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Amazon Accused of a ‘Deceptive Scheme’ to Make Customers Pay More

Hey, Fellow Amazon Sellers!

Welcome to another edition of our weekly newsletter! Let’s dive straight into the latest buzz in the Amazon selling universe:

1. Amazon Accused of a ‘Deceptive Scheme’ to Make Customers Pay More

Amazon faces a class-action lawsuit alleging the use of a “biased algorithm” to conceal cheaper offers, thereby deceiving customers into overpaying for items. The lawsuit claims Amazon prioritizes offers in the “Buy Box” from sellers enrolled in its Fulfillment By Amazon (FBA) service, who pay “hefty fees,” over cheaper alternatives from non-FBA sellers. This practice allegedly results in consumers frequently paying more than necessary due to less visible, lower-priced options. The plaintiffs seek monetary and injunctive relief, aiming to prohibit Amazon’s current use of the algorithm for the Buy Box and to revise its offer selection process.

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2. Impact of Ad Timing on Performance According to Amazon Marketing Stream Data

An analysis of 10 billion impressions from Amazon Marketing Stream data reveals the significant influence of ad timing on conversion rates across various product categories. General trends indicate that conversion rates start to increase at 3 AM PST, peak between 5 AM and 8 AM PST, and remain above average until 3-4 PM PST before declining, reaching the lowest point between 9 PM and 1 AM PST. However, consumer behavior varies greatly among categories, such as automotive parts and skincare products, displaying unique trends in conversion rate (CVR), cost per click (CPC), and return on ad spend (ROAS). Advertisers can enhance sales efficiency by targeting ads during times of highest consumer intent and cost-effectiveness, tailored to specific Amazon categories.

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3. The Amazon Aggregator is Dead

The landscape of Amazon Aggregators, once thriving entities acquiring numerous Amazon brands, has drastically transformed, moving away from their original model of growth through acquisitions. Initially, firms like Thrasio led this trend, drawing in over $16 billion in capital, primarily in 2021, to buy out Amazon businesses. However, the operational challenges of managing these acquisitions and a shift in the funding environment have led most aggregators to cease their buying spree. Now, the focus has shifted to internal growth, product launches, and channel expansion, with a more selective approach to acquisitions. The era marked by the aggregator boom has given way to a more nuanced phase where former aggregators evolve into operators, distancing themselves from the aggregator label and the unsuccessful model epitomized by Thrasio’s bankruptcy news.

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4. Amazon’s “Significant” Reliance on Chinese Sellers

Amazon has officially recognized the “significant” role of Chinese sellers on its platform, highlighting this in their annual Form 10-K filing with the SEC. This disclosure underscores the potential risks associated with its international operations, given the substantial contributions of China-based sellers to Amazon’s third-party seller services and advertising revenues. Chinese sellers, accounting for nearly half of the top sellers in the U.S., have become a critical part of Amazon’s marketplace, reflecting a broader trend of Chinese-American tech interdependence. This shift represents a new phase in retail, with factories that once manufactured products for U.S. retailers and brands now selling directly to consumers through platforms like Amazon, further illustrating the evolving dynamics of retail trade.

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5. Is Amazon a distributor?

Amazon Marketplace, which accounts for 60% of Amazon’s sales, operates without Amazon taking ownership of inventory, allowing third-party sellers to list their products. The U.S. Consumer Product Safety Commission is considering classifying Amazon as a distributor, which would make Amazon responsible for the safety of products sold on its Marketplace and for conducting product recalls. This change could increase compliance costs and force Amazon to vet Marketplace sellers more stringently, potentially reducing the number of third-party sellers and impacting the product selection available on Amazon. The classification could also affect other online marketplaces like eBay or Walmart Marketplace, reflecting a significant shift in how online retail platforms operate and are regulated.

