Amazon has launched a new program for sellers in the US: With ‘Sold by Amazon’ the E-Commerce giant has created a new way to control market prices and minimize their own financial risk. Learn here, why this is a pretty smart move.
Lowered Financial Risk for Amazon – Guaranteed Payout for Sellers
Up until now, Amazon was on a mission to transfer brands to become sellers on the platform’s Marketplace instead of choosing the Vendor-model. That way, Amazon no longer carries the inventory risk and does not tie up huge amounts of working capital. The downside is that Amazon has lost the opportunity to actively influence the prices on the market and might have to offer higher prices compared to other E-Commerce players.
With SBA, brand owners allow Amazon to lower the price of their products. In exchange, they get a guaranteed payout, the so-called “Minimum Gross Proceed” or MGP. This means that sellers can set a lower limit for their revenue per product and do not risk losing profit.
There is no extra charge to participate in the program, but the seller has to be the brand owner and a user of “Fulfillment by Amazon”.*
The SBA model is the next logical step for Amazon:
- Elimination of inventory risk
- No purchasing of goods, i.e. tying up of working capital
- Competitive price offerings
Thus, Amazon minimizes its financial risk, wins big on marketing opportunities and optionally secures its position as a price leader in the market. All in all, this looks like a very intelligent approach.
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