Amazon exempting existing sellers from new brand gating fees

Dive Brief:

  • Days after rolling out new rules and regulations designed to curb the availability of counterfeit name-brand merchandise on its Marketplace, Amazon now says it’s exempting existing sellers from paying non-refundable “brand gating” fees of up to $1,500 per brand, CNBC reports.

  • "If a seller is already selling brands on Amazon that are now subject to a fee, they are not required to pay the fee to continue selling those brands. The fee only applies to new sellers of particular brands," an Amazon spokesperson wrote in an email to CNBC. "Sellers can see whether a product requires a fee to sell when they search for that product using the 'Add a Product' tool on Seller Central."

  • The problem of Marketplace counterfeits has grown along with the number of international sellers there. In addition to the new fees, Amazon is requiring sellers to show evidence proving the authenticity of merchandise, like invoices or other paperwork from brands or manufacturers. It’s not clear whether or not existing sellers are subject to those requirements.

 Dive Insight:

While the sale of counterfeits across Chinese e-commerce giant Alibaba's platform continues to generate the most attention and controversy, the problem is also growing at Amazon, eBay and even artisan marketplace Etsy.

Many sellers on such marketplaces find products on clearance racks at places like Wal-Mart and dollar stores, and sell them for a significant markup on Amazon, a practice known as “retail arbitrage.” While in some cases those are name-brand items, the fact that they were bought at retail doesn't necessarily mean there's a guarantee of authenticity or warranty: Sometimes the items are indeed fakes, or, in the case of beauty products, watered down or past their expiration dates.

Amazon enjoys a high level of trust from its customers, especially its Prime members, and can’t afford to let that trust erode. In addition, its impressively huge product assortment, which dwarfs retail behemoth Wal-Mart's own online inventory, could falter if relations with brand partners grow strained. In fact, Amazon suffered an embarrassing departure in July when Birkenstock pulled its popular sandals from the site, saying it would make clear to shoppers that no seller on Amazon is now selling its products, meaning that any Birkenstock item found for sale on Amazon is likely a fake.

But the news that Amazon is taking steps to eradicate counterfeits and instituting fees and paperwork requirements — changes that weren't clearly communicated to sellers — has upset many. Because Amazon also collects a hefty 40% of its sales from its Marketplace (sales in which it more or less kicks back and does little selling work), it’s now in a delicate position.

"It's hard not to be nervous about rules you don't understand 100%,” Rania Sedhom, managing partner of New York-based Sedhom Law Group, told CNBC. "This is a reactionary step that Amazon is taking to all the grey market areas that have been percolating.”

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Filed Under: Corporate News