The Amazon Deal You Never Heard Of
By Ray Petrick, VP of Sales, Boiron USA
Amazon's accelerator program has existed for almost a year, and you've probably never heard of it.
Amazon Accelerator gives sellers prominent placement on its website and individualized support through its vast marketing expertise. This includes social media, email marketing, and access to their Seattle team. But here is the caveat. It also gives Amazon the right to buy your brand for a predetermined price with as little as 60 days’ notice.
Amazon’s private label brands account for only 1% of total retail sales. For an average brick and mortar retailer, private label brands represent 20% of total retail sale (15% at Whole Foods Market). The private label brand “Amazon Basics” has expanded beyond a handful of goods and categories, like batteries and cables, to thousands of other items including the OTC category. Yet to become an even bigger player in the private label business and obtain an edge on exclusive brands, this new program launched with little fan fair in late 2018. Sellers are invited to the program. They can choose not to opt into, and only the brands that enter in the program are subject to purchase. This is the first program that allows Amazon to obtain direct control over independent brands that it sells on its site.
The terms allow the seller to sell the same products elsewhere under different brand names. Interestingly, Amazon has the right to acquire the brand for a minimal cost or as low as $10,000 per brand. Amazon buys a brand and the original owner remains as Amazon's exclusive supplier for two years after the acquisition. After that, Amazon can source products for the brand elsewhere.
Sellers are still signing up, knowing that they are risking their long-term brand equity. Yet others have taken a much harder line, expressing that “resources that the giant is putting behind these partnerships is unfair to other sellers on the platform and it is set up to benefit Amazon.”
Whether Amazon's accelerator program is an opportunity or not is debatable, but one thing is clear. This program is evidence that Amazon is consistently monitoring the marketplace for categories and potential products to quickly develop its own private label offerings. The strategy is clear.
As they say, “buyer beware.” In this case, seller beware.