This post exposes the power Amazon has when products are sold direct (sold by, shipped by) to Amazon.com. It’s a detour off the Amazon cycle article here.
A Brief History of Jet.com
Jet immediately scored a place on the map as Amazon’s largest competitor with the help of a huge cash injection. Jet promises to save consumers more money than Amazon. They offer free shipping on orders over $35 to compete with Amazon’s $50 or more.
Since Jet’s goal is to take Amazon down, it must be the best price on the internet. One way to instill new customers trust in Jet.com was to display competing website prices on product pages. Imagine you’re viewing Moleskin notebooks on Jet.com. You can compare Jet, Ebay, Walmart and Amazon pricing all in one place. Jet showed it was the most competitively priced, so customers purchased from Jet.
This feature stepped on Amazon’s toes a bit because Amazon aims to out price all sellers of products on and offline. Jet’s price comparison feature discourages customers to buy from Amazon.com. In retaliation to Jet’s price display, Amazon created a scraper robot that scans Jet.com. The scrapper automatically adjusts Amazon.com’s pricing to beat Jet’s whenever it found Jet’s price lower. When you’re searching Jet for Moleskins you see Amazon’s price is more competitive. Thank the universe you didn’t let go of your Prime membership and you jump ship.
What’s the point of this story?
If you sell direct to Amazon, they have the ability to automatically adjust pricing lower than any other online marketplace. Meaning, once your product is sold direct to Amazon you have zero control over pricing. Amazon’s sales team will assure you that you have control over pricing on Amazon.com. They may even follow MAP for a probationary period of time. After 3-6 months they wont adhere to any of your guidelines.
Amazon will use their buying power to negotiate lower rates than all your other customers. If they convince you to sell direct, you’ll be left with razor thin margins and without a payment for 60 days. This leaves your relationship with retailers you’ve been nurturing for years in a compromising place.
You Have More Options than Selling Direct
You can reap the benefits of being on Amazon without having to sell to them directly. Other options include managing your own store and selling to third party sellers. A few benefits to managing your own store are you have control over pricing, can protect your brand image and you make full retail margins. If someone else manages your store you make less than full retail but significantly more than you would if you were selling direct to Amazon.