Amazon Marketing Tips

Lost Buy Box Strategies for Amazon Vendors

1. Amazon Vendors and the Buy Box

Imagine a sales agent that is working for Amazon customers. He sorts through all sellers of a particular product and recommends the best one. If he recommends you, you are making 90% of the sales of that product. If he recommends one of your competitors, you are losing out big time.

That is what the Amazon Buy Box does. With the help of an algorithm, Amazon scans all offers available for a specific product and displays the most favorable one in the Buy Box. In general, there are three criteria based on which Amazon picks the winner:

  1. Selection: Your product is available to ship to the customer straight away.
  2. Value: You offer the best price for the product.
  3. Convenience: You offer Prime advantages.

You can see that the Buy Box is very high maintenance. One consequence of the Buy Box is intense competition between everyone trying to sell their products on Amazon. Since you as a vendor sell directly to Amazon, you’d expect to always win the Buy Box. But that is not always the case.

2. How you (or Amazon) can lose the Buy Box

The two main reasons why you/Amazon might lose the Buy Box are performance issues and hijackers. They are, however, two sides of the same coin: hijackers can only steal your Buy Box if they outperform you in one of the criteria mentioned above.

You are going out of stock or cannot meet Prime shipping requirements

Whoever has inventory is eligible to conquer the Buy Box. If you fail to deliver your products to Amazon in time, your product listing will show ‘out-of-stock’. This means that a 3P seller who CAN ship the products might be able to take over the Buy Box.

If this ‘out-of-stock’ situation persists across all regions you are selling in, Amazon might also start looking into acquiring inventory from other wholesalers. So even IF Amazon wins the Buy Box, the sale might not be yours.

Someone is undercutting your price

Whoever has the lowest price is eligible to conquer the Buy Box. Amazon is a buyer-centric platform. That means they want to provide the best possible buying experience, of which affordability is a big part. If a 3P seller is offering your product at a lower price they might be able to steal the Buy Box from you.

Amazon’s commitment to offering a competitive price means that they are matching rates not just from sellers within the platform, but from all online retailers and E-commerce websites. The limit to the price matching is when the product becomes unprofitable for Amazon to sell. If someone can undercut Amazon’s price to this extent it either means that they are participating in predatory pricing or that they got a better wholesale price somewhere else.

And there is a very uncomfortable consequence you will have to bear if this happens for an extended period of time. Amazon puts any item that isn’t performing, i.e. proves unprofitable, on the CRaP list which could mean that they are not ordering any units in the future. There is a two-way relationship between CRaP and the Buy Box. Consistent LBB puts your product on the CRaP list, and ending up on this list is itself an easy way to losing the Buy Box.

A counterfeit is hijacking your product listing

Counterfeit products and unauthorized sellers not only steal your sales, but they also hurt your brand image. This is why some big brands such as Birkenstock have pulled the plug and even stopped selling on Amazon altogether. Sellers of inferior fake products can often drastically reduce the price of their offer so that Amazon cannot compete anymore. The result? LBB.

3. How to not lose the Buy Box

Now that we know how you can lose the Buy Box, let’s talk about what you can do to avoid it. Keep in mind that the following actions are preventative. You should implement them early on to reduce the risk of LBB.

Cut the CRaP

CRaP (Can’t realize any profit) products are unprofitable for Amazon, which means they open a direct route to LBB. It’s a deadly spiral downward. You can identify at-risk products by the following signs:

  • Amazon stops its own marketing for the product
  • You cannot target the product with an AMS campaign
  • Save&Subscribe is no longer possible
  • Amazon doesn’t re-order that product from you (watch out for replenishment code OS or OB)

CRaP products usually tick at least one of these boxes:

  • oversized
  • excessively heavy
  • small profit margin
  • consistently out-of-stock
  • slow sales velocity
  • high minimum order quantities

To fix the CRaP problem, you need to find out which of these boxes your product ticks. You can then decide which of the following actions can effectively solve the problem:

  • re-think your product packaging to get out of the oversized label
  • bundle your products or adjust the number of units to differentiate your Amazon offer and avoid price matching with other E-commerce sites
  • adjust your minimum order value to make it more favorable for Amazon

Proactively manage your inventory and logistics

Product availability is key for Amazon’s buyer-centric approach to E-commerce. That means that running out of stock or slacking in your order management will be detrimental not just for sales, but for your relationship with Amazon.

