eCommerce: The Amazon Seller Risk Mitigation Strategy

by | Dec 23, 2020 | Business Entity, eCommerce, Finance, Small Business Growth, Videos

Amazon has become a household name that evokes mixed reactions from consumers as well as my eCommerce clients. While many see this platform as an opportunity to optimize profitability, there are risks. A recent survey of over 1,000 Amazon Seller participants from JungleScout confirms what I have learned from my years of advising e-commerce clients. 

  • 76% of Amazon Sellers are concerned about Amazon shutting down their account without reason.
  • 58% of Amazon Sellers say Amazon has made it harder for third-party sellers to compete in their product category.
  • 53% of Amazon Sellers say Amazon sells its own products that directly compete with the seller’s.
  • 68% of Amazon Sellers are concerned about Chinese suppliers selling their or similar products at lower costs.

At the same time, very few Amazon Sellers are planning to leave the Amazon Platform anytime soon; 83% reported profitability within their first year of selling.  Selling on Amazon is an opportunity with risk, much like any other business opportunities in life. So to succeed, you need to develop and implement what I have inartfully named the Amazon Seller Risk Mitigation Strategy by EmergeCounsel (you can see why I am an attorney and not a brander).    

  • Analyze the Risk of Your Amazon Play – There are basically three ways to sell on Amazon: make your own unique product, private label an already made product, or arbitrage (buy a product in bulk at a lower price on Amazon or anywhere, and resell at a higher price on Amazon).  Each of these requires its own legal strategy.  For example, if you are going to market a brand new designed boomerang, you are going to want to protect against other Amazon Sellers knocking off the design.  If you are selling the products of others, you may have an issue not being an authorized vendor and even violating the distributors MAP pricing (the price established by contract that you cannot go below).  
  • Determine How You Are Going to Protect Your Product – Every product has its own unique selling propositions.  Maybe it is the price, or the design/look and feel, or it is directed to a certain audience or has a certain panache.  The most obvious way to protect is a trademark strategy.  A registered trademark provides exclusivity in the marketplace for a word, design, and even certain sounds (like the HBO static sound).  Trade dress protection protects product packaging.  Copyright protects original art which can include product packaging, product naming and even the shape or other unique elements of the products.  Patents protect inventions including potentially the product look and feel, or even the originality of the product. All intellectual property protection can be secured domestically and/or internationally.   Not only do you need to protect your product, but also your supply chain.  For example, you should always do due diligence to assure that your supplier is not e.g. manufacturing extras and selling them on AliExpress. This can all be very daunting and figuring out the right combination of strategy is something that experienced IP attorneys at EmergeCounsel help their clients with.  Any initial discussion on what is right for you should be free by whomever the intellectual property attorney is.
  • Have a Plan for Knock Offs – My experience is no competitor, including Amazon, really cares about a new product play until it achieves success.  However, once a product is successful, a knock off is inevitable.  Early signs of knockoff issues include competitive trademarks being applied for in China, or a similar product or product names showing up on the Amazon platform.  The design could be similar, the competitor’s product could be cheaper, it could just serve the same purpose and sometimes even the name is similar.  According to investigative reporting by the Wall Street Journal, Amazon may be involved directly through brands called Amazon Basic or they may even work with foreign companies in Asia to create your derived product at a lower price point, take a cut, but have it labeled without the Amazon brand.

In summary, a rule in product marketing is that every product has a certain useful life; only you can determine if your Amazon product play is a short opportunistic one which needs little intellectual property protection, or a long profitable one in which you need to spend the time and resources to build and protect. Given the always evolving nuances of eCommerce platforms, we want to provide our expertise for the protection of your business. We are always around to help you with your eCommerce play.  

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