25 Juicy Tidbits That Congress Forced Out of Amazon

December 28, 2019 in Blog
25 Juicy Tidbits That Congress Forced Out of Amazon

25 Juicy Tidbits That Congress Forced Out of Amazon

In July of 2019, Congress held hearings on “Online Platforms and Market Power, Part 2: Innovation and Entrepreneurship”. After the hearing, Congress requested on the record responses to more than 100 questions which have recently been released.

Amazon’s lawyers were very careful with how they responded to many of these questions, but even with a strict stroke of legalese, there were countless fascinating insights revealed about Amazon. We broke down and summarized the most interesting of these points for sellers.

Note: Italics are Amazon’s formal responses; non-italics are EcomCrew commentary

Read more: Full Amazon Responses to Sub-committee Questions (69 pages, PDF), Amazon’s Initial Response for Further Information

 

Amazon Has 158,000 (!!) Private Label Products

If you ever wondered how many private label products Amazon has, it’s almost certainly more than you think:

Amazon currently offers approximately 158,000 private brand products (some of which have additional variations, such as color and size) across 45 brands in the Amazon store in addition to some private brand products sold by Amazon Fresh, its online grocery store available in select metro areas.

How Amazon Determines Who Gets the Buy Box

Amazon didn’t really offer any earth-shattering information on winning the Buy Box:

Amazon identifies a Featured Offer by considering factors including price, fulfillment speed, delivery speed, Prime eligibility, and seller performance

Even if Amazon is Out of Stock, They May Still Take the Buy Box if They Have Open POs

Amazon did, however, more or less acknowledge favoritism for awarding IT the Buy Box:

If an Amazon retail offer is out of stock with no outstanding purchase orders and that same product is available at the same or a lower price from a Prime-eligible seller with a high performance rating, then the Amazon retail offer would not be the Featured Offer.

What Amazon SEO DOESN’T Look At

Surprisingly, Amazon doesn’t consider an item being FBA or an item being Amazon’s own brand when ranking items:

Amazon’s algorithms do not take into account [Whether a merchant is enrolled in FBA, whether a merchant purchases ads, or whether a product is private label sold by Amazon] when ranking shopping results.

There Was Heavy Scrutiny on Amazon “Stealing” Third Party Seller Information

There were numerous questions about what Amazon does with private third party seller information (such as vendor information). Many sellers are suspicious about Amazon’s request for supplier invoices and similar information.

Amazon Claims It Doesn’t Use Individual Seller Data for Developing Its Own Brands…

Amazon basically shut down conspiracy theories that those requests for invoices with sensitive supplier information are used to source products (these rumors were pretty absurd as this information is basically public information through tools like Jungle Scout anyways):

Amazon prohibits Amazon’s private brand products business from using individual sellers’ data to decide which products to launch, and Amazon prohibits the use of individual sellers’ data to make sourcing, pricing, or inventory decisions for its private brand products.

…But It Does Aggregate Seller Data and Use That Towards Its Private Label Brands

Amazon might not use individual seller data to get the upper-hand for its own brands, but it does get to use aggregated data (i.e. category revenue information, keyword data, etc):

…Internal teams are permitted to examine aggregated selling partner data for business purposes.

And, from another question:

Amazon uses public and aggregated data from its stores to identify categories and products with high customer demand over a given time period… It includes data such as aggregate sales reports at a product category level.

In a further question, the committee also asked why Amazon does not share aggregated category information with sellers.

Amazon does not provide category-level traffic and conversion data to external parties, as this information would provide competitors detailed insight into the performance of its business

Amazon Doesn’t Favor Its Brands in Search Results but It Does in Other Marketing…

Amazon generally does not distinguish the treatment of brands based on the selling model or brand owner in Amazon’s store. Consistent with the value proposition for private brands generally…like other retailers, Amazon highlights its private brands in promotions and marketing in the Amazon store when Amazon thinks they will be of interest to customers. 

…Other Marketing Such as Advertising

Amazon  acknowledged its brands may get preferential treatment in advertising positions on Amazon:

Like all retailers, Amazon regularly makes decisions about how to use the space in Amazon stores based on a variety of factors, centered on what customers will find most helpful. Whether to show ads from third parties or merchandising placements highlighting Amazon’s private brand products, and how many, depends on many variables

Amazon Hinted at a Problem with Leaked/stolen Individual Seller Reports (i.e A9 Reports)

Amazon trains employees on these policies [to restrict employee access and use of individual selling data], and regularly audits its systems and processes for compliance…Amazon is also continually improving its technical controls to automatically enforce [limited access to individual selling data], and many tools in use today are already configured to omit seller data or have strict permissioning requirements.

