How the Absence of MAP & Seller Restrictions Will Doom Your Products on Amazon

How the Absence of MAP and Not Restricting Authorized Sellers Will Ensure a Race to the Bottom on Amazon

as well as put your offline retailer relationships at risk

If you care about how your product is marketed on Amazon and you want to avoid seeing the price of that product “race to the bottom”, there are 3 things you absolutely must have in place:

Minimum Advertised Price (MAP) Policy
Online Reseller Agreement (ORA)
A system for Monitoring & Enforcement

If you do not have all 3 of these in place, our data strongly suggests that price degradation is inevitable.

Predatory Sellers vs Value-Added Sellers

On Amazon today, there are basically two types of 3rd party sellers

Predatory Sellers
As the name suggests, 3rd party sellers who use the predatory business model see every product they carry as a commodity with a limited shelf life. They don’t care about your brand.

All they care about is dominating the buy box to sell as many units as possible – often at a very minimal profit margin. These types of sellers are often obtaining your products via distributors offering short-term special promotions that allow them to pay a very low price. Or they are purchasing products via diversion, or the gray market. It may even be that some of your existing brick & mortar retailers are running their Amazon business “out the back door” of their retail location.

Predatory sellers are always the ones that start (and accelerate) the race to the bottom on price because they operating on volume business model and do as little as possible to extract a minimum profit per transaction.

You can expect Predatory Sellers to:
- Be unknown to you and unresponsive to your request for their true business identity
- Violate your MAP policy
- Initiate (and accelerate) the race to the bottom
- Not bother to respond to negative product reviews
- Do nothing to add value to your brand

Value-Added Sellers
As the name suggests, Value-Added Sellers are focused on building a lasting relationship with your brand. They don’t see themselves as merely a reseller. Instead, they see themselves as your strategic eCommerce partner.

Unlike Predatory Sellers who stock thousands of products across hundreds of brands, when you look at the number of products carried by a Value Added Seller, it might add up to a few hundred products over only a dozen or so brands because the very nature of their business model prevents them from properly managing thousands of products.

As your strategic partner, Value-Added Sellers are going to:
- Sign your MAP agreement
- Sign your online reseller agreement (or help you create one if you don’t have one)
- Help you identify & remove unauthorized sellers
- Help you to monitor and enforce MAP
- Willingly re-invest a meaningful portion of their profits into ad campaigns to help you increase market share
- Assist you in enrolling in Amazon’s Brand Registry
- Proactively respond to negative product reviews
- Be very proactive with suggestions for ways to enhance your brand
TLK is a Value-Added Seller.

Additional Resources

7 Ways Professional Amazon 3rd Party Sellers Can Add Value to a Brand

Why Having Fewer 3rd Party Sellers Will Increase Sales

Three-Step Approach to Stopping Unauthorized Online Sales

About our Study

Since our founding, TLK has always focused being a Value-Added Seller and today we enjoy solid relationships with our Preferred Suppliers (who have MAP and limit the number of authorized online sellers).

Over the last year, in addition to servicing these Preferred Suppliers, we also bought products from brands that didn’t have MAP policies and made no effort to limit the number of unauthorized sellers. For the sake of simplicity, we’ll call these suppliers, “Suppliers without an Amazon marketing strategy” or SWAMS for short.

Results from SWAMS Suppliers (No MAP)

During the period of our study, we purchased products from 20 SWAMS brands. In 70% of cases, we were unable to place a second order beyond our initial order, with an average 1.65 orders per SWAMS brand.

In every case, the reason we were unable to continue to order product was due to the SWAMS product’s price “racing to the bottom” and eliminating any profit potential.

Results from Preferred Suppliers (MAP enforced)

Over this same period, we purchased products from 14 brands that had a MAP policy (that they actually enforced) and had made a decision to actively limit the number of authorized resellers of their products on Amazon.

These products had price stability due to having an enforced MAP policy, combined with choosing to cap the number of authorized sellers,

For this group of companies, we’ve been able to consistently re-order products due to price stability.

How the Absence of MAP and Not Restricting Authorized Sellers Will Ensure a Race to the Bottom on Amazon

On Amazon today, there are basically two types of 3rd party sellers

Predatory Sellers

Value-Added Sellers