Here’s How Amazon Gets You to Buy Its Own Products. And Why That’s Bad News for Third-Party Sellers

Here’s How Amazon Gets You to Buy Its Own Products. And Why That’s Bad News for Third-Party Sellers

Amazon has a reputation problem. Or maybe it's more of a love/hate relationship problem. To some, Amazon is the big bad ecommerce giant de

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Amazon has a reputation problem. Or maybe it’s more of a love/hate relationship problem. To some, Amazon is the big bad ecommerce giant destroying smaller retailers, using unfair competitive tactics, and constantly sucking more fees out of the businesses that sell on its platform. Yet, it’s still the place Americans go for almost half of all online purchases, and half of American households pay for a Prime membership.

That’s a lot of power in the hands of one shopping platform, and the company has faced plenty of criticism over how it uses that power. In fact, just this week Jay Greene from The Washington Post (which is owned by Amazon founder Jeff Bezos) reports that “Amazon has introduced a feature that pitches its own private-label brands right before customers add rival products to their shopping carts.”

Think about that for a moment. In the tests conducted by the Post, when users add common brand-name items like Glad trash bags, Energizer batteries, and Dr. Scholl’s insoles, an offer for a “Similar item to consider,” would appear just above the button you would click to add the item to your cart. In every case mentioned by the Post, those offers were for Amazon brands sold at a lower price.

An Amazon spokesperson said in a statement that “like any retailer, we promote our own brands in our stores, which provide high-quality products and great value to customers. We also extensively promote products from our selling partners.”

That makes sense. It’s really no surprise Amazon promotes its own brands. But this is a little different. This is like going to the grocery store and finding a sticker advertising the store brand on the box of Cheerio’s that you’re about to put in your cart–and the store brand comes at a lower price. 

According to the Amazon representative I spoke with, this feature is a part of the company’s regular testing to “improve the shopping experience for customers.” However, the company views this effort as merchandising and not advertising, meaning that third-party sellers can’t pay to have their products shown in this location. Amazon decides.

Amazon says it shows both Amazon brands and third-party sellers, though the Post‘s research didn’t find any cases of non-Amazon brands displayed.

In addition, that representative told me that “third-party sellers have access to advertising and promotion tools including display ads, Sponsored Products, Coupons, Deals, Subscribe & Save, and more.” That’s true, and to be fair, the company recently announced a suite of features that are designed to help those sellers better manage their business, including pricing and inventory tools.

At the same time, it’s still fair to ask: Does Amazon have an unfair advantage over its partners who sell their own brands? As a customer, it’s always great to get a lower price for a quality product, but as a business owner, ask yourself where this leads. How much influence is reasonable for Amazon to exert over how customers interact with both Amazon and non-Amazon brands on the site?

Jeff Bezos said in his most recent Annual Letter to Shareholders, that third-party sellers now account for over half of purchases on Amazon’s site (58 percent in 2018), and that–in his words–those sellers are “kicking our butt.” While Amazon makes money off of all of those sales, it obviously makes more when it sells its own brands instead.

Either way, it looks like Amazon is kicking back.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

This article is from Inc.com

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