The Client: The client is a global manufacturer of power tools. The products in its portfolio are classified into the following five categories: cordless tools, power…
Amazon’s SBA Program (Sold by Amazon)
Blogs | August 4, 2019
What is Amazon’s SBA Program?
Amazon will buy items from Brand Owned Third Party Sellers, Fulfilled by Amazon (FBA) inventory, and price those items competitively to other sellers on Amazon as well as external websites. Brand owners have the ability to set a minimum threshold on what they want to net on an individual item’s basis.
Note: Brands in this program do not set the sales price, only the net they want to make.
What is Amazon’s dynamic pricing engine?
Amazon’s dynamic pricing engine is the algorithm that Amazon uses to adjust pricing on the products it sells directly. This pricing engine lowers the price based on both internal Amazon Third Party sellers, as well as pricing to competitive websites, including Walmart.com and Target.com.
Is this new?
The combination is new, but the parts are not. Amazon already transfers ownership of products and is the seller of record for Third-Party FBA inventory in Amazon Global Store. The ability of Third-Party Storefronts to reprice their products competitively and automatically is also not new. Amazon has a free repricing tool available to all sellers to adjust the price of their products. The combination of transferring the ownership of inventory to Amazon PLUS Amazon taking over pricing is new.
How this affects consumers?
Positively. Consumers will get even more competitive pricing on items.
How this affects Amazon?
Positively. Amazon can be more competitive vs. competitive websites and increase its marketplace competitiveness.
How this affects third parties?
Neutrally. The vast majority of third-party sellers on Amazon are not brand owners. The few that are, have the ability to opt-in and are not affected unless they choose to be. Sellers that opt-in will likely increase their direct sales.
Note: Amazon does not currently allow advertising on items in this program. Sellers highly dependent on advertising to drive sales should consider that impact.
How this affects large brands?
Neutrally. This has no effect on large brands that do not have a third-party storefront. Their brand is not owned by any other third parties and can not be included in the program.
Should brand owner third parties sign on to SBA?
If a brand owned third-party wants to increase sales and is less concerned about price erosion, this may be a good program. If a brand owner wants to maintain and control pricing, they should exclude those items from the program.
Amazon SBA can now adjust the price of what brand owned third-party FBA products can be priced at. Brand owned third parties who want to maintain price, while increasing their Buy Box percentage may want to consider a service like POTOO, that can help them gather insights on the third-party marketplace, help identify distribution leaks and remove sellers that may be affecting their customer experience and decreasing their price. This may be a better solution than lowering pricing to compete with your own products.
Full Details of Program from Amazon Seller Central:
Sold by Amazon (or SBA) provides a new, hands off the wheel selling experience for FBA listings that are designed to help sellers grow their business. Sellers choose which products to enroll in SBA, and once enrolled, these products are priced by Amazon. Amazon’s pricing engine will make pricing adjustments so customers receive competitive prices. To ensure peace of mind, for each SBA product, Amazon will provide a Minimum Gross Proceed (MGP) amount to protect your margins – you will never receive less than this price. SBA listings will appear to customers as “Ships from and Sold by Amazon.com,” just like products sold by Amazon retail.
When a customer purchases a SBA product, Amazon will purchase the product from you, and sell it to the customer. You will be paid based on the sales price, or the Minimum Gross Proceeds (MGP), whichever is greater. The Minimum Gross Proceeds (MGP) are calculated in advance of enrollment, providing full visibility so you can enroll listings in SBA with confidence. You will continue to manage your listings and inventory the same way you do for your FBA listings. Standard selling and FBA fees will apply, but there are no additional fees for joining or participating in the SBA program.
What are the eligibility requirements for SBA?
To be eligible for SBA you must register your brand through Amazon Brand Registry, have a Professional Selling Account, and have your products registered for Fulfillment by Amazon Services (or FBA).
I’m interested! How do I enroll my listings in SBA?
To register for the SBA program, go to your Seller Central account and locate “Account Info” in your “Settings.” You will see a registration button for “Sold by Amazon” listed in “Your Services,” where you can review the terms and conditions and register your account. Keep in mind, you must register your account for SBA and then enroll your specific listings. Registering for SBA will not automatically enroll your listings.
Once you have registered, Amazon will enable a new view in your Seller Central account called “Sold by Amazon.” This can be located under your “Manage Inventory” view. All of your eligible FBA listings along with their Minimum Gross Proceed (MGP) amounts will be displayed. This allows you to easily select which SKUs to enroll in the SBA program. Also, once a listing is enrolled, you can unenroll it from SBA anytime.
