Online shoppers who have grown accustomed to using Amazon.com to shop for and compare prices on products from the likes of Macy’s, Gap, and Buy.com have probably started wondering what happened to those products lately.
The three big name merchants had all partnered with Amazon as third-party sellers through Amazon’s Marketplace offering at one time or another. But in recent months, they have all decided to pull their products from the site over concerns that the sales and product information they provided to Amazon may have been used by the site to gain a competitive advantage over the very retailers it was partnering with.
For the record, none of those three retailers who have backed out of the Amazon Marketplace lately have actually levied such a claim, charge or accusation against Amazon. At this point, it’s all a guessing game.
But clearly there’s something there when merchants with the size and brand recognition that Macys, Gap and Buy.com all decide to end a partnership with the consensus #1 shopping portal.
The Marketplace offering alone accounted for nearly 34 percent of the total units sold during Q4 2010, according to Amazon. So there is certainly sales potential there in the offering for retailers, those as large as the big three to leave the service and their smaller counterparts as well.
So what went wrong?
According to some industry experts, the issue at hand (which, again, has not been directly cited or commented on by either Amazon or any of the companies involved in the Marketplace exodus) is that many of the retailers using Amazon Marketplace are growing increasingly concerned with the very heart of the partnership. Namely, there has been talk that Amazon uses information that retailers provide to them to assist in the marketing of its own interests. Yet another theory espouses that Amazon could take a retailer’s product information and use it to deal directly with that retailer’s product suppliers, essentially removing the retailer itself from the process.
The potential of Amazon taking otherwise sensitive information and using it to advance its own competitive agenda is what has resulted in mixed support from major retailers for the Marketplace offering. And in the case of the three here, we can assume that it led to them eliminating their partnership.
For the record, only Macy’s and Buy.com have directly mentioned their leaving Amazon for public comment. Buy.com, which dropped out in October, says it doesn’t want to give Amazon pricing information that can be used against it and says it runs its own third party system anyway.
Macy’s statement was just as dry, claiming that Amazon no longer represents a good business partner for the department store chain, while also saying that they’re hard at work on their own “omnichannel” offering.
The larger issue here is what all of this means for smaller merchants. Sure, the bigger ones can afford to sever ties with a company like Amazon with the relative confidence that they can make up the difference somewhere else. But for local, niche or just small retailers who depend on Amazon for a good chunk of their revenue stream, this situation raises some serious questions. Do they stick around? Do they bail on Amazon? We’ll have to see if more retailers move away from Amazon in the future to know for sure where this is going.
In the meantime, we’re anxious to hear if any of our readers who are retailers have come across this problem as of now. If so, leave us a comment with your story!
It seems that Amazon will see what is a good selling item. Then all of a sudden Amazon starts selling that item below what we can get it for basically forcing us out of that market. This has impacted our sales dramatically and does not seem like a fair practice. We have built our business based on the volume created through Amazon and this has forced us to rethink how we operate. Unfortunately the amount of traffic through Amazon is nearly impossible to replace. Wish I had better options available as I have had to let some people go due to the lack of revenue.
There is nothing we can do to ‘get around’ the issue. We’ve asked the manufacturer to enforce their minimum pricing standards with Amazon (and their response is that ‘We’ve asked them to…’). We once had sales over $1mil with Amazon, but now that they are competing with us with lower pricing – we are lucky to see $150k in yearly sales. Since our sales have dwindled down so significantly, we have focused our effort in other areas outside of Amazon. It was a tough lesson to learn and one that I hope other retailers think about before selling on Amazon.
This is so true. We started selling on the Amazon Marketplace several years ago with great success. Once Amazon noticed how successful we were with our product line, they started competing with us directly by selling the entire line. To make matters worse, they ignore the manufacturer’s minimum selling price requirements and sell for less, and they make sure we never get the buy box. As a small retailer, we feel like we’ve been totally screwed over by Amazon.com – but don’t have the money to put up a fight.
Thanks for the response, Stacy, we figured there were cases like this out there for sure. In the interest of filling in our other readers who may have had similar experiences, what exactly did you guys decide to do? Did you stop listing with Amazon altogether?
I am really interested on what Stacy has done to get around the problem. As stated some retailers rely on this for a big part of their revenue. Any other input anyone can give woud be greatly appreciated.