Effective inventory management, on the other hand, can ensure that you/Amazon is staying in the Buy Box. The three main questions you need to answer are:

  1. How long does it take for your manufacturer to make your product and then ship it?
  2. What is your sales velocity? How often does Amazon send you a PO?
  3. What are Amazon’s packaging and labeling requirements and how are you making sure they are being met?

The answers to these questions are a good start for your inventory forecasting. Develop a timeline so that you know exactly how much inventory is needed when.

A few things to look out for in your planning include:

  • Have contingencies in place: Come up with a Plan B in case your primary logistics strategy isn’t working out. It can always happen that your manufacturer cannot deliver in time or there is a bottleneck in the transportation route. Find alternatives you can activate in case someone in your supply chain cannot deliver on time.
  • Hold some inventory in reserve: Of course, this is not possible for vendors with hundreds or thousands of products in their portfolio. However, you could concentrate on your best sellers that you know to fly off the shelf. If you have your own warehouses you could also redirect inventory from there to an Amazon fulfillment center if times are dire.
  • Plan for seasonal fluctuations: We all have experienced this: one day its easter, and the next day it is a week before Christmas and you haven’t bought a single present. This cannot happen if you want your brand to be successful on Amazon. Plan ahead and be aware of holidays and seasonal fluctuations in your sales velocity. And don’t worry – forecasting and planning get easier once you’ve done this for a few years and can use your data to make better decisions.
  • Plan your promotions and discounts properly: There are two best practices to keep in mind. Running a promotion is great for your sales, but you should stop as soon as you can see that your inventory is running low. The extra sales are not worth the hassle of losing the Buy Box and running out of stock. The second best practice is to limit the number of units a customer can buy as part of a promotion or discount. If unlimited units are available at a lower price an unauthorized reseller might be able to wide your inventory for cheap and then start competing with you for the Buy Box when re-selling it.

Manage your Distribution tightly (if you can)

Effective distribution management means understanding and possibly controlling who buys your product, at what price, and where. Depending on your geographical location you have a few different legal/contractual options.

US: Monitor your distribution with Distribution Agreements

Distribution agreements or reseller policies are legal agreements in the form of contracts that put limits on where, how and for how much your distributors can sell your products. It outlines how you plan to support your resellers and distributors, and what obligations they have to your brand.

In these agreements, you can choose to prevent resellers to offer your products on in general, limit the way they can sell on (e.g. FBM only) or put a pricing policy in place. However, always make sure that your agreement is complying with the Robinson-Patman Act to avoid legal backlash. The main three criteria are:

  1. No adverse effect on the market
  2. Not influenced by a third party
  3. Issued the same for everybody without exception
  4. Unilateral statement (rather than agreement)

An effective structure to monitor and influence your retail prices could look something like this:

lost buy box amazon vendor distribution management

The goals of your retail price maintenance efforts are manifold:
(a) Protect the value of your brand
(b) Track and monitor your distribution to understand who is selling what and where
(c) Control and enforce a price floor as much as possible within the legal grounds

Setting out a MAP or MRP is popular with many vendors, but keep in mind that they are not actually legally enforceable.

Amazon also doesn’t get involved in MAP/MRP enforcement. They accept that you impose price policies on your distributors, but since this is not an intellectual property issue, Amazon will not enforce minimum prices, listing ownership or exclusivity agreements.