Frequently Asked Questions (FAQs):
Is there a cost to join or participate in the Sold by Amazon program? No. Standard selling and FBA fees still apply to the listings you enroll in SBA, but there are no additional fees for joining or participating in the SBA program.
How does Amazon price my SBA items?
Products enrolled in SBA are priced using Amazon’s pricing engine, which dynamically prices offers in real-time to optimize for the competitiveness of your listings.
What is MGP and how does it work?
Minimum Gross Proceeds (MGP) act as a safety net on your listings. When there is a sale, you are paid based on the price Amazon sets, or the Minimum Gross Proceeds (MGP) – whichever is higher, less any applicable selling/FBA fees. Here’s an example: The Minimum Gross Proceeds (MGP) on a pair of shoes is $20. If Amazon sets the price at $21, your net proceeds are based on the $21 selling price, just as they would be for an FBA listing. If instead, Amazon sets the price of the shoes at $19 (below the $20 Minimum Gross Proceeds), the customer pays Amazon $19, but your net proceeds are based on the $20 Minimum Gross Proceeds (MGP) amount.
Will I have visibility into the MGP Amazon sets before enrolling my listing?
Yes. Once you have registered, Amazon will enable a new view in your Seller Central account called “Sold by Amazon.” This can be located under your “Manage Inventory” view. All of your eligible FBA listings along with their Minimum Gross Proceed (MGP) amounts will be loaded into this view. This allows you to easily select which SKUs to enroll in the SBA program.
Will MGP ever change?
It may, but this typically would occur once every six months. If the Minimum Gross Proceeds (MGP) change on any product enrolled in SBA, you will be notified in writing, in advance of the changes, and you will have seven days to accept the new Minimum Gross Proceeds (MGP). To view your listings with new Minimum Gross Proceeds (MGP), go to your “Sold by Amazon” view and filter for “Pending MGP Update” under “SBA Issues.”
What happens if I do not accept the new MGP in 7 days?
Your listing will become inactive. You will be able to re-activate your listing by either accepting the new Minimum Gross Proceeds (MGP) or unenrolling it from the SBA program. You can find your impacted listings by going to the “Sold by Amazon” view and filtering for “Expired MGP” under “SBA Issues.”
Can I run Sponsored Products on SBA listings?
Not at this time. We are still working on enabling Sponsored Products for products enrolled in SBA. You will be notified as soon as it is ready to use.
Can I run Lightning Deals on SBA listings?
Not at this time. We’re still working on enabling the Deals feature; including Lightning Deals, Best Deals, and Deal of the Day for products enrolled in SBA. You will be notified as soon as these features are ready to use.
Who will handle product returns for SBA listings?
For volunteering as an early adopter, Amazon will handle product returns with no additional cost to you at this time. Should this change, Amazon will notify you in advance.
Would Amazon take care of advertising if I enroll in SBA?
No. Advertising will be managed by the Seller
Could my SBA listing ever be disqualified from the program?
Possibly. We don’t expect this to happen often, but in the scenario when there is an issue that causes negative customer experience (e.g. product quality) the listing may be disqualified from the SBA program. When this happens, you’ll be notified in writing and you will need to unenroll the listing from the program. You will be able to view impacted listings by going to your “Sold by Amazon” view and filtering for “Other Issues” under “SBA Issues.”
Will I be able to see sales data for SBA products?
Yes. You will be able to monitor your SBA sales the same way you do for your FBA listings. As a reminder, Amazon is the Seller of record so your SBA sales will show up as “AMZN CONSIGNMENT.”
Will my FBA offer compete with SBA after enrollment?
No. If you enroll a product in SBA, your SBA listing will replace your FBA listing for that product.
Would SBA change my payment terms?
No. You will continue to receive payment on a bi-weekly basis, just like you do now for your FBA listings.
Will MAP policies be factored in to SBA pricing?
No. SBA will manage pricing to drive competitiveness and will not incorporate any manufacturer MAP policies. However, each listing enrolled in SBA will have a Minimum Gross Proceed (MGP) – you will never receive less than this amount, protecting your margins (see FAQ #3). We recommend working with your brands to determine where SBA makes sense for you.
Who would manage sales tax processing for items enrolled in SBA?
Amazon will be the seller of the record on your FBA listings enrolled in SBA, so they will collect and remit any necessary sales taxes. Amazon will issue you Tax-Exemption Certificates when this occurs, and you can find these under Reports – Tax Document Library.
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