Amazon has launched a new beta feature, ‘Sold by Amazon’ (SBA), available for brand owners and third-party sellers. Recently, Amazon’s pricing policies have received a lot of unwanted attention due to apparent anti-trust concerns. One such policy was the ‘price parity clause’, which advertently prevented sellers from displaying lower prices for a product in other marketplaces.
In a bid to stay competitive with pricing, Amazon rolled out ‘Discount Provided by Amazon’, whereby Amazon cuts third-party seller prices and funds the discount.
What is SBA?
SBA allows Amazon to set product prices through its dynamic pricing engine while protecting seller margins with a guaranteed price. This is called, ‘Minimum Gross Proceeds’. In Amazon’s words, as stated in the invitation letter to third-party sellers:
“Sold by Amazon (SBA) provides a new, hands off the wheel selling experience for FBA listings that are designed to help sellers grow their business…”
This means that once you enroll any of your products to SBA, you have authorized Amazon the right to reprice the product. Once purchased by a customer, Amazon buys the product from you to sell to the customer.
You receive the actual sell price or the Minimum Gross Proceeds (MGP), whichever is higher. For instance, if the MGP of a particular SBA product is $25 and Amazon repriced and sold it for $20, you will be paid $25. This is the guaranteed price. If sold for more, for example, $28 – you receive the actual sell price, $28. Amazon determines eligible products’ MGP before product enrolment into SBA and re-evaluates MGP every six months based on the average sell price over that period.
Sellers decide which products are enrolled into SBA and can remove them at any time. Customers see enlisted SBA products as “Ships from and Sold by Amazon.com”, similar to products sold by Amazon retail. However, just like ‘Fulfilled by Amazon’, (FBA), listings and inventory management are still the responsibility of the seller.
The Difference between FBA and SBA
While one seems to be an extension of the other, FBA and SBA are different. FBA products are owned by the seller, but storage, packaging, delivery, and returns are fulfilled by Amazon. Whereas with SBA, Amazon owns the product.
How to Enroll Your Products in SBA Program
To enroll your products in SBA you have to register your account for the SBA program first. To do this, go to “Account Info” in your “Settings”. Click on the “Sold by Amazon” registration button as listed in “Your Services”. After registration, you can then go on to enroll your listings in SBA.
Once you register your account for the SBA program, Amazon automatically creates the “Sold by Amazon” tab in your Seller Central account. You can find it under your “Manage Inventory” tab. You will find all your eligible FBA listings with their MGP amounts under this “Sold by Amazon tab”, from which you can easily enroll and de-enroll SKUs of your choice anytime.
The Good, the Bad and the Ugly of SBA
The main reason Amazon rolled out SBA was to stay competitive and benefit the consumer. There are already concerns as to how MGP will be determined and what type of products will be accepted.
If your goal is to sell-out inventory, SBA may be the most effective fulfillment method for you. However, SBA is not the best service for brand owners who sell on Amazon and on other marketplaces.
SBA seemingly can and will affect the ability for brands to control pricing and remain competitive. Therefore, using a repricer will allow you to have more control over this. Aside from the loss of control over pricing, another SBA limitation is that you cannot run sponsored products or lightning deals on Amazon SBA at this time. That could, however, change in the future.