Recently Amazon has massively invested in helping smaller, upcoming businesses establish and build reputable brands, said Jon Emont, who works at The Wall Street Journal. Although, this generous gesture has a caveat to it: Amazon has the right to purchase a merchant’s brand whenever they deem fit for a fixed price of $10,000.
The majority of what’s sold on Amazon belongs not to the company, but its thousands of third-party sellers. This category of sellers caters to the needs of its numerous customers. Third-party sellers are independent businesses on Amazon that sell everything from laptops to skaters using Amazon’s massive online retail space and warehouses. The preponderance of these businesses spurs a lot of competition for visibility and sales amongst sellers.
In light of this, Amazon launched an initiative to empower smaller businesses registered on its platform to stand out from the numerous competition. This initiative of Amazon to boost sales is called the “Accelerator program.” The sellers that sign on to the Accelerator program will get marketing support, product reviews, and prominent display. If a merchant’s brand, registered on the Accelerator, becomes a huge success, Amazon has the right to purchase it after giving a 60 days’ notice. After Amazon has successfully acquired the brand, the original owner becomes an exclusive supplier for a stipulated period of two years.
This decision does not sit well with many merchants. Many of them feel they are being constrained to choose between holding on to their brands or fighting for the attention offered by Amazon to other favored sellers. One seller says it is a false partnership that is deceptively planned to favor one partner at the expense of the other.
Amazon is a favorite spot for most buyers, almost every item you think of can be found on its large platform. However, sellers do not share the same sentiment, said Rachel England at Engadget. Many of the contract terms are hard and somewhat unbearable for sellers, as most of them get Amazon seller account suspensions for committing seemingly minor mistakes unwittingly. Most businesses have claimed that their products have been counterfeited by competitors who earned them Amazon suspensions. Others have stated that despite following the Amazon plan of action and submitting an Amazon account suspended appeal, their accounts have remained unsuspended.
After an investigation by a German antitrust body, Amazon has decided to modify some of its terms of agreements that will apply to third-party sellers worldwide. Some of the terms include giving merchants information on why their accounts were suspended, and also the chance to submit Amazon suspended appeals afterward. Merchants in Europe can now employ the services of an Amazon account suspended attorney in the event of their accounts being suspended. This was only previously possible in Luxembourg.
Amazon is also under investigation by the European Union antitrust body over allegations that it is using third-party sellers’ data on its site to create similar products of its own that compete with sellers’ products on its platform. US lawmakers have also aired similar concerns about what they perceive to be Amazon’s cunning anti-competitive tactics.
At house hearings, Amazon has strongly refuted the claims that it uses harvested data from its marketplace to create unique products that put competitors out of business. However, lawmakers have remained unconvinced. Rep. David Cicilline (D-R.I.), said that “you collect all this data about the most popular products, and you mean to tell us all that you don’t use this information in any way to change an algorithm that supports the sale of products that have Amazon brands.”
Dan Gallagher at The Wall Street Journal, said, “truly, Amazon seeks its growth, but lawmakers are confused as to where the company’s true self-interest lies.” It is believed that as long as Amazon has access to merchants’ data, it must use it solely to its benefit.
Dan said that Amazon’s profit margins from third-party sales are higher than profit margins from its own retail transactions. Since the majority of the risk and cost are borne by third-party sellers, it would be counterintuitive to implement any plans that would put sellers out of business. According to Wall Street, Amazon is expected to double sales in the next five years to nearly $500 billion. The company understands that to attain this goal, it has to bring a lot of sellers to its marketplace. Much more than getting them on its platform, it has to ensure that they sell massively, too.
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