Selling on Amazon

david goliath

Don’t get me wrong. I like buying on Amazon, and I do so frequently because Amazon is good for consumers, as long as they have merchants to support them. The problem is that it is hell for merchants, that’s why we no longer sell there.

Recently there was an article in the New York Times comparing eBay to Amazon. The author proclaimed that Amazon had taken the advantage in the ecommerce wars by investing in new technology like the Kindle (which is an amazing appliance) and mp3 downloads. eBay, meanwhile was stagnating. It had spent billions on Skype and was distracted by failed initiatives like eBay Express, while trying to migrate from its core auctions business to retailing. Amazon, the newspaper wrote, was a tempting platform for third party merchants who were seeking visibility to its millions of members. Don’t be fooled. It’s a loser’s game.

Several years ago, one of our glove suppliers asked me to represent them on Amazon. Being a manufacturer, they were not set up to ship or provide service to retail customers, and as a result were booted off.

We enthusiastically signed up and found a technology that enabled us to download orders from Amazon into our order system. As our sales picked up, I found myself obsessively trying to gain positive feedback ratings. That is one thing I will say about Amazon’s customer feedback system: it really motivated us to provide a high level of service out of fear of getting negative feedback. My moods swung daily from the sweet rush of a positive rating, to the agony of a negative review. I was surprised how vulnerable I felt to the capricious and sometimes unfair “oh, so unfair“ assessment of my patrons on Amazon.

During the first week of December, our download application broke and the developer abandoned us. This happens more frequently than you would think. In some ways, the internet economy is like the Wild West, with rogues and vipers slithering under nearby nooks and crannies, but that’s another story.

We were left swinging in the wind, and then frantically scrambled to enter hundreds of transactions in the $20 range into our order system. Our data entry employee in India gallantly worked eighteen hour days, trying to catch up, but it was a losing battle, and as Christmas drew nearer, we started shipping out orders by FedEx 2nd day express to ensure delivery before December 25th. As more and more anxious customers inquired whether their gifts would be delivered in time, we escalated our shipments to overnight courier, which often cost us more than the value of the purchase. The negative ratings rolled in. Finally, with our backs against the wall, and the sands mercilessly passing through the hourglass, we resorted to giving refunds; not that this gesture would remedy the hurt feelings.

The next year we promised ourselves we would be better prepared, but once again, we shipped products overnight and gave refunds when orders fell through the cracks or we could simply not get them out the door. Although it took us two festive seasons to learn this lesson, it finally dawned on us that most Amazon customers are not repeat customers and they do not buy in volume. Not to mention that Amazon was carving 12% commission out of our sales, including shipping.

LESSON NUMBER 1: AMAZON CUSTOMERS ARE HIGH MAINTENANCE AND LOW MARGIN.

This system is great for customers, and I still buy things on Amazon because of the convenience, security and low prices. Despite the problems, we had actually performed reasonably well. Our feedback improved considerably, and we had the most popular winter work gloves and garden gloves on the site. As a result, our products were listed first under key words associated with “winter work gloves” and “garden gloves”. However, unscrupulous merchants tried to push us out by stealing our Amazon stock identification numbers and then switching to a lower quality product. I was amazed at how grudgingly Amazon technical support accepted our pleas for fairness.

LESSON NUMBER 2: AMAZON TECHNICAL SUPPORT IS NOT INTERESTED IN ACTUALLY SUPPORTING AMAZON MERCHANTS. THEY ARE MORE CONCERNED ABOUT PROTECTING THE INTERESTS OF AMAZON.

The next development was that Amazon started selling the same winter work gloves that we had done so well with. Not only that, they pushed us out of the featured merchant spot, even though our gloves were priced lower. When we complained, Amazon explained that if the customer purchased over $25 in merchandise from Amazon, they would get free shipping whereas we charged for delivery. Therefore Amazon had the better deal and was entitled to be the featured merchant.

LESSON NUMBER 3: WHEN YOU ARE A MERCHANT ON AMAZON, THEY HAVE ACCESS TO YOUR SALES RECORDS, AND MAY BE IN A POSITION TO CHERRY PICK WHICH PRODUCTS THEY ARE GOING TO SELL, BASED ON THIS INFORMATION.

Ah, but we still had the best selling garden gloves. Not only that, I owned the trademark on the name, and paid for and owned, not only the UPC code, but also the images. Imagine my horror one morning when I discovered that we were no longer number one on the list for garden gloves. We were displaced by a competitor who was selling our gloves, with our name, our UPC code and our image at a higher price! After toiling for years to establish our gloves as the most popular garden gloves on Amazon, and losing money in the process (remember the overnight deliveries), with one flick of the digit, we had lost our position.

I phoned Amazon technical support and firmly asked them to put me back where I belonged. They explained that it was out of their hands as there was an “algorithm” – a mystical and omnipotent “algorithm” – that determines who is the featured merchant.

LESSON NUMBER 4: WHEN YOU ARE A MERCHANT ON AMAZON, YOU HAVE NO EQUITY IN YOUR PRODUCTS. IN OTHER WORDS YOUR VISIBILITY ON AMAZON IS SUBJECT TO THE WHIMS AND FANCIES OF A “SUPERNATURAL ALGORITHM” THAT CONTROLS EVERYTHING, AND CANNOT BE CONTROLLED.

“Algorithm meet Hal”. That was it. Enough is enough. I promptly notified Amazon that I was canceling my account and removing my products. They sent me a form letter telling me that I had been a good merchant, and would I reconsider? “Never!” I said to myself, and with a determined push of a button, obliterated all my products that we had spent months entering into the database. With a sigh of relief and futility, this episode had come to an end. I could now focus on my own web site and my own customers.

About a week later, I decided to see what had happened to my Amazon competitor who had pushed me out as the featured merchant for garden gloves. When I clicked on the link to view the product detail, there was my garden gloves image, in all its glory, with my trademark name and my UPC code, selling briskly, I’m sure.

“They can’t do this”, I said to myself through clenched teeth. I fumbled for the phone in a panic, and with a short breath, told the Amazon technical support person that I owned that trademark, the image and the UPC code for the gloves on sale, and they did not have permission to use them. The representative, in a steady, confident tone referred me to the Amazon merchant agreement. When I signed up as a vendor, I had granted Amazon unlimited rights to use my products as they deemed fit, in perpetuity.

LESSON NUMBER 5: WHEN YOU SIGN UP AS AN AMAZON MERCHANT, YOU FORFEIT YOUR RIGHTS, AND YOUR CHILDREN’S’ CHILDREN’S’ RIGHTS IN PERPETUITY.

Several weeks later, after I had partially recovered from this trauma, I realized that I had never reconciled my Amazon commission checks with my sales reports. As I had closed my account, I no longer had access to that information, and I could no longer phone the support line. Actually, you don’t phone them. You send them a message and request that they phone you. I sent an email to everyone at Amazon I had on record, humbly requesting my records. I needn’t have bothered. I received an email from an Amazon technical representative a week later telling me that my information had been purged.

THAT IS WHY SELLING ON AMAZON IS A LOSER’S GAME.

Copyright © 2009 Darryl Abrahms