Your pricing policy should outline:

  • Why such a policy is necessary
  • A price list for all products that indicates the minimum advertised/resale price
  • That authorized resellers are responsible to ensure that their advertised/actual price is always above the price floor
  • The media to which this applies (e.g. third party E-commerce platforms, print media, social media, company website, email etc.)
  • That you as the brand owner and supplier have the right to (a) lower the price floor for certain times and (b) change the price policy with advanced notice
  • What does/does not violate the policy, e.g. free shipping, 0% sales tax etc.
  • The rules around price matching
  • Statement that you are solely responsible for determining whether the policy was violated
  • Consequences of violations (e.g. warning, cancel pending orders, restrict orders, suspend distributor form dealer program)

Please also keep in mind that we are not giving you legal advice. Make sure to check any legal document you are drafting with your lawyer first.

EU: There is not much you can do

While you can set up distribution agreements with your resellers, European antitrust laws prohibit the existence of MAPs or any form of price collusion. As a supplier, you are also not allowed to forbid your resellers to offer your brand’s products on Amazon.

One way to control internet sales is to restrict distributors to territories. That means that your German distributors can advertise on their local and your UK distributors on the local, but they cannot venture into each other’s territories. Only if customers themselves find their way to an international distributor are they allowed to sell cross-border.

The only way to completely control online sales is through a Selective Distribution System. A Selective Distribution System states the criteria and conditions a distributor must meet to carry your product. These minimum standards must be guaranteed throughout the entire supply chain until the product reaches the end-user.

In order to be legitimate, a Selective Distribution System must:

  • be implemented due to the following reasons:
    • maintain a certain brand image
    • foster non-price competition
    • protect retailer investment
  • be required due to the nature of the good (e.g. special technical expertise is necessary, suitability of premises for sale)
  • be based on quality-specific, non-discriminatory selection criteria

Example products for which suppliers successfully set up Selective Distribution Systems include complex electronic gadgets and luxury goods such as make-up or watches.

Even a Selective Distribution System cannot ban resellers from online distribution or set prices. The options you have to include:

  • asking that distributors have at least one brick-and-mortar store. This way you can prevent online-only sales
  • setting a minimum level of criteria for websites and presenting products on third-party platforms

If your product and/or Selective Distribution System does not meet these requirements you have very little options to control the sale of your brand’s products online. The only way left is to refuse to supply a distributor with additional inventory. However, if the retailer can prove that your action is aimed at enforcing a minimum price or at controlling the market, he will have grounds to take legal actions against you.

Include serialization on your product for tracking

If you do not want to, or cannot, make use of distribution agreements, one way to gain more control of your supply chain is to introduce a serial number system for each of your products. Differentiating serial numbers according to channels then might help you find out which authorized seller is either selling below your minimum price or from which distributors an authorized seller is buying inventory from.

For EU vendors, this strategy merely helps to identify holes in your supply chain where resellers might be able to extract your products at a low price. In the US, serializing products is a lot more effective as you can follow up with enforcing your MAP/MRP policy once you have identified the leak.

Join Amazon’s Transparency Program (US only, FBA only)

The Transparency Program is Amazon’s attempt at serialization. It is their goal to identify counterfeit products before they reach the customer.

As a brand, you can order unique barcodes (26-digit Amazon Identified) from Amazon and place them on the outside packing of all sales units – no matter if you want to sell it on Amazon or through a different channel. The cost per barcode is between $0.01-$0.05.

Products that arrive at the Fulfillment Centre and do not carry such a barcode, even though claim to be affiliated with your brand, will be identified as counterfeits by Amazon and the seller will be investigated.

For customers, the Transparency program offers a way to receive more information on production processes and the journey of a product by scanning the barcode in the Amazon App.

4. What you can do after losing the Buy Box

This is all very useful — BEFORE you lose the Buy Box. But what can you do once Amazon is not making the sale anymore?

We reached out to our network of experts to hear about their experiences. The insights we received from our contact at Nozani, a managed services provider, and from Markus Wiese, a vendor E-commerce manager, have contributed to our strategies laid out below.

First things first. You first need to be aware that you/Amazon is losing the Buy Box. Regular monitoring of your listing and LBB is therefore essential in protecting your brand and thereby sales.

