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How do you cope with Price Parity on Amazon?

By Chris Dawson November 20, 2011 - 1:25 pm

We’ve been forwarded an interesting email along with a bit of confusion from an Amazon seller. They’ve had a “Policy Warning” from Amazon and the rap on the knuckles is due to their pricing.

Amazon say that they “require that sellers who choose to sell products on Amazon not charge customers higher prices on Amazon than they charge elsewhere”. This means that you can’t sell on other marketplaces or your own website at a lower total price (item plus carriage) than you sell on Amazon. Amazon’s policy on this is set out on the Amazon Price Parity page. It’s worth noting that the Price Parity policy also mandates that customer service and returns rights are also at least as favourable on Amazon as on the other sites you trade on.

There are two arguments here – firstly Amazon say that their customers trust that they’ll find consistently low prices and other favourable terms on Amazon. On the other hand sellers incur fees when selling on Amazon which may be higher than the cost of selling on alternative channels – price parity might actually lead to making a net loss when selling on Amazon.

The question has been asked is this Price Fixing which is illegal under the Competition Act, however as Amazon allow each marketplace partner to set their own pricing this doesn’t apply. Amazon aren’t colluding to set prices for products, they’re simply requiring that sellers don’t charge a customer more on Amazon than they do elsewhere online.

There are a number of solutions for sellers who don’t feel able to price match due to Amazon’s charges:

  1. Put the price up on your own website and other marketplaces
  2. Consider selling at a lower margin on Amazon which may be justified by higher sell through rates
  3. Offer different merchandise on Amazon to other websites. This could be by
    1. Offering different models on each channel
    2. Sell product bundles e.g. Sell a camera with one lens bundled on your website and a different lens bundled on Amazon

Whilst you may not agree with Amazon’s decision it’s understandable that Amazon don’t want a customer to purchase on Amazon today and then realise that they could have paid less on the merchants own website. That in the long term could lead to Amazon customers deserting the site in droves as they come to view the site as overpriced and uncompetitive. Equally though merchants need to make a decision as to whether they can profitably trade on Amazon and if that’s not possible when complying with Amazon policies then it’s time to concentrate on your own website and alternative marketplaces.

If you sell on Amazon how do you cope with Price Parity? Do you offer a different product set on Amazon, have sufficient margins to justify Amazon’s fees, or (feel free to comment anonymously) do you simply ignore the rules and hope not to get caught?

  • FT
    8 years ago

    How do they catch people? Does it rely on sellers grassing each other up?

    I’m planning to maintain prices accross all channels and just try and direct customers to my more profitable ones (the site) and see eBay and Amazon sales as bonuses.

    However if I had to charge higher prices on Amazon I’d just slightly chanhge the product name and description and claim it was a different product.

  • Richard
    8 years ago

    It’s not exactly hard to make you and your business totally seperate and unlinkable between Amazon and other venues, just requires a bit of thought.

  • Carl
    8 years ago

    Such a different attitude to eBay where there’s a chance your order will just be drop-shipped from Amazon’s retail site and the customer now knows where to go in future for a better price and eBay don’t care at all.

    Seems to have had a big effect in the media cats where this is rife and customers seem to be reducing in numbers. Amazon certainly are earning a lot of custom through this and making a margin at the same time as indirectly poaching eBay’s customer base!

    Personally I charge as much as I can on each site, if it means more on Amazon so be it, until they notice I’ll carry on and if they do I’ll just sell in the place with the highest overall profit.

  • fozz
    8 years ago

    3.Offer different merchandise on Amazon to other websites

    I’m currently working with a client who does just that. We created an entirely new product for them , just a slight, but significant enough variation from the product they sold on ebay & their own website.
    Ironically , they now sell the product designed for selling on Amazon on ebay too (at the same price as on Amazon). A win win situation.

  • James
    8 years ago

    Until I can see a concrete way this is enforced I wont be changing anything.

    I dont also think that amazon will try to enforce this, its just them trying their luck. Some people will follow this rule which is great for them, others wont, but what can they do?

  • 8 years ago

    I’ve just had the same email last week from Amazon, with 3 examples of products we sell on our site and Amazon. On each one they had calculated the total cost including postage and done a proper comparison.
    It’s not a matter of whether they will try to enforce it, it’s a Policy Warning. If they catch you out again they can (and will) close your seller account.

    • Frances
      8 years ago

      Is the warning just a ‘warning’ (i.e. are you allowed to continue trading if you agree to make your prices consistent?). And are there any account penalties for having had a warning (funds withheld etc)? Many thanks!

  • Carl
    8 years ago

    There is a series of links on each product page where you can submit updates, give feedback on images, or report a lower price. Amazon will most likely be using the data gathered from here.

  • Robert Morris
    8 years ago

    I have had this email from Amazon too. I used to maintain three different prices per product. It is hard to defend to customers and hard to manage. When customers call you don’t know where they found you and what price they expect to pay!

    I have reviewed all this. I focussed on margin contribution and let the channel which provided most margin per product “lead” the pricing for the other channels. I know have identical prices across channels and further refinements has lead to me also having “Amazon-only” or “Ebay-only” products. Time to get smarter really. I know consider it a mature thing to be consistent across channels. Oh, and I’m making more profit overall.

  • 8 years ago

    I’m still a complete noob on Amazon and so opened a completely unbranded store which I will slowly build as I have on other platforms and so I guess this will not really effect me.

    Its just a thought but I guess this will actually dispraportionately effect larger and more established fully branded stores?

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