Why You May Not Want To Sell (Or Buy) On Amazon – Advice From Launching 30,000 Products

When you’re launching a new product or publishing a new book, one of the first distribution channels “experts” say you “have to” be on is Amazon.  Not Jules Pieri.

“Amazon has done a lot for competition, because in their earlier days, they were a fair and transparent marketplace,” Pieri told me. “But they’ve really changed and become much more of a net destroyer of innovation and a complete destroyer of competition. It’s very bad for our economy. Very bad for innovation. Very bad for jobs.”  

Before you dismiss her comments, look at her track record: She launched about 30,000 products through her innovative e-shopping site TheGrommet.com, and before that was a senior branding executive at Fortune 500 companies, including Keds/Stride Rite.   She has seen so many of the makers on her site have so many business-threatening issues with Amazon that she counsels small businesses to “Use Caution With Amazon.” That’s the section of her new book, “How We Make Stuff Now” (McGraw Hills Education, 2019), about this issue.

Why?

Here are her two big reasons and what she recommends:

1.     Counterfeiters: “Amazon does two things that people don’t realize,” Pieri told me. “Number one, in 2015, they changed the rules” to open their platform to Chinese suppliers to compete with Alibaba, the Amazon of Asia. As a result, “Chinese suppliers flooded Amazon.  So, now today, in 2019,” Pieri explained, “25% of what’s sold on Amazon comes from a Chinese factory. But here’s the deal. It’s a very different business culture in China where counterfeiting is not a problem.  We look down on in, we have legal protection in the U.S…. So, 25% of what’s sold on Amazon now has the likelihood, the probability of being counterfeit.”

Here’s how Pieri says it works: Are you getting great reviews and rankings?  Great! But those great reviews and rankings are a neon sign inviting counterfeiters. They pretend to be your product, even use the same photos from your product listings (she said some of TheGrommet’s clients have seen their kids’ photos on these counterfeit listings).

“These products are cost-reduced, so they always win the top ranking on Amazon. They look like it’s the real products, but just at some miraculously low price,” she said. But, when the products are ordered from these counterfeiters, the products sent are defective.  So, when the product fails, the buyer holds your brand accountable, because it’s your name on the product. “The reviews are crummy and there goes their business.” Think you have legal recourse? Pieri says you don’t. “So, Amazon’s power can very easily, from the counterfeit standpoint, destroy a business,” she said.

Recommendation: Pieri recommends using retailers. “Traditional retailers, whether it’s a department store or a local store, or a chain store like CVS, are in business for their customers to make sure they’d curated a product that’s worthy of their brand’s reputation. So, they don’t sell counterfeiters. That’s one of the big roles of retailers in the world.” She outlines how to negotiate with retailers in her new book.

Bloomberg’s “China Rising” blog reports on a new law in China as of January 1, 2019 to “crack down” on counterfeiting, but says the counterfeiters are already finding ways to evade it.

2.     Amazon private label: “The other thing they do,” at Amazon, Pieri continued, is “they have, at last count, 125 private label businesses.”  Here’s how she said it works: “A few of them are named Amazon Basics, so you know you’re buying from Amazon….But 120-something of them are under…a made-up name, like Rocky River brand.  These are Amazon’s own brands, but they don’t tell you they’re their own brands.  (Amazon is) looking at the data from what’s selling (on their platform)….and they’re saying, ‘oh wow, that thing’s going crazy, let’s make one of our own under our new brand name that we just made up.’”

They are not just launching a product and letting competition take its course. Because Amazon controls “the pipes,” as Pieri called them, they’re launching these new private label products at the top of the listings, therefore, they are circumventing the natural course of competition, giving their own products the competitive advantage and “putting these (small) businesses out of business.… they can destroy competition.”  

Recommendation: If you do decide to distribute via Amazon, Pieri recommends in her book that you “plan to staff up to support Amazon’s ever-expanding policing, listing, advertising, compliance and operational demands,….or, a potentially wiser and more effective alternative is to contract a specialist rep agency to manage your Amazon business for you.”  She explains how to do both and has other recommendations for “Healthy Routes to Retail” in her book.

So, the next time you’re launching a new product or book and someone says you “have to be on Amazon,” think twice about it first, and if you do, take precautions to avoid these pitfalls and learn from Pieri’s vast experience.

You can hear the full interview with Jules Pieri on my podcast, Green Connections Radio, when it drops the morning of September 13th, 2019, either on our website or wherever you listen to podcasts.