If your brand relies on 3rd party sellers to sell your products on Amazon, it’s critical to understand how the number of sellers on any given product listing will impact sales, pricing, customer service, and brand equity in general.

Generally speaking, the larger the number of sellers, the less control your brand will have over pricing, content, promotions, advertising, and customer service.

The Negative Impact of Multiple Sellers

Whenever I talk to brands that sell their products on the Amazon marketplace, they are often surprised to learn that having more sellers on each product listing is a bad thing. Many mistakenly assume that having more sellers will somehow increase exposure – and therefore increase sales.

Nothing could be further from the truth.

Consider the following…

Demand is Not a Function of the Number of Sellers

Amazon is nothing more than a consumer product search engine, and as such, the number of sellers of your product has zero impact on the number of times a given search term(s) is typed into Amazon’s search box.

Instead, demand is driven entirely by consumer’s search actions.

So if having more sellers doesn’t increase sales volume, what does it do?

The Race to the Bottom on Price

The more sellers you have competing for the buy box, the faster these sellers are going to start creating a race to the bottom on price, violating MAP pricing policies and pissing off your offline retailer partners in the process.

With just one or two sellers, there is no need to compete for the buy box, and therefore, there is no reason to deviate from MAP pricing – and that means fatter margins for you because they won’t be asking for wholesale discounts in order to compete in the race to the bottom.

Fewer Sellers Leads to Increased Ad Spend

In the image above, you’ll notice that in the pie chart on the left, each slice of the pie is quite small; whereas over on the right, two sellers are splitting the pie 50/50.

In which case do you think sellers have more money available to spend on advertising your product?

Obviously not the one of the left!

If you want to increase your product’s market share, ensure you have as few sellers as possible and ensure that the ones you do have are committed to investing a portion of their profits into advertising your product.

Having too many sellers guarantees that each seller will not have enough profit to justify creating ad campaigns – and your product’s market share will stagnate, or possibly even decrease.

No Listing Ownership / Optimization

How well your Amazon product listings are optimized will influence both how well your products rank in Amazon’s search results as well as how well potential buyers convert once they do find your product pages.

With multiple sellers on any given product listing, no one seller has any ‘ownership’ or incentive to put time and resources into optimizing the product listing to its fullest.

To illustrate, consider a very simple example. If each product listing is a pie, and each slice is a seller, why would a seller bother making a larger pie if they are only getting one slice?

Whereas, if the seller’s ‘slice’ is, in fact, the entire pie, the seller has serious incentive to do everything they can to make the biggest pie possible.

In other words, by having just one seller who owns the buy box, that one seller is every bit as motivated as you are to do everything possible to maximize sales.

No Control of Your Promotions

If you have multiple sellers on each product listing, how are you going to control and coordinate all the promotions you’d like to run on Black Friday, Prime day, Valentine’s Day, Mother’s Day, etc…?

With multiple sellers, the reality is that you can’t control what they are all going to do, and in all likelihood they aren’t going to coordinate with each other, thereby resulting in a complete lack of any cohesive promotional strategy.

With just one seller on each of your products listings, product promotions can be strategically planned in advance. Then when it comes time to run the promotion, the mutually created plan is executed and results are measured; thereby giving you the much-needed data to make better decisions about future promotions.

Inconsistent Customer Service Levels

When consumers purchase your products on Amazon and they have a problem or a question, they are going to contact the seller via email.

They key thing to remember is that these consumers won’t necessarily realize that they aren’t communicating with your brand, so if the customer service they receive is below expectations, they are going to blame your brand!

With multiple sellers on a product listing, it will be nearly impossible for you to ensure a consistently positive customer experience. Instead, your brand reputation will be the result of the collective experience that thousands of customers have with companies. You have very little control over this experience, and will not be able to build the trusted relationship you would expect to have with just one or two authorized sellers.

With a single trusted seller on each product listing, you can rest assured that customer service levels are going to be exactly where they need to be to build the brand equity you need to maximize the growth of your company.

Conclusion

The more sellers you have on your product listings, the less control you are going to have – which, over the long term, can negatively impact your brand, cause a price war, impair customer service, and aggravate your brick & mortar retail partners.

So instead of letting just anyone sell your products on Amazon, you’d be far better off to find a preferred 3rd party seller, grant them exclusivity – once they have proven themselves worthy, of course – and then work with them to systematically remove all the unauthorized sellers that are currently on your product listings.

You, your brick & mortar retail partners, and your end-customers will all be happier as a result.

About Inovtech Services

Inovtech Services is a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them – thereby ensuring that our interests are 100% aligned with yours.

Unauthorized sales of products on third-party websites like Amazon is significantly impacting many businesses.

In short, we recommend a three-step program for addressing these unauthorized sellers as follows, with more details listed below.

