Dealing With Brand Violators
To this day, Amazon.com could still be considered the “Wild West” of modern-day retail. This e-commerce landscape is still new and exciting for brands looking for new markets to make their mark and establish a presence with their products. However, when entering new territory, no matter the scope, there are always new pitfalls and challenges to overcome. Each brand will face its own unique obstacles. However, one common hurdle brands face when attempting to integrate into the Amazon landscape will be the threat of Unauthorized Sellers & MAP Violators. Below, you will find the classification of the 8 types of violators you will encounter as well as how to identify and deal with each of them. After all, it is only after you understand your enemies, that you may overcome them.
How Bad is the Unauthorized Seller Problem on Amazon?
As you enter the online retail world, a brand must consider its perceived image and reputation on the internet and how it can be hijacked by 3rd party sellers. All it takes for an unauthorized seller to take hold of the Amazon Buy Box is to have the lowest Fulfilled by Amazon price. At this point, everything you have helped built is at the mercy of this unauthorized seller and the quality of the product they send to the consumer. As you may be aware, on Amazon it does not matter if the product was sold by the official brand or by a violator, good and bad reviews all count the same.
Do not take these MAP policy violators and unauthorized resellers as a necessary evil or a cost of doing business! The closer you monitor your listings the more you become aware of what kinds of violators you are dealing with. Not all violators are made equal, in fact, quite the contrary. These violators come in all shapes and sizes, and your awareness is crucial to combatting this critical issue. Not only do these MAP policy violations impact the consumer’s image of your brand, but they also affect your ability to sell your products to your distributors. Why would your brick and mortar retailers continue sending purchase orders if customers walk into their store, find a better price on their phone, and walk out the door without a purchase? Why would your online distributors continue buying from you if they are losing the Buy Box every time to an unauthorized MAP violator? Do not let these violators win. Below is a thorough breakdown of what these violators truly look like when a light is shined on them.
As the title implies, these sellers are authorized to sell the listing online as long as they are in compliance with MAP pricing policy. However, either on purpose or by accident, MAP pricing is often violated even by those you have authorized. If done by accident it is usually due to a clerical error since many of these sellers have thousands of listings or due to an automatic pricing error if they have auto-price match set up and another seller violated your MAP.
If not an accident, an authorized seller may violate on purpose if they feel their sales are low as a result of sharing the buy box with 10+ other sellers while they are following MAP. They may also have too much excess inventory and need a positive return on their investment. In that case, they may wait until the evening, weekends, or holidays to violate MAP when they feel the brand is not checking for violators. Another scenario that they may violate MAP is due to price cascading. If they see that another MAP violator has had the buy box for a period of time, they may get frustrated and drop their own price below the MAP simply to compete.
Since these sellers are authorized, the brand usually knows exactly who they are and how to contact them. A quick phone call or email will typically put an end to the situation almost immediately if an electronic cease & desist is ignored.
The most common and the least of your brands worries. Usually this is a just single individual with little Amazon experience who stumbled across your product(s) through a multitude of channels and aims to quickly resell them for a fast profit. They usually have 5 or less units (in some cases only 1) and try to sell via Fulfillment by Merchant (FBM) since they don’t know about Fulfillment by Amazon (FBA) or Buy Box mechanics. They may not even be competing for the lowest price since they are unaware of the automatic pricing tool. These types will instantly remove their listings if you send them an electronic cease & desist letter.
Arbitrage sellers are often considered “amateur professionals” who sell on Amazon for a secondary source of income. Some are good at it while others have read only 1 or 2 books and want to give it a shot. Five years ago, the standard practice was to buy scanner fobs that attached to their smartphones, and then walk around retail stores scanning items, looking for something they could sell for profit on Amazon via arbitrage. As the market became saturated, these sellers evolved to focus more towards online arbitrage.
As the previously mentioned methods became less and less effective, these violators began utilizing software that tracks many ecommerce channels at once; looking for sales, clearances, etc. that they may resell on Amazon. They are constantly using addons such as Keepa and CamelCamelCamel to track pricing changes and out of stock inventory. The most popular category for this type of arbitrage is toys because they may sell for $19 on Target one day and $59 on Amazon the next. This is due to the fact that inventory can suddenly become out of stock and in demand. They capitalize on the public’s reliance on Amazon two-day Prime shipping as they know most people would rather pay more on Amazon than spend time shopping around. Many buy inventory and wait for Amazon to go out of stock so they can boost the price and sell out on their inventory at a significantly higher profit margin. These sellers have a substantial number of products and often lack any personal attachment to a specific brand. In order to preserve their arbitrage business, they will often immediately drop a product line if they receive an electronic cease and desist letter in order to preserve their Amazon account and in doing so, their ability to sell the variety of other brands in their stock.
