Third-party sellers report that it is stressful selling on Amazon marketplace.
According to a recent analyst note from Morgan Stanley, Amazon’s third-party business is worth $307 billion of the company’s $1.1 trillion enterprise value, comprising 58% of all merchandise sales. Meanwhile, the first-party platform is worth $93 billion.
Amazon founder Jeff Bezos raved about third-party sellers, which he described as mostly small- and medium-sized businesses, in his 2018 letter to the shareholders. From 1999 to 2018, these sellers had a compound annual growth rate of 52%. On eBay, those same small sellers had a CAGR of 20%.
“To put it bluntly: Third-party sellers are kicking our first party butt,” Bezos wrote. “Badly.”
But third-party sellers who spoke to Business Insider aren’t exactly feeling the same love towards Bezos as he professed to them.
“I’ve been selling on Amazon for seven years,” Scott Needham, CTO of Amazon marketplace seller BuyBoxer, told Business Insider. “From the beginning, if you look at the mechanics of things work, in some situations, it just wasn’t a fair marketplace.”
Some sellers say that Amazon has an unfair advantage in accessing sales data on its third-party platform. For instance, one company told Bloomberg in 2016 that its top-selling laptop stand was displaced when Amazon Basics launched a very similar product — at half the price.
Another leading complaint from Amazon sellers is that they might have their accounts suspended without much notice or explanation. The process to get one’s account reinstated is brutal, sellers told Business Insider.
“I think a lot of sellers sense who they’re up against and that Amazon’s not their friend,” Paul Rafelson, a tax law attorney at Francissen Rafelson Schick, LLP whose practice is focused on helping Amazon sellers, told Business Insider. “Amazon will use them when necessary and dispose of them when appropriate. There’s no love there.”
Chris McCabe worked at Amazon for more than five years on account compliance. McCabe, who is now an independent consultant who helps Amazon sellers whose accounts have been suspended, explained to Business Insider why it’s so stressful selling on Amazon for sellers whose accounts are abruptly canceled.
When customers complain to Amazon about a seller, Amazon takes those complaints seriously and is likely to jump to suspend the account, even if the reasons are “murkier,” McCabe said.
“Amazon’s a ‘buyer experience is king’ marketplace,” McCabe, the founder of consulting firm ecommerceChris, said. “So any buyer complaint, unless it’s determined to be from a competitor by your account, is considered a valid complaint that needs to be addressed by a seller. So as you can imagine, it’s easy to accrue a handful of complaints that might warrant further scrutiny.”
But, McCabe added, “buyer complaints aren’t really vetted to much of a degree. They’re more or less considered to be valid almost every time out.” That means seller accounts can sometimes be suspended when they really shouldn’t be.
Not All Third-party Sellers are Small
While they may be thought of as small businesses, some of these marketplace sellers are massive. Around 50,000 third-party Amazon sellers generated more than $500,000 in sales last year.
Take BuyBoxer, where Needham works. The Logan, Utah-based company partially manages Amazon selling for BIC, Hasbro, 3M, and around 200 other massive household name brands, according to its storefront page. In total, BuyBoxer has about 100,000 products on Amazon at any given point.
BuyBoxer was indeed suspended for seven days for what Needham said was ultimately an incorrectly formatted label. The company wasn’t told of its suspension until two days into the process.
“We had to send a hundred employees home for a week,” Needham said.
“I just know that like every seller out there has feared the policy enforcement out there,” Needham said. “Amazon says that they’re going after the bad actors. I completely support and I want them to do that, but I can name dozens of sellers that have tried to do things in good faith and they still come across this.” Continue reading