ungating fee. If you have been unable to provide the documentation or Amazon has declined your application, it’s time to start looking for other sales channels for your existing inventory.
If you are considering becoming a reseller of a particular brand, do your homework before you buy. Check to see if you are able to list the product or if Amazon has gated the brand and find out if they are accepting applications from sellers for that brand. This is going to be especially important for sellers engaged in retail arbitrage. It’s not likely that Amazon will accept your receipts from the clearance sale at Target or Walmart. A seller must provide an official invoice from a distributor or manufacturer—and in some cases, written permission from the brand—to be allowed to sell the brand.
Will There Be More Changes?
If I know anything from our years of experience helping sellers with Amazon, it’s that policies can change quickly and without warning. I always recommend that sellers diversify their sales channels. Keeping all your eggs in the Amazon basket can be disastrous should a policy change directly affect you and your products.
Sellers should also strive to play by the rules. Many of the recent policies from Amazon are targeting sellers who are intentionally manipulating their systems (reviews, search rankings, etc.) or selling inauthentic products and misleading customers. While you still may be affected by future policy changes, playing fair will at least minimize your exposure.
The Amazon marketplace is rapidly changing and can be both a frustrating and exciting place to sell. Take time now to evaluate your Amazon strategy and how you can best minimize the risks inherent in selling on an open marketplace and best protect your business.