Liquidation Lot Buyers
These types of violators have become more common place over the years as the returns industry has boomed. Retailers like Walmart or Target will sell off their returned inventory to liquidators for pennies on the dollar who will then have public auctions for the contents of the bulk lot. The winners of these bulk lots then take pallets of inventory to their garage or warehouse and go through it one by one to see what can be salvaged, fixed, and resold.
This type reseller model can often be risky venture do to the inconsistent condition of the purchased bulk lots. However, savvy lot buyers can turn a very handsome profit if they are capable of properly managing this inventory.
The real risk lays with the brands whose products make up this inventory. This is due to the fact that an FBA seller is able to initially sell a damaged and returned item as new on Amazon, and an unhappy customer may write a negative review, which reflects poorly on the brand, not the seller. Again, in order to preserve their business, they will often immediately drop a product line if they receive an electronic cease and desist letter, in order to preserve their Amazon seller account.
These sellers simply have too many other products and too great of a personal financial investment in other inventory to risk an account suspension.
Mom-and-Pops are where MAP violating on Amazon gets interesting. These are smaller retailers who buy either direct from the brand or from a distributor. They may have been around for a while or they can be relatively new to the scene. A classic example would be of a small salon, who buys product from Cosmo Professional, or direct from a hair and makeup brand. As brick and mortar retail locations and malls have begun to have sales troubles, these businesses find themselves with excess inventory and little recourse. They assume that their reselling online may be considered too insignificant to be of concern and that they may never get caught. As a result, many decide to pursue this gray area reselling even if their distribution agreements specifically mention online sales being forbidden, and some have even turned it into an impressively profitable side business.
Mom-and-Pops are often very sloppy and can be easily tracked. After identification, one or two electronic cease & desists typically do the trick. And if not, a test buy will shut them down right away as no buffer generally exists between them and the resold products if they purchase direct from the brand. They may continue to ignore your cease & desists if they have gone out of business and have no other way to get rid of their inventory. In this case you can either go after them legally, or simply wait for their inventory to run out. Brand Alignment retains a very thorough capability of investigating each 3rd party seller and calculating how much inventory they have left at the relevant FBA fulfillment center. Patience is the best solution in some situations.
Smash and Grab Sellers
Smash and Grab Sellers represent your typical small-time con artists working the gray area of the law. They will often rent retail space in a cheap plaza, a kiosk/Retail Merchandizing Unit at a mall or book a booth at a trade show or event for the sole purpose of acquiring a contract with a major brand in order to resell their goods online. They view such efforts as a small start-up fee for what will usually become a profitable endeavor.
The best prevention is to research where they would like to open the retail location and if it makes sense. For example, if you have a luxury beauty brand, and a client wants to open a kiosk at a low-income mall, that would be a red flag. Do your due diligence to avoid problems down the line.
If the sellers are smart they will only sign a month to month or 3-6-month lease with the retail location while continuing to buy goods from your brand. They will have their orders shipped to their residence or receive them at shipping facilities since they no longer have a physical storefront. These shipping addresses should be considered a red flag since it makes little sense to receive the product elsewhere and then move it to the storefront. They will then take the product, label and prep it, then ship it direct to FBA. As soon as they are able, Smash and Grab Sellers will purchase more and more product from their contractually targeted brand as they know the clock is ticking.
To combat such violators, it would be in your best interest to download an app such as JungleScout or Scope and see which of your products sell the most on Amazon. If your client only buys the top selling Amazon items while seemingly disinterested when you try to offer them a new line of products or a popular product that sells poorly on Amazon, you have another big red flag.
Finally, if your overall client sales are down while a few of your sellers keep buying more and more product even if they are located in middle of the road cities, consider this a HUGE red flag since the Amazon business is booming while malls/brick and mortar retail outlets are at historical lows.
