I was recently talking with a seller who sells some sporting equipment on Amazon.They’re feeling pretty excited because they’re doing really well. They’ve put a lot of work over the past year into getting their product trademarked and Brand Registered. Now they’re looking at expanding distribution into brick and mortar, places like Target or Walmart.
There’s just one problem. In Amazon’s terms of service, there’s something called the Manufacturer on Amazon agreement. If this seller does expand into those stores, it could activate that agreement and jeopardize their seller account.
In this episode, we’re talking about the Manufacturer on Amazon agreement. What it is. How it can impact brands, plus how to potentially avoid problems.
“Brands who are sellers it’s really a win-win all around. They have more access to controlling their content, they have access to Enhanced Brand Content,” says former Amazonian, Peter Kearns.
Peter used to work at Amazon and his job was to find holes in the Amazon catalog and then he would find sellers to fill those holes. Peter’s now the Vice President of Client Solutions for 180Commerce. He helps brands grow on the Amazon Marketplace.
“Brands that are sellers have the ability to monitor their product reviews and have better opportunities for creating positive customer experiences and resolving negative customer experiences faster,” Peter says.
Peter’s pretty bullish on the number of opportunities the Amazon marketplace provides for brands as sellers. Amazon also keeps creating more tools for brands to use through Seller Central. Things like Enhanced Brand Content, Customer Insights, all give brands an edge up in the marketplace. But there’s one piece about being a seller that can hurt brands, even suspend the brand’s account. It’s part of Amazon’s terms of service.
“It’s a Manufacturer on Amazon terms or clause if you will, often referred to as the MOA and what this says is that if you are a brand that is selling on Amazon and you’re also wholesaling to other businesses, especially image competitors like Target or Walmart that you’re agreeing to give Amazon first right of refusal to also purchase that product form you at a wholesale price,” Peter says.
That means Amazon can force you to sell your products to them at the same cost you’re selling them to places like Target or Walmart. If you refuse, you can have your account suspended.
Ok, as an example, let’s say you’ve created a brand of bedding including sheets and pillows that help induce sleep. You launch your product on Amazon. You receive a trademark. You start gaining a lot of traction. Customer reviews are around 4.5 stars. Sales velocity is climbing and you decide to reach out to brick and mortar and you get an order from Walmart. Way to go, that’s awesome!
Except now Amazon, wants you to sell your bedding collection to them for the same cost that you’re selling it to Walmart and now you’d be a vendor.
You can say no, but your seller account will be suspended. If you say yes, you lose control over the listing, the pricing, the marketing and you no longer control your brand on Amazon. That’s the impact the Manufacturer on Amazon or MOA agreement can have on your business.
So before any of this happens, you need to have a full understanding of the MOA.
“Amazon can turn around and say to you, you’re also selling on these other channels, you need to give us the opportunity to purchase from you at wholesale as well,” Peter says.
Let’s try to understand why Amazon is even doing this. Why did they create the MOA?
“The big factor behind it is usually making sure that the brands catalogue is fully represented on Amazon,” says Peter, “If you have products that you’re selling only on other image competitors, they may be coming to you because they want to make sure that Amazon has the full selection of your brands catalogue.”
Let’s go back to our bedding example. If you have five colors available on Amazon, but you have seven available inside Walmart, that will be a problem for Amazon. They want their customers to be able to buy anything that’s available in the store. They don’t want customers to leave their platform and go to brick and mortar.
Another reason Amazon might enforce the MOA is because of money.
“It could be a profitability section of the catalog in terms of it may not be as profitable for Amazon in terms of generating 15% revenue share versus 30 or 40%,” Peter says.
Now, you might be thinking, well maybe brands in this situation should just switch from sellers to vendors to avoid this situation completely. That is an option but not one many brands will be interested in.
Amazon is putting less emphasis on Vendor Central, they’ve been creating more tools for Seller Central instead. There’s also more control that comes from being a seller. Sellers control pricing, promotions, listings, Enhanced Brand Content and marketing, plus, it’s more profitable.
So if you find yourself in this situation, how do you protect your account and stay a seller? First, talk with Amazon.
“Try to engage in a dialogue with whomever from Amazon is contacting you. Find out what’s the motivating factor behind the decision to contact the brand and try to enforce that MOA,” Peter says.
Next, it’s important to realize that you do have options. You can choose to stop selling through Seller Central and decide to partner with other FBA sellers or you can choose not to sell on Amazon at all. Another option is you can create a strategy with Amazon that enables you to still be a seller, while also selling products to Amazo retail.
“One of the things that we’re seeing more of is it’s called hybrid strategies where Amazon Retail doesn’t necessarily want the full catalog,” says Peter, “They’ll say we’ll take this portion of the catalog in retail and you can sell the rest.”
The ideal situation is to create a compromise to make you both happy. Amazon loves products that are exclusive to Amazon. They created Amazon Exclusives a couple years ago. Now, this may not be an option for all sellers and brands but again, it’s something that you can discuss with them.
There is that option of switching to vendor. We discussed that earlier and it’s not a great option.
“I’m not trying to be too critical of Amazon but I do think that the brand experience is pretty frustrating from a Vendor Central side,” Peter says.
It’s better to try to come up with a plan with Amazon that keeps everyone happy –
“There are strategies that allow brands to do it and stay within Amazon’s terms of service and we’ve helped brands do that before but it’s not always easy,” Peter says.
If you’re a brand and having these issues or just looking for help growing on the Amazon Marketplace, reach out to Peter. You can find him at 180commerce dot com.