Amazon Rolls Out New Sold By Amazon (SBA) Program
Last week, Amazon invited third-party vendors to participate in their new pricing program, Sold by Amazon (SBA). Vendors who chose to use the new program will be giving Amazon permission to adjust their product prices competitively on the platform.
Vendors who choose to participate in this program will set their desired minimum profit threshold (known as the Minimum Gross Proceed (MGP). This will assure vendors that the SBA discounts won’t result in a net loss. Then, Amazon will algorithmically adjust the prices for products to maximize while ensuring that the net margin never drops below the MGP. To qualify for the program, vendors must already be part of Amazon’s FBA program, which allows vendors to have access to Amazon’s warehouse and shipping services.
Vendors will have the ability to choose which ASINs (SKUs) they want to enroll in the new program. At that point, Amazon will have control over the sale price (similar to the way they run Fulfillment by Amazon [FBA]). Amazon will issue order requests for items subscribed in the SBA program, and because of this, Amazon will be able to pick and choose the items based on how well the item sells on the site.
The benefit of this program is that Amazon can leverage their A9 algorithm to maximize unit sales, which would mean less work for vendors. Additionally, Amazon will cover any return expenses.
However, there are a few factors that vendors should keep in mind regarding the SBA program:
1. Vendors will lose control of their pricing. This might turn off some vendors on Seller Central because price control is one of the benefits of selling on that platform.
2. Amazon will not factor MAP into their pricing. As such, the Sold By Amazon program may result in a lack of MAP compliance.
3. This program will not maximize profits for vendors above the MGP. This program is only designed to drive unit sales.
If vendors choose to participate in this program, HINGE GLOBAL recommends they experiment on a few ASINs to start.
Rest assured though, if vendors prefer to maintain control of their prices, there is no obligation to participate in the program .
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