Amazon is discounting third-party seller items and covering the discount themselves.
After a report emerged in the Wall Street Journal about this practice, we went to look at an example. In this Risk Legacy Boardgame, Amazon is offering an 8 percent discount on the item. (Click on image to enlarge)
Clicking on the “Details” link by Amazon, the following information is provided.
- This item is sold by a third-party seller. The discount is provided by Amazon.
- This is a limited time discount.
- Discount does not apply to digital content.
- Discount good while supplies last or until withdrawn by Amazon.
- Shipping charges and taxes may apply to pre-discounted prices.
- Amazon reserves the right to modify or cancel the discount at any time.
- If any of the products or content related to this discount are returned, your refund will equal the amount you paid for the product or content, subject to applicable refund policies.
Amazon Discounts to Match Prices by Competitors?
There is no real information on how Amazon chooses the products to be discounted. The WSJ article included information about other items that were cut and apparently sellers that responded to questions about this issue were unaware of the discounting.
In the items we found, there were no items for sale by Amazon themselves, so this appears to be a new strategy to price-match popular products on Amazon found on non-Amazon websites.
We also do not know if this practice is being tried outside the U.S., or if this is a limited test. Lots of unanswered questions about this program.
Minimum Advertised Price Policy Implications
If, as it appears, Amazon is trying to gain market share by discounting products for which they do not have stock or do not have a distribution agreement, there could be pricing issues for sellers.
In the United States, it is legal for manufacturers to set so-called MAP (Minimum Advertised Price) or Colgate (minimum sell price) policies.
In the early days of Amazon, the company was a perennial pricing violator but as more brands took legal action, the company began following policies.
While it did not enforce the pricing policies for third-party marketplace sellers automatically, brand protection style consultancies engaged with Amazon and eBay on the brand’s behalf. This violation could often lead to the removal of the listing or suspension of the third party seller account.
If the item they are discounting is from a brand they typically sell themselves, then the company would be aware of price policies as they had to sign a dealer/distribution agreement.
But, if Amazon does not sell the product being discounted, the marketplace could potentially put sellers in a legally awkward situation.
In theory, Amazon’s defense to this issue would be that they only discount if they find the item on another major retailer’s site at a lower price, meaning, that website should not be advertising a product below a pricing policy.
Simply, the company is assuming the other retailer is an authorized dealer of the brand and therefore signed a dealer/distribution agreement stipulating price maintenance.
Check Your Listings!
While there are some potential issues for sellers that sell brand-name merchandise, what about sellers selling their own brand products?
As a seller with your own brands, you may have pricing agreements with other sites to keep your prices at a certain level. If Amazon decides they want to undercut a price if only by a few cents, that might create an issue.
It seems unlikely that this program is going to extend beyond products that are off-brand or unbranded. How would Amazon choose a discount? But we have been surprised before.
Keep an eye on your listings. This may not be easy if you have thousands of them, but if a customer contacts you about a discount that is being offered on Amazon and you do not have running discounts, now you know why.
What do you think about this practice by Amazon? Drop us a line in the comments section below.
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