Smash and Grab Sellers may send you pictures of their storefront that they took during their first month while in reality they are no longer occupied. Calling the mall for occupation confirmation is a priority. Also, check to make sure the forwarded lease agreement you received wasn’t a forgery. If so, this would be crucial ammo to use against them when drafting legal documents.
These sellers will 100% ignore your electronic cease & desist. They may reply and say they took the product down but put it back up on the weekends, evenings, or holidays and change their seller names. Keep in mind the Merchant ID stays the same, so you can easily track their movement, if they are the same seller.
You must begin test buying with these specific types of sellers and immediately cut off their supply chain. At this point, they are proficient at creating new accounts and dancing around loopholes. Waiting until they run out of inventory is a good option, but often they have purchased so much inventory (as they anticipated the day they would get caught) that this may not be a viable option.
At this point, depending on how skilled this seller is, more advanced methods are required to break their resolve. These methods can include:
- Trademark violation complaints
- Account suspensions
- Advanced legal methods
- Lawsuit threats
These examples are the types of work that Brand Alignment specializes in and are ready to deploy to safeguard a brand on the Amazon platform. Our goal is to make their resell strategy seemingly impossible to navigate so that they will never infringe upon your product lines again.
Wholesale Distributors are a significantly larger threat in terms sales volume than the previous five. They may either operate openly or in the shadows. They tend to have their own warehouse, employees, and liaisons to acquire new brands to buy from. They have strong legal representation ready to fight for the First Sale Doctrine and reverse Amazon account suspension, which is recognizable in the large number of feedback responses their accounts receive. They jump industry to industry and buy in large bulk, but not so much as to cause suspicion.
Of course, if you have included the necessary verbiage in your distribution agreements mentioning that online or Amazon sales are forbidden, you can terminate the contract immediately and cut off their supply. At this point I recommend contacting each of your distributors and warning them to place the company on a Do Not Sell list. However, these companies often have numerous LLCs and addresses they operate under (and Amazon seller accounts), they may circumvent these deterrents by utilizing a new sales liaison. They are very persistent, ruthless, and are even more powerful when operating in the shadows by paying middlemen and patsies to procure product for them.
You want to do what you can by catching them with product tampering, trademark violations via material differences, etc. These companies have big assets but try to split everything up among many different LLCs so as not to have too many eggs in one basket in case of a lawsuit. Identify the largest umbrella LLC they have and go after it. Be persistent yourself and they will drop your brand and take a loss. It’s not worth them losing 6 or 7 figures when they have so many other brands they are selling. If possible find their private financier, if they have one and many do (by going through public records) and send him a personal letter or cease & desist to ruffle some feathers.
Most counterfeiters originate from China and often ship the product themselves from China (or an intermediate location) to an FBA fulfillment center. However, some counterfeiters are American who sometimes unknowingly (but often knowingly) purchase the counterfeit items from a 3rd party reseller space (such as Alibaba.com) and then proceed to resell the inventory on Amazon.
Amazon is very serious about stopping counterfeit sellers due to the legal trouble eBay found themselves in years ago with Louis Vuitton. Purchase the product and send counterfeit evidence to Amazon and they will quickly shut down the seller’s Amazon account, usually after only two complaints on the same listing. Legally there is not much you can do pursue international counterfeiters, but if they are selling counterfeit items in gated categories like Supplements or Topicals, suspending their Amazon account can be a big blow to their business due to the difficulty in becoming ungated with new accounts.
Some enforcement companies promise enforcement by stopping shipments at ports and other difficult and exasperating methods. However, we find that it is quicker and equally effective to simply pursue a suspension on of their account as it is significantly cheaper and an equally painful penalty for these sellers since Amazon confiscates their product unless they can prove the inventory is genuine. In most cases, they can not and their investment is forfeit.
Brand Alignment is the Solution
In today’s global, fast-paced world of retail sales on Amazon, every brand needs to be more vigilant about protecting their image and bottom-lines more so than ever before. A well-planned and executed MAP and UA removal strategy is critical to these efforts. If long-term sustainable growth is your goal and of course it is, you will inevitably need a strong defense against these outside threats.
Fortunately, with the evolution of these violators, protective measures, methods, and software has been developed to protect brands so that they can continue to focus on doing what they do best, providing an excellent product and buyer experience for each and every one of their loyal customers.
If you have questions about establishing these protective measures, or would like additional information, contact the Brand Alignment Team @ firstname.lastname@example.org or by phone at 1-888-844-8929