Sold by Amazon: Third Party Pricing Control
The month of August has captured the attention of brands that sell on Amazon with many changes. Of those changes, a new program known as Sold by Amazon has been introduced. Here we share what we know about the program and our perspective on Amazon’s motive to encourage sellers to jump on board. We’ll also explain what this might mean for brands. Continue reading for a deeper understanding so you can make the best decision for your business.
What is Sold by Amazon?
Sold by Amazon is designed for sellers within Amazon’s third party marketplace. Sellers that participate in the program relinquish control over the retail price of their ASINs, passing that responsibility over to Amazon’s pricing algorithm. This is similar to the way Amazon currently prices products offered on the 1P platform.
To qualify for Amazon’s newest program, it requires enrollment in both Fulfilled by Amazon (FBA) and Brand Registry. Brands that wish to take part also need to meet Amazon’s trademark registration qualifications. Right now, it’s only available through an invitation sent by Amazon.
The goal of Sold by Amazon is to ensure products sold on the channel maintain the lowest price on the market. For example, this program will adjust a product’s price to be lower than what it is listed on Walmart.com and other online marketplaces.
Since its launch, the program has been criticized by analysts and industry experts on the heels of existing pricing policy scrutiny. But, Amazon ensures price cuts won’t negatively impact sellers’ margins. To make good on this promise, sellers will receive compensation known as Minimum Gross Proceed (MGP). Sellers can expect to receive this compensation when margins are sacrificed substantially because of the algorithm’s discounts. In other words, MGP will promise sellers a minimum dollar amount per unit to protect their margins.
Why is Amazon Encouraging Sellers to Take Part in Sold by Amazon?
Sold by Amazon is a free incentive for sellers to relinquish control to Amazon’s pricing algorithm, rather than having to maintain manual oversight. With this comes the promise of more reliable Buy Box ownership. Above all, this program is clearlyAmazon’s way of gaining control over the price point for a greater number of products on their site by offering its pricing algorithm services to brands on Seller Central.
What Does this Mean for Sellers?
Although Sold by Amazon is promoted as a winning solution for sellers to win the Buy Box, there are downsides and alternative solutions.
For a Seller on Amazon, the cons of using Sold by Amazon can be summed up in relinquishing control. By allowing Amazon to control price points, brands no longer hold the reins on their margins. Additionally, allowing Amazon to adjust the price up and down could have implications for channel conflict, including other online retailers on which a brand is selling.
For brands interested in the idea of automating pricing on Amazon to raise Buy Box percentage, there are a variety of third-party tools available with similar functionality. These tools often allow brands to provide price ceilings, floors, and even margin targets.
The Sold by Amazon program could make sense to brands that have significant competition for their Buy Box, or that lack the bandwidth to monitor pricing changes consistently.
However, for the most part, sellers can maintain similar control over their pricing by using third-party tools or by relying on a strategic partner.