Amazon’s betting there are a lot more passengers than drivers in the U.S. today. At least that’s how it looks with the just-announced launch of Sold by Amazon, the company’s new service that guarantees sellers a minimum payout on sales in exchange for Amazon taking full control of price setting for a company’s or brand’s products.
Let’s look at this a little more closely. What’s in it for Amazon, what’s in it for you and should a seller take their hands off the wheel when it comes to the pricing of their own products? In short, are you happy letting Amazon drive?
SBA – What is it?
Back in March Amazon removed a seller contract clause that had previously forced sellers to sell on Amazon at the same, or a lower, price than other platforms on the web. The move came as a reaction to intense scrutiny by watchdogs, and the news this week is one more step on the journey to evolving pricing policy.
Sellers who sign up for Sold by Amazon effectively agree to allow the company’s pricing engine to set and control the price on nominated products to stay competitive and drive incremental or volume sales. SBA allows Amazon’s pricing algorithm to automatically reduce (or increase) the pricing of products if Amazon believes or determines a change may generate more sales at volume.
Each SBA seller can set a Minimum Gross Proceed (MGP) at the SKU level which designates a minimum payout threshold per transaction. To sign up, you must be a Fulfilled by Amazon customer and also signed to Amazon’s Brand Registry.
What’s in it for Amazon?
Simple. More control of more parts of the sale. Third-party sellers make up 58 percent of all Amazon sales, so it makes sense Amazon wants to exert as much influence over pricing strategies as possible in order to drive volume sales based on market conditions, competitor pricing, and seasonal promotion windows. More sales at volume mean more seller fees paid for Fulfilled by Amazon services.
SBA is also a powerful new tool for Amazon to fend off low-price competition from Walmart and Target who excel in this area – a clear company focus given that Amazon also recently doubled down with one-day prime shipping to match offerings of Target and Walmart.
What’s In it For You? Who Should Sign Up?
There are definite seller benefits to SBA. There’s also a certain stress-free appeal to the service too for some. The ability to focus on other aspects of running and building your business while Amazon’s pricing algorithm does the hard work for you. Plus, you now have the ability to price set on other platforms at any level you wish, without fear of reprisals or buy box ineligibility from Amazon.
The more complex question is: should you sign up? It’s possible that some of your products may benefit from this kind of pricing strategy but not all. And selecting which will benefit most is a time-consuming endeavor that may require expert, outside assessment. It’s also important to note that right now promotions for SBA listed products are tricky. For the moment, you cannot offer SBA products as sponsored products, or run lightning deals. Amazon says that will change but in the short term, it’s not an option.
All of this goes to say, time will tell. In the short term, it may take Amazon quite some time to convince and sign up sellers, but success will breed momentum. Watch this space…
Need more immediate advice or assistance with Sold by Amazon insights and strategies? Talk to our Channel Key team.