The Final Report From the Antitrust Subcommittee - Episode 157

KEY TAKEAWAYS FOR BRANDS SELLING ON AMAZON 

DESCRIPTION

Today we’re talking about the new report from the US House Judiciary antitrust subcommittee that was published last week. We want to share some of the takeaways from Amazon-related content, predictions on what’s going to change, and some industry responses. 

The antitrust investigation took 15 months, and a couple of months ago there was a hearing where the CEOs of Amazon, Google, Apple, and Facebook appeared and made their case why they aren’t monopolies.

Make sure to tune in to find out what this means for brands!

KEY TAKEAWAYS

  • Amazon using 3rd party seller data to create competitive private label products and brands - subcommittee doesn’t believe that Amazon’s testimony that this was limited to a couple of occasions.

    1. At a headline level across all categories, Amazon doesn’t have as much of a share of GMV as Walmart or Target, however, if you’re a branded manufacturer of a particular niche product which has been totally swamped with Amazon knock-offs, this is a hard argument to follow.

    2. This creates a lot of tension between brands and Amazon, and in public relations, even though there’s a valid argument that this is good for the customers as it drives prices down.

    3. Advertising - very fast-growing and very profitable part of Amazon: if Amazon is putting their own products in #1 sponsored spots, other brands aren’t paying for that - so this is another profitable source of revenue that Amazon misses out on.

  • Amazon uses its market power to negotiate better terms - ‘strong-arm tactics’ in negotiations with Vendors (the retailer has the power to de-stock the brand’s products on Amazon, as a “bargaining chip to force terms”).

    1. Seen in buy box suppression as well, making the purchasing process difficult for customers, and all the advertising stops.

  • “Fair Pricing Policy” - guarantee that the retailer will always receive the best prices and terms.

  • Minimum Advertised Price (MAP) - not allowed in EU and AU; Amazon disregards MAP with 1p vendors, and this drives down the price.

  • Amazon dictates the distribution model - with a 3P model, the brand itself can control inventory positions, pricing, marketing spend, and product assortment, but Amazon is known to force certain brand manufacturers into being wholesalers.

  • Can’t Realize A Profit (CRaP) - Amazon identifies unprofitable products: attempts are made to make these products profitable through raising delivery fees, requiring vendors to repackage products, but most commonly - asking the brand to lower their wholesale prices.

MENTIONED IN THIS EPISODE

Season 3Kiri MastersComment