What is “Sold By Amazon?”
Sold by Amazon (SBA) is a new program that grants Amazon the power to automatically re-price select third-party products on the Amazon Marketplace.
Automatic re-pricing is not new; third-party tools have with this exact function have been helping sellers maintain their competitive edge for years. What’s different, however, is that Amazon SBA grants Amazon final say on what your price will be. And that can be both a good and a bad thing.
How does Amazon SBA work?
Participating merchants enroll specific products into the SBA program. Once in the program, Amazon uses its dynamic pricing engine to recalculate prices in real-time. This calculation is based on similar products found on Amazon, as well as prices found on external ecommerce marketplaces like Target and Walmart.
If you’re worried about your profits, you’ll be able to establish a Minimum Gross Proceed (MGP) for each product. MGP is essentially a guaranteed payout. When a participating item is sold, Amazon will pay either the item’s listed price or the MGP, whichever is higher.
For example, if you have an MGP of $15 and Amazon sells the item for $18, you as the seller get the full $18. If Amazon sells the item at $13, you still get the $15 payout.
Minimum Gross Proceed amounts are not fixed. According to the terms and conditions, Amazon has the right to revisit the MGP amount every six months, at which time Amazon can propose a new amount. You will be notified of the change and will be given seven days to approve. If you fail to take action, the item will be delisted temporarily until you go into your admin console and either confirm the new MGP or remove it from the SBA program.
What is the potential impact of Sold by Amazon?
Customers will love the Amazon SBA program because it means real-time savings for online purchases.
But what about sellers? There’s a lot of debate, largely due to how much trust–or distrust–sellers currently have towards Amazon itself.
Although the SBA program looks like a good deal at first glance (thanks to the minimum payouts), jaded sellers suspect that Amazon will use it as an opportunity to undercut the same product on other websites, or use the seller’s products as a loss leader to sell Prime memberships.
Also, the clause that the Minimum Gross Proceed amounts are not fixed. A seller could find all of its MGPs drastically reduced after the six-month review, with no other options except to either bite the bullet and accept or unenroll the affected listings. Amazon could force sellers into adopting low MGPs if they wanted to stay enrolled in the SBA program.
But there are potential upsides, as well. For instance, sellers focused entirely on the Amazon marketplace would be able to get some benefit from the SBA program. Since they don’t have products on other websites, undercutting their own product will not be a problem. It is in their best interest to offer competitive rates on Amazon.
Sellers could also use SBA’s hyper-competitive pricing to help sell slow-moving inventory or to close out products that are being discontinued. That way, they can make room in their inventory for higher-value items.
How can I participate?
You become eligible for the Amazon SBA program by first registering your brand through the Amazon Brand Registry. You must then have a Professional Selling Account, and get your products listed on the Fulfillment By Amazon program.
You can actually register for the SBA program by going into your Seller Central account, going to Settings, and clicking Account Info. There will be a registration button for Sold by Amazon. Clicking this will register your account to participate.
Registering for SBA won’t automatically enroll your listings, though. You will have to enroll each product individually into the Amazon SBA program. This can be done by going into the Manage Inventory view. All of your eligible FBA listings will be displayed here with their Minimum Gross Proceed amounts.
Note that you can remove your listings from SBA anytime you want.
For now, the Amazon SBA program seems to be what it is advertised to be: a way to keep your listings at a competitive price while still guaranteeing a minimum profit.
There don’t seem to be any clauses that lock you into participating for a period of time, nor do there seem to be any consequences from unenrolling for the program.