In mid-2019, Amazon launched the invite-only beta version of Sold by Amazon (SBA) Program to help sellers automate their listings and grow their business. At the end of 2019, Amazon made it available to all eligible sellers. Sellers who choose to use this new pricing program give Amazon permission to adjust their prices competitively on the platform.
How does the Sold by Amazon program works?
Sellers who opt to participate in this program need to set their preferred minimum profit threshold, also known as the Minimum Gross Proceed (MGP). This is basically the amount you need in order to make a profit on your goods.
Once the MGP is set, Amazon uses its dynamic pricing engine to recalculate prices in real-time. It alters the product prices to maximize the net margin while ensuring it never goes lower than the desired MGP. Amazon’s calculations are based on similar items found on its own marketplace as well as on outside eCommerce platforms, like Target and Walmart.
This means that no matter the price Amazon sells the product at, the seller will receive a minimum amount for each product sold. Even if they sell it for less than that price. In scenarios when the product sells at a higher price than the MGP, then you receive the full profit of the higher sales price.
Further, Amazon will control the amount of inventory similar to how they handle all FBA (Fulfillment by Amazon) inventory. They will be the seller on record and handle the sales tax for all items sold.
Who can join the Sold by Amazon program?
Susbscribing in the SBA program is free for eligible sellers. To be eligible, you must:
- Have a professional selling account
- Be enrolled in the FBA program
- Sell goods as part of Amazon’s Brand Registry
If you are a private label seller and you meet all the requirements above, then you can enroll in this new pricing program. If you decide to join the program, you have the option to pick which ASINs (SKUs) you want to enroll. Amazon will then be in charge over the sale price of your products, and will issue order requests for all those ASINs you have enrolled in the program. For this reason, Amazon will be able to select products based on how well they sell on the marketplace. Your items will also be displayed on the website with the “Sold by Amazon” tag.
What are the advantages of the Sold by Amazon program?
The program is absolutely free.
If you’re eligible, it costs you nothing to join Sold by Amazon. Take note, however, that standard FBA selling fees will continue to apply.
It removes the need for manual repricing.
Since you have given Amazon full control over the pricing of your products, you have nothing to worry about constantly repricing your items. This means less work for you in return. Other than the price, you retain complete control of your listing – title, pictures, description, search terms, A+ Content – and all of your inventory management.
Amazon can leverage their A9 algorithm.
This enables you to maximize sales for every ASIN you have enrolled in the SBA program. The guaranteed payout protects your brand from price erosion, while also allowing Amazon to sell your goods at the lowest possible price to capture more shoppers.
Amazon carries the burden of the sales tax.
If you don’t have access to Vendor Central to sell your products, and at the same time, you want to prevent any potential sales tax liability, then the SBA program could be the right path for you.
Finally, you can opt out anytime.
You are still selling under the FBA method and have complete rein over your inventory. So, if SBA can no longer meet your needs, you can unenroll straight away. There is no minimum timeframe so you can opt out whenever you want.
What are the disadvantages of the Sold by Amazon program?
While the SBA program offers plenty of benefits, there are also a few things you have to reconsider.
You lose control of your product’s pricing.
If you are more concerned about the amount of sales and the minimum gross proceeds than the price displayed on Amazon, then Sold by Amazon could be a good match.
Amazon does not take into account the Minimum Advertised Price (MAP).
So what exactly is MAP? A MAP price is a minimum amount that resellers agree not to advertise below. For example, if a furniture company sets a MAP price of $100 for its best selling item than all resellers, including physical retailers, then all Amazon resellers must advertise this product at $100 or more.
MAP agreements are made in order to:
- Promote fair competition across all distribution channels
- Preserve brand identity and value
- Enable small-time sellers to compete with bigger retailers
- Avoid underpricing
- Secure seller margins
With all that said, the SBA program may potentially lead in a lack of MAP compliance. Unfortunately, when a MAP agreement is violated on Amazon, brands can be left at a disadvantage because Amazon ultimately does not take a major role in seller pricing agreements.
SBA doesn’t maximize profits for products above the MGP.
Sold by Amazon is merely created to drive unit sales. It doesn’t prioritize your profits but instead focus more on giving shoppers the lowest possible price.
Lastly, it devalues your brand.
Amazon is more likely to run the race-to-the-bottom strategy, which may put your brand at a disadvantage. More often than not, customers perceive low prices as a sign of a low-quality product. If you are looking to build your brand on and off the Amazon marketplace, SBA is not the right place for you.
If you wish to join the Sold by Amazon program, we suggest that you try a couple of ASINs first. See how much profit it brings you and find out if it can benefit you in the long-term. If it doesn’t work out for you, you are not locked in and can unenroll your ASINs at any time.
If maintaining MAP pricing is crucial to your brand and you want to have a full control over your pricing, then we recommend that you do not enroll in this program. FBA is a better option for sellers who are looking to safeguard their items from price erosion.
But wait, Sold by Amazon is not your only automated pricing option. You can still optimize your product pricing and maximize your profits without Amazon taking over these key metrics. A third-party algorithmic repricing tool, like SellerMobile, removes the arduous pricing task off your hands while still giving you full control over your pricing, inventory and branding.
If you want to learn more about our repricing tool, we’ll be more than happy to give you a live demo. Schedule a demo here or speak to any of our experts at at 1-888-786-1512.