|Amazon’s decision to raise its rates on Prime membership affects so many Americans (est. 20-25 million); people were talking about it all around me during lunch today. The folks at my table agreed that it wouldn’t affect us – we’ll still be Prime members – but there’s a bit more to the story than that. Amazon is being sued because some customers claim that the free shipping isn’t free (read the ABC story here). They are claiming fraudulent pricing practices and that Amazon is encouraging third-party vendors to increase their prices to Prime members by the amount they charged others for shipping. I know my fellow FBA sellers are silently chewing on the irony here. So what’s going on with all the Prime Brouhaha and how does it affect us as FBA Sellers?First of all, the new price of Prime. This is a tempest in a teacup and we can ignore it. While it is quite likely that some current Prime members won’t renew and numbers may drop instead of the sharp upward trajectory we’ve seen in the past few years, the fact is I made money selling on Amazon three years ago when the number of Prime members were a LOT smaller than today and I’ll continue to do so.|
The people who continue their Prime like my friends at the table (and me!) are rabid fans of Prime. Twenty dollars more a year is nothing. Many of us pay more in annual fees for our AMEX cards than for Amazon Prime. The typical Prime member today (who most likely signed up when they bought a Kindle Fire) buys 10 or fewer items a year. These guys will most likely drop off unless they are also big consumers of the free streaming video and the free Kindle books and games for Prime members.
I can easily place 10 orders on Amazon in an average month with much more during the holidays. I’m the Prime member that buys all your stuff. I’m also the third-party seller that helps Amazon offer Prime on over 20 million items (up from 1 million when the program was introduced). While we won’t really know until the new prices go into effect, my perspective is that the heavy Prime users will spend even more than they do today. In addition, while Prime memberships may temporarily drop and slow down, Amazon will continue to add incentives to make it a super deal for customers.
Prime is the gateway drug to full-on Amazon addiction and they aren’t going to mess with that. They’ve done their research and concluded they could raise their prices by up to $40 more a year and still continue growing. If it turns out to be Amazon’s “New Coke,” they’ll fix it. So pay no attention to this particular Prime bogeyman. He’s toothless.
Next, the lawsuits about the Prime program. These are worrisome because Prime is that gateway drug and we want the whole world to shop on Amazon, right? However, there isn’t much we can do about it so I suggest: 1) Try not to think about it; 2) Be suspicious of any phone calls where people ask you a lot of questions about the Prime program and; 3) Don’t join the class action suit (it only encourages this kind of behavior and is kind of hypocritical if you are an FBA seller…).
Amazon has not answered any of the claims yet so right now it is mostly saber-rattling on the part of the plaintiffs. Lawsuits are filed all the time against huge wealthy corporations in the hopes of a settlement of some kind. As FBA sellers, we know the claims are incorrect. Amazon’s policy on price-fixing is quite clear and enforced. At one time or another I’ve read just about every word on SellerCentral and not once does Amazon give advice on pricing beyond providing its FBA calculator so you can decide for yourself whether to use FBA or merchant fulfilled.
Amazon does not directly encourage us to raise our prices to include the shipping costs charged by merchant-fulfilled sellers. We do that because the opposite is true. The extra dollars are going into our capitalist pockets. And yet the lawsuit claims “Amazon advised FBA Vendors to include the amount they would have charged for shipping in their item prices in order to maximize total revenue and profit margins. Amazon disguised this price increase by giving priority to FBA Vendors, showing their items first in the results of a Prime Member’s product search.” [Emphasis is mine]. If this can be proved, then we can all wring our hands and be upset because Amazon’s reputation is so important to our business model. The reality is we all tell ourselves about this strategy because it makes us more money. Check back in to the issue in a year or two. These cases never move fast.
Oh, and to answer some questions I got this week. No, don’t change your prices because of this news. You’ve done nothing wrong. If the day ever comes that third-party sellers are required to price a certain way, Amazon will tell us….but it won’t happen.
This will certainly not be the last time that Amazon draws fire for something or other. Traditional brick and mortar and other online retailers are furious/jealous of Amazon’s success with the Prime program. They see the writing on the wall and they don’t like it. Attempts to discredit Amazon.com will be ongoing as the company continues to grow. Many of us remember the brouhaha about the Amazon warehouse workers. Some people quit selling on Amazon because of it. Obviously, I was not one of them.
Every business with which I’ve been involved over the past 20+ years has had some hiccups. I’ve never represented the perfect corporation. My job was reputation management so I’m perhaps more jaded than most. However, I have learned that there are at least two sides to every story and usually four or five. A lot of the stuff you see in the news was made up by someone like me and the agenda is pretty obvious once you know that. A fire or cute rescue dog will beat out a complicated business story any day of the week. When you see a story heating up online and on the news, remember that their job is entertainment and attracting followers. Everything else is far down the list.
As an FBA seller, your best bet for success is to keep your head down and work. Avoid the noise. Don’t get sucked in and sidetracked. If a particular activity isn’t pushing you towards your financial goals, eliminate it or push it down the priority list.
Take it from a recovering workaholic. You are worth your full attention. Your family is worth it. Your work is important. Your life is important. All this other stuff is noise and distraction.
When another Amazon storm whirls in, compare the importance of the issue to your FBA business and financial goals. Most likely, there won’t be a correlation. When Amazon informs you that you need to do something new or different, then it’s important.
Happy Selling Y’all!