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6. Amazon Surpasses eBay as Leading Australian Marketplace for First Time

For the first time, Amazon has outpaced eBay to become Australia’s top marketplace, as revealed by Pattern’s latest ‘Marketplace Consumer Trends Report – 2024’. The Australian marketplace sector is witnessing significant disruption with new entrants like Temu and Shein rapidly gaining market share. Amazon’s growth is attributed to its competitive pricing, extensive product range, and Prime’s ease of use, projecting a $5.5 billion turnover in Australia by the end of the current financial year. Despite cost-of-living pressures, the e-commerce market in Australia is expected to reach AU$ 64.14 bn, with online retail purchases increasing. Marketplaces are becoming a preferred tool for product research over Google, with shoppers directly visiting retailers or platforms like Amazon for inspiration.

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7. Hardly Ever Worn It Amazon Luxury Resale Collaboration

Amazon has teamed up with Hardly Ever Worn It to offer pre-owned luxury items to customers in the UK, Germany, Spain, and Italy through Luxury Stores at Amazon in Europe. This collaboration allows shoppers to explore a wide range of high-end, hardly worn designer pieces, including women’s wear, shoes, accessories, jewelry, and watches. A meticulous pre-screening process ensures the quality of each item, aligning with Hardly Ever Worn It’s commitment to customer satisfaction and sustainable fashion. This initiative not only widens the scope of luxury resale but also marks a significant step towards a circular fashion economy, making high-end fashion more accessible and environmentally conscious.

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8. Target Weighs Paid Membership Program Akin to Amazon Prime

Target Corp. is reportedly considering launching a paid membership program, internally named Project Trident, to enhance growth and competitiveness against larger rivals like Amazon Prime and Walmart+. While Target already has a free loyalty program, Target Circle, offering deals and rewards, this new fee-based program might include benefits from Shipt, its 2017-acquired grocery-delivery business. Facing sales declines and aiming to boost consumer loyalty, Target’s move into the paid membership arena seeks to generate additional revenue and encourage shopping across online and in-store platforms. This strategy follows in the footsteps of Amazon, Walmart, and Kroger, which have successfully leveraged similar programs to increase customer spending and loyalty.

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9. Watch Out for a More Costly Postal Zone 10 in July

The USPS plans to introduce a new postal Zone 10, making it more expensive to ship packages to Alaska and Hawaii starting July 2024. This change will affect sellers who offer free shipping and may necessitate adjustments in product pricing to accommodate the increased structural costs associated with using the Postal Service. Additionally, sellers in Alaska and Hawaii will need to account for higher costs for sourcing inventory, materials, and supplies from the contiguous United States. The new Zone 10 will impact pricing tables for Priority Mail, Priority Mail Express, and USPS Ground Advantage products, including a separate rate structure for Flat Rate Products for Zone 10 and Zone 9, which covers US territories and some military addresses. This move has drawn criticism from Alaska’s congressional delegation, who argue that no state should be financially penalized due to its geographical location.

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10. UPS Launches Saturday Residential Delivery in Canada

UPS has introduced Saturday residential delivery for its Standard Service in key Canadian cities, starting with the Greater Toronto Area and expanding to Montreal, Laval, Calgary, and Greater Vancouver by March. This enhancement allows for weekend deliveries at no additional cost to the recipient, positioning UPS as the first global small package carrier in Canada to offer such a service from the US and within Canada. This move caters to the expectations of half of the Canadian consumers who anticipate online purchases to be delivered within 1 to 2 days, including weekends, providing a competitive advantage for UPS customers.

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11. IP Alert – The #1 Choice for Avoiding IP Complaints

IP Alert has become an indispensable tool for safeguarding our Amazon business against intellectual property complaints. With thousands of brands in their extensive database, IP Alert ensures we stay ahead of potential issues with the most current and relevant brand information available. The real-time updates are conveniently stored in an offline database, eliminating the need for constant refreshing or updating of the extension. What sets IP Alert apart is its crowd-sourced and vetted data, allowing sellers to share their experiences with IP claims, ensuring a comprehensive and accurate resource. And the best part? IP Alert offers a free mobile version, enabling us to access critical information while outsourcing, without any additional costs. With over 20,000 satisfied users, IP Alert remains the original and top choice for Amazon sellers to protect their businesses and avoid avoidable intellectual property disputes.  Read my review here.

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That’s all for this week! Keep thriving in your Amazon journey.

Happy Selling!

Todd Welch
Amazon Seller School