If you sell to distributors, retail stores, or even multiple ecommerce vendors, someone out there is likely flipping your inventory back to Amazon to make a quick buck… unless you are taking intentional steps to stop them.
You’re likely already aware of the problem.
It may be a minor issue that you’ve handled with an IP complaint here or there, or such an overwhelming mess that you’ve given entirely on policing your Amazon listings.
The size of the problem likely depends on how widely distributed you are and how much money an unauthorized seller can make off your brand with low effort.
No matter how big or small the problem is, it’s worth getting under control. And there are several solutions.
First, do you know the real cost of unauthorized sellers?
If you aren’t already taking action, the full cost may not be apparent.
Some brands may not even worry about clean ecommerce & Amazon channels. “A sale is a sale” means you’re moving units regardless of who is selling it.
But damage may be happening to your brand depending on how those products end up in the hands of the end consumer.
Unauthorized sellers can damage your brand in many ways:
- Unauthorized sellers often provide little to no customer service.
- They don’t run advertising. And they will turn yours off by stealing your Buy Box.
- They violate MAP and erode your margins.
- They do not keep content, images, and SEO optimized and on Brand.
- They create an over-proliferation of listings, which confuses customers and reduces conversion.
- They damage your retail store relationships.
There are a few ways to handle unauthorized sellers:
First, understand the types of unauthorized sellers, as they must be handled differently.
3 Types of Unwanted Sellers on Amazon:
- Sellers of Counterfeits / Knock-offs
- Drop Shippers from other marketplaces
- Unauthorized Resellers of authentic products
Amazon currently gives you some tools to remove the first two types of unauthorized sellers (counterfeits and drop shippers). The last type, unauthorized sellers of authentic products can be the most difficult to deal with as Amazon does not prohibit these types of sellers and using the tools incorrectly can put your own account at risk.
1. Counterfeit Sellers / Knock-offs
The Brand Registry Report IP Infringements tool can be used to remove Counterfeit Sellers and if you use this tool sparingly, Amazon will often immediately accept your reports and remove the offending sellers quickly.
This article won’t dive into the details of how to use Brand Registry to file IP complaints. But that is the recommended path for counterfeits.
There are also tools like Transparency, which require putting individual QR style bar codes on every product. Only sellers that can scan the authentic bar codes are able to list the products for sale. This solution works for some, but has drawbacks for others in that it won’t necessarily cut down on unauthorized resellers of authentic products.
This is because those resellers would also have access to the individualized QR codes unless you took steps to only put those codes on the inventory that you send to Amazon and not on all of your inventory.
2. Drop Shippers sending your inventory from other marketplaces
Drop Shipping is also prohibited by Amazon.
Drop shipping, or allowing a third-party to fulfill orders to customers on your behalf, is not acceptable unless it is clear to the customer that you are the seller of record. The following examples of drop shipping are policy violations that may result in a restriction of your ability to sell using Amazon’s Merchant Fulfilled Network (MFN):
-Amazon’s Drop Shipping Policy. (Requires Seller Central login to access)
These sellers can also be removed through the Report IP violations tool in Brand Registry. The Amazon Transparency program will also be effective against these types of resellers as they won’t possess the inventory in hand in order to obtain the unique QR codes printed on them.
3. Unauthorized Resellers of Authentic Products
The most common, and often the most difficult problem to resolve is unauthorized resellers of authentic products.
These sellers have obtained your authentic inventory from somewhere within your distribution & sales network, and are flipping it back on Amazon to make a profit with low effort.
One may be enticed to file IP Complaints through Brand Registry for a quick removal of these unwanted sellers, but doing this is actually using the tool in violation of Amazon’s Policies.
According to Amazon, the tool should not be used to enforce distribution or resale agreements. Amazon’s view is that everyone has the right to sell their authentic/non-counterfeit inventory on Amazon even if doing so is damaging to your brand and business.
So while this approach may work a handful of times, eventually it can backfire. Your submissions may be disregarded by Amazon or require an increasing burden of evidence to prove your case. If you cry wolf too many times to Amazon, then you’ll lose the benefits of this tool and be caught defenseless when a real counterfeiter strikes.
What is the most effective way to clean up your Amazon channel and remove unauthorized resellers?
The most effective way to maintain a clean Amazon channel is through high quality distribution and resale agreements, along with swift enforcement action taken against those that violate those disagreements.
Many sellers state “I would cut off the resellers if I knew who they were, but I don’t recognize any of their selling accounts.”
Everyone buying your inventory is going to set up another entity with which to flip their inventory to Amazon. Their business address on Amazon is rarely going to match the ones on the purchase orders they send you.
In order to effectively solve this problem, you need to step up your enforcement game, and if required, enlist expert legal help to do so.
While this may appear to be a large hassle or prohibitive cost at the outset, the long term cost of price erosion and a brand you do not control will be much more damaging to your business.
The best process to clean up unauthorized resellers:
- Update your Distribution/Sales Agreements to create a clear list of authorized marketplaces and sellers, as well as spell out the penalties for violation.
- Create a “material difference” between products sold by authorized sellers and those not sold by authorized sellers.
- Spell out this policy in your Distribution/Sales agreements as well, and even note in your product manuals.
- This policy can be a difference in warranty terms depending who the product is sold by.
- Products with and without a warranty are materially different, and you can treat those materially different products as counterfeits.
- Ensure that your Distributors also update their sales agreements and adhere to this requirement.
- Do not allow Distributors to sell your products without also requiring acceptance of your material difference distribution policy. Distributors will not hold themselves accountable if you do not.
- Use a Law Firm to go after every unauthorized seller and threaten them with legal action.
- Send Cease & Desist Orders to the registered business addresses listed for each seller.
- If your distribution agreements are airtight, then anyone with reselling inventory on Amazon without being on your approved sellers list is in violation of their purchase agreement and is causing material damage to your brand (by selling products without warranties that are represented as having a warranty).
There are law firms that specialize in this type of service specifically for ecommerce sellers.They can monitor your listings and check against your list of approved sellers. When an unauthorized seller shows up, they automatically send notices to violating sellers.
What does a legal monitoring service cost?
For a large brand with hundreds of products, fees can exceed $5k-10k per month for the initial setup.
They can help you craft your distribution agreements to be air tight, and then to file the initial notices to begin threatening sellers with legal action.
Do you want to clean up your Amazon marketplace, maintain consistent pricing and regain control of your marketing and promotional strategies (and also improve your margins?)
Let’s talk and we can help walk you through the process.