Amazon Does Not Sell Its Brands at a Loss (Kind Of)…

Amazon does not offer its private brand products at a regular price below the cost of goods that Amazon pays to its manufacturers

(Of course, as well all know, the cost of goods equation can omit a lot of considerable selling costs, most specifically advertising, which Amazon does not need to pay for, for its own brands)

…But Amazon’s Goal is To Undercut the Top Competitors…

For private brands, Amazon aims to offer incremental selection at a better price/value ratio than leading brands.

There Are Nearly a Million Active Sellers in the United States

As of September 29, 2019, there were approximately 384,000 active individual seller accounts in the U.S. and approximately 514,000 active professional seller accounts in the U.S.

Amazon Uses Inserts to Solicit Reviews

Amazon at times includes a hang tag that invites customers to leave a review, without specifically requesting the review be positive or negative. The hang tag says “We’d love to hear from you! Please leave us a review.”

Amazon Hinted It Received About $10billion in Advertising Revenue (on a total of $140billion in Sales) in 2018

Amazon has been releasing an “other” figure in its yearly financial statements since 2018 which has widely been believed to be advertising. Based on these figures, the average Amazon-wide Total Cost of Advertising (TACoS) would be roughly 10%.

…beginning in 2018, Amazon has provided additional disclosure about sales of advertising services in the “Other” revenue category. Amazon reported $10.1 billion in net sales in “Other” revenue worldwide in 2018.

Amazon Received Over 40million Contacts from Sellers in 2018

Amazon’s Selling Partner Support team handled more than 40 million contacts from selling partners in 2018

Editorial Recommendations Make Up 2.5% of Search Results

For each month since July 2018, the number of Amazon private brand products featured within Editorial Recommendations has been less than 2.5%

Amazon (probably) Won’t Gate Your Brand But They Will Gate Others

For a limited number of national brands that supply their products to other major retailers for sale by those retailers, Amazon has elected to source the brand’s products for sale by Amazon only. As part of business agreements, Amazon has in certain circumstances chosen not to list third party products for sale in Amazon’s store if those products do not allow customers to access Amazon services, such as Amazon Prime Video

Amazon Gives Big Brands Preferential Third Party Treatment

In the rare cases when Amazon does negotiate specific selling terms with large or strategic sellers

The Committee Scrutinized Amazon’s Often Unfair Suspension Practices

In one question to Amazon, the committee asked:

If Amazon suspends a seller without detailing the precise basis for the suspension, how does Amazon expect the seller to remedy the violation and bring itself in compliance with Amazon’s policies?

(Amazon more or less dodged the question)

There Are Over 200,000 Brands in Brand Registry

Amazon does not make a list of the over 200,000 brands enrolled in Brand Registry publicly available

Amazon Allows Bidding on Branded Keywords

Consistent with common practices across advertising and the policies of providers of advertising services, Amazon Advertising permits advertisers to bid on branded keywords of their brands and other brands.

There Are More Than 25,000 Sellers Using Seller Fulfilled Prime

More than 25,000 seller partner accounts are enrolled in Seller Fulfilled Prime

163 Sellers Have Sought Arbitration Against Amazon Since 2014

…Amazon’s records reflect that 163 sellers have initiated arbitration proceedings since 2014. Those arbitrations involved the following types of claims:

• Funds withholding/inventory reimbursement dispute (100)
• Account closure or suspension (22)
• Reimbursement for lost, damaged, or disposed of inventory (16)
• Account compromise or unauthorized funds transfer (8)
• Infringing or counterfeit sales by other third party seller (5)
• Challenge to customer refund (5)
• Removal or restriction on certain product listings (4)
• Shipping charge dispute (2)
• Challenge to infringement complaints by others (1)

Conclusion

What did you think of Amazon’s answers to Congress’ questions? Do you think they were being candid and forthright? Let me know in the comments section below.

  • About The Author: Dave Bryant

    Dave Bryant has been importing from China for over 10 years and has started numerous product brands. He sold his multi-million dollar ecommerce business in 2016 and create another 7-figure business within 18 months. He's also a former Amazon warehouse employee of one week.

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4 Comments

  • Blake Cabot
    December 28, 2019 Reply

    I don’t believe that Amazon doesn’t look at it’s own brand, FBA, or advertising. I have seen too many results that this looks like.

    • Dave Bryant
      January 2, 2020 Reply

      They acknowledged they do promote their own brands in advertising. For organic search results, I think *most* of their brands are ranked with the same algorithm but it's kind of irrelevant because they can just be uber aggressive on pricing (imagine saving 15%+ on referral fees + advertising costs).

  • Jonathan Bergstrom
    December 30, 2019 Reply

    How did they dodge the suspension question? Having successfully fought one earlier this year(after a month and a six figure loss), I am very curious how they danced around their abysmal SOP in that area.

    • Dave Bryant
      January 2, 2020 Reply

      They dodged a lot of things :)

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