Amazon charges sellers 'brand gating' fee to curb counterfeits

By Daphne Howland | August 30, 2016

Dive Brief:

• In an effort to curb a growing problem of counterfeit name-brand merchandise available on its Marketplace, Amazon is requiring third-party sellers to pay a one-time, nonrefundable fee of up to $1,500 per brand, CNBC reports.
• Such “brand gating,” in addition to other requirements like showing such evidence as invoices or other paperwork from brands or manufacturers such as Nike and Adidas, will likely be prohibitive for many smaller Marketplace sellers.
• "We want customers to be able to shop with confidence on Amazon," an Amazon spokesperson wrote in an e-mail to CNBC. "For certain products and categories, Amazon requires additional performance checks, other qualification requirements, and fees."

Dive Insight:

The new limits and requirements are a blow to sellers that profit from so-called “retail arbitrage,” where they scoop up a ton of merchandise at one retailer and resell it on marketplaces like eBay or Amazon. Retail arbitrage is a mixed bag for consumers: While it can be a way to find otherwise sold-out merchandise or items at a discount, savvy shoppers will often find that an item on eBay or Amazon listed at full price or higher can be found at the original retailer for less.

The problem has been especially acute for Target, which last year faced a lot of disappointed (and even angry) customers who didn’t get a chance to shop for its limited-edition Lilly Pulitzer line when it sold out in stores and the retailer's site crashed. Customers had to go to eBay for many items in the line, at drastically marked up prices.

Sales of counterfeits are even more troublesome for sellers and their marketplace hosts. They leave brands and consumers furious — and, of course, it's against the law. 

While Amazon has largely escaped the counterfeit buzz, the problem appears to be growing as its Marketplace expands. Citing concerns over counterfeiting and unauthorized selling, Birkenstock USA, for example, this summerinformed Amazon that as of Jan. 1, 2017, it will no longer offer its footwear on the e-commerce site or its third-party Marketplace, citing concerns over counterfeiting and unauthorized selling.

While Amazon is the dominant e-commerce player in the U.S., with a stellar reputation for customer service and a massive (and growing) membership base, it can ill afford to to cede any ground in those areas over dubious practices by its marketplace sellers. “Amazon’s North Star is the consumer, not the seller. If there’s a collision of the two things, they'll choose the consumer,” Scot Wingo, founder and executive chairman of e-commerce firm ChannelAdvisor, which works with a range of Amazon Marketplace third-party vendors, told Retail Dive earlier this year. “Everyone talks about the customer, but I’ve never seen anyone walk the walk like Amazon does.”

Still, Marketplace purchases account for some 40% of Amazon’s sales (and growing), so keeping those sellers happy is increasingly important, too. More stringent and expensive Marketplace policies, plus what some sellers say are arbitrary and unfair consequences of consumer complaints (some totally unfounded), are a growing source of frustration. Some sellers say they’ve been kicked off the marketplace without being able to speak with anyone at Amazon.

But bottom line, Amazon needs to be able to guarantee that its merchandise and sellers can be trusted... and many sellers realize that, too.

"Amazon feels that they're somewhat under attack and their credibility is under attack," Jeff Cohen, director of business development at Seller Labs, a site to help Amazon sellers, told the audience at last week’s Sellers' Conference for Online Entrepreneurs in Seattle, according to CNBC. "The customer is the most important thing. Sorry, it's not us.”