First, a company should revise its policies, procedures and agreements to: 1) support legal claims against third-party unauthorized sellers, and 2) differentiate its products from those sold by unauthorized sellers.

Second, a company should implement a graduated enforcement system. The purpose of this system is to eliminate authorized sellers through the integration of monitoring technology, investigation, and enforcement tactics.

Third, we recommend implementing a communications strategy that: 1) demonstrates to authorized distributors that the company is protecting them (providing measureable results from the enforcement system); and 2) demonstrates that products sold by unauthorized sellers are unreliable and often do not come with certain services and benefits or do not have the quality controls that the company has established.

Creating a Foundation for Legal Claims Against Third-Party Unauthorized Sellers

Our recommended first step for companies is working with counsel to review existing distributor agreements, procedures and practices.  The goal is to provide the best support possible for the enforcement program, described in step two.

Under what is known as the First Sale Doctrine, once a trademark owner (“the company”) sells a product, the buyer ordinarily can resell the product without infringing the owner’s mark.  However, the First Sale Doctrine does not apply when a reseller sells a trademarked good that is materially different from the company’s genuine goods.

Case law has established a few important principles relating to material differences. This includes that: 1) the threshold of materiality is considered “low”; 2) only a single material difference is necessary to give rise to a trademark infringement claim; and 3) material differences do not have to be “physical” differences.

Courts have also held that trademark owners have the right to control the quality of their products. Thus, unauthorized sellers who do not follow a company’s quality controls can also commit trademark infringement, assuming the quality controls are not “pretextual” and that the company is actually enforcing them.  Quality controls can include certain packaging, tracking codes, pre-sale consultations or storage instructions, among others.

Many companies already have strong policies, procedures and agreements established. It is just a matter of tweaking them to maximize protection against unauthorized sellers on eBay and other websites.

The Graduated Unauthorized Seller Enforcement System

Once a company’s policies, procedures and agreements are adequately in place, it is time to roll out a graduated enforcement system aimed at efficiently and effectively reducing the numbers of unauthorized sellers.

Our suggested model begins with a monitoring company finding all unauthorized sellers. Among other things, a monitoring company can rank these sellers from high- to low-volume, based on the number of client products and total products each reseller is selling.

Cease and desist letters are usually sufficient for most unauthorized sellers. However, a more aggressive enforcement approach might be necessary for sellers offering a significant number of products.

After reviewing the data from the initial monitoring report, it is ultimately up to the company who to target through the enforcement system.  But because both eBay allow for the private messaging of their online sellers, this can be a low cost vehicle for sending a large number of cease and desist letters online (“eC&Ds”).

A strongly-worded letter from an outside law firm is often most effective in approaching the highest volume sellers, which might include a detailed explanation of the illegality of the seller’s activity and why the First Sale Doctrine would not apply; an explanation that courts in the company’s state will have jurisdiction over the seller; and relevant case law, including citations to prior cases in which large damages have been awarded against unauthorized sellers.

The company itself might also choose to send additional eC&Ds to low volume sellers.

After the letters are sent, the company and its enforcement team should track which sellers comply with their demands. Then, cyber investigators can investigate the identities of any sellers who do not remove the products from eBay.

Once these identities are obtained, the outside law firm can send actual cease and desist letters to the unauthorized sellers’ physical addresses, effectively communicating that: 1) the company knows who they are and where they are and, 2) should they keep engaging in unauthorized sales, that the company will pursue them legally.

This whole process can be repeated on a monthly basis, incorporating any new sellers that pop up each month.  If necessary, for any sellers still online after the previous month, the attorneys can utilize additional legal tactics to put further pressure on those sellers.

Depending on the situation, this can entail sending draft complaints to the sellers; obtaining temporary restraining orders to freeze online sellers’ PayPal accounts; obtaining injunctions to order online sellers to cease selling the products; obtaining injunctions ordering the transfer of the sellers’ website domains to the client; serving subpoenas to identify still unknown sellers; obtaining court orders that can be used to de-index unauthorized sellers’ e-commerce websites from Google; filing lawsuits and negotiating with the sellers; or preparing and executing settlement agreements.

Above is an illustration of how we often structure our own graduated enforcement program. For more on this program, check out our recent white paper.

Communications Strategy

For some companies, depending on their model and distributor network, it can be effective to communicate to the authorized distributors the impact of the enforcement program.

It is helpful to educate (or remind) distributors that the company has an aggressive enforcement program. Specifically, the company can show them the data reflecting the number of unauthorized sellers eliminated from eBay (or elsewhere) and are no longer harming the business and threatening the authorized distribution channels.

About Inovtech Services

Inovtech Services a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them – thereby ensuring that our interests are 100% aligned with yours.