Whether an Amazon reseller is honest or dishonest, there is not much upside for you.
If you are in the product business and sell on Amazon, then you are likely already familiar with Amazon resellers: someone who buys product from you at a wholesale rate and lists it for sale on Amazon, often for less than what you are selling it for.
Amazon considers itself an open platform and as a result, almost anyone can list a product for sale. There are few exceptions and restrictions, but they are mostly related to counterfeit products.
Think about the advantage an Amazon reseller has: there is a shorter time to market and much less risk buying product in bulk and selling it on Amazon than there is developing your own branded products. Developing your own product requires a large capital investment and constant iterative processes to achieve something that would be considered final and polished.
In my many years of selling on Amazon, I have encountered Amazon resellers from different industries and backgrounds. Although I do not want to paint with too broad a stroke, I can place Amazon resellers in two separate groups that I simply refer to as honest and dishonest resellers.
Many of the largest Amazon resellers can be found on the list of the top Amazon sellers. They will usually reach out and say that they understand Amazon better than you do. Often, they purchase upfront, have you ship bulk product directly to an Amazon warehouse, and make an average of two-thirds of the profit from product they sell than you would selling at retail.
The pitch from dishonest Amazon resellers differs from the honest ones. They will call you and flatter you to no end with something along the lines of, “You have an amazing product. I have three retail stores that could sell hundreds of these a month.” You will eventually find out that the person on the other end does not have a single retail store. Maybe you are smiling right now reading this because you fell prey to this sort of pitch. Don’t worry, I have too.
A rule of thumb I use is that if someone sells one unit of a $40 product per store per week, they are doing well. If the math from someone that is pitching you varies greatly from this rule of thumb, be wary.
Another thing that you will hear from these dishonest Amazon resellers is that most of their sales come from their website. Unless you have direct access to their numbers, trying to determine the accuracy of their statement is difficult. But there are tools that can help.
My favorite tool to use is Alexa. Alexa estimates how much traffic a website receives. The more traffic there is, the higher a website’s Alexa ranking.
A second rule of thumb is that if their Alexa ranking is not higher than 250,000 in the United States, they do not have real traffic to warrant a purchase bigger than 20 units of a $40 retail item.
Most of the time, honest Amazon resellers use their company’s name for their Amazon accounts. The dishonest ones often have a different account name than their actual store or company. They do this to hide who they really are and dissuade brands from putting a stop to their Amazon sales.
One of the best predictors of success on Amazon is how often you own the buy box. If I’m selling my shower speaker, Splash Tunes Pro, and there are two Amazon Resellers trying to sell the same product, I may not get all the sales through Amazon. The percent of the time I get sales is determined by account health, Fulfilled by Amazon (FBA) vs non-FBA, price, and a few other variables of the sellers. So if an Amazon Reseller is willing to break my minimum available price (MAP), they will own the buy box and get almost all available sales.
There is no foolproof way to catch a dishonest Reseller, but here are six tactics to discourage them:
If someone has malicious intent, this likely won’t stop them. This will stop the well-intentioned small retail shop that doesn’t know any better and plans to list the item on amazon as secondary income for the store.
Every time I’ve ran into trouble with a Reseller, they paid with American Express. The likely reason is that it is so easy to file a dispute. In these situations a Reseller bought too much product, realized they couldn’t sell it all, and they then dispute the charge. Amex then pulls the money from your account and you are left scrambling to try to get your product back from the Reseller.
Use the FBA calculator to figure out the margins if someone bought a wholesale unit from you. How much would they make reselling on Amazon? What return is that on their capital? How long will it likely take them to sell that inventory on your Amazon listing? Whenever possible, price your products for wholesale to make it difficult for Resellers.
Resellers often slip-up. Google their store name. Look at what else they are selling. Message other companies whose products they are selling. Compare sales channels and it becomes easy to find the overlapping sales channels.
This is a more time-consuming tactic, but an easy way to find out who a reseller is. Several of our clients make an internal barcode they put on each product that helps them track who the wholesale customer is. If you mark every unit leaving your facility with an identifying barcode, you can simply buy a unit from the reseller and identify who they are.
Add an item to your cart from the reseller you are trying to identify. At checkout, change the quantity to 999. Amazon will then automatically correct the quantity to the amount the buyer actually has in stock. This is an easy tactic to learn how many units a reseller has in stock and hopefully that will help you identify who the reseller is.
If the thought of maintaining your own Amazon seller’s account seems overwhelming, you will be tempted to engage Resellers. Don’t. Your B2C margins will disappear when your channel becomes B2B. Go ahead and make an Amazon listing even if you don’t want to sell on Amazon – if you don’t, a Reseller will and the content will look terrible.