Unfortunately, there is no quick fix to the LBB problem. But before jumping into specific actions, let’s agree on what not to do:

Do Not Lower your selling price to Amazon

This might be the first idea that pops up in your panicking mind. Lower the price you sell your inventory to Amazon so that they can lower the selling price and win back the Buy Box. This is a bad idea for two reasons:

  1. The reduced price will be applied to ALL your inventory, including the units Amazon is already storing in their fulfillment centers. That means that you will have to pay the price difference for all existing units, leading to potentially massive losses.
  2. Price negotiations with Amazon are tough. Going back to the original (higher) price after the Buy Box scare is over will be close to impossible.

Now that we’ve agreed on this, let’s see how you can get the Buy Box back without sacrificing more than is necessary.

Short-term: Get the sale back

Run a time-limited promotion

If selling your product and thereby winning the Buy Box is of paramount importance to you (e.g. you need to clear out stock), there is one way you effectively lower the price without having to re-negotiate overall selling prices with Amazon. You can run a promotion to change the price of your product for a short amount of time. Temporarily discounting your product means that the price is more competitive and the likelihood of winning the Buy Box increases substantially.

This strategy includes a trade-off: you are reducing the price to make more sales, immediately. You should first look at the numbers if winning the Buy Box and making the sale justifies the lower margin.

Switch to a hybrid seller-vendor model

This is a feasible solution for both LBB and CRaP. If a product is underperforming when sold by Amazon, chances are high that you can still get a good deal selling it as a Seller yourself. It also helps you retain a broader product portfolio and brand visibility on Amazon, even when the margins are too low for Amazon. Overall, having an additional seller account helps you push sales, influence the price of your product, and retain sales when you go out of stock on your vendor account.

Medium-term: Find the leak in your supply chain

To decide on your course of action and plan your next steps, you need to first understand who the Buy Box competition is. Depending on the type of competition, you have to implement a different strategy:

Try to discipline authorized sellers undercutting your prices

If one of your authorized sellers in winning the Buy Box for your Amazon listing you can do the following:

  • give them a warning that they are violating your MAP policy and if necessary take action as laid out in your distribution agreement
  • rethink your wholesale price. Increasing the price to make it financially untenable for resellers to distribute your products via Amazon can get you the Buy Box back. However, this action must not violate antitrust laws.

Take action against counterfeits and unauthorized sellers

A counterfeit means that someone is selling a fake version of your product on Amazon. An unauthorized seller is someone who has not entered an agreement with you but is selling your brand’s products.

You can first try an easy (but unfortunately not always effective) scare tactic: send the hijacker a ‘Cease and Desist’ message directly through the Amazon system and threaten them with legal action. If this doesn’t work, you need to find out more information about the crook.

To identify if it is a counterfeit or an unauthorized seller who is stealing your Buy Box you should do a test buy. If the product is marked with a serial number, you can track it back to your supply chain and see where the unauthorized products are coming from. In case of an authorized seller distributing products at below MAP, you can make use of your distribution agreement and send out a warning. Once a distributor repeatedly violates your agreement, you will have to take action and stop supplying your products if necessary.

If the product turns out to be a counterfeit, you need to start building a body of evidence to file a complaint to Amazon. Important information you need to collect are:

  • the ASIN/ISBN of your product listing affected by the counterfeit
  • the store name or business name of the fake reseller
  • the order ID of your test buy
  • an explanation of the violation including photographic evidence that clearly shows the difference between the counterfeit and your brand’s product

Long-term: Resolve logistical bottlenecks

Processes such as inventory management might take some time and experience to set-up and continuously optimize. As we said before, the most important part is understanding your lead times and figuring out how to make sure that there is always enough (but not too much) inventory available in Amazon’s warehouses. Resolving these logistical bottlenecks in the long term helps you make the same mistake twice and avoid being out of stock in the future.

You can use this checklist to identify potential logistical bottlenecks along your supply chain

  • The manufacturer of your product did not meet the deadline. For example, many manufacturers shut down for Chinese New Years, which means you are running risks of getting low on stock if you don’t prepare.
  • Something went wrong in customs and your shipment got stuck. It is often the case that your products are made in a different country to where you are selling them. International shipping can be tricky, so make sure that (a) you find a trusted transportation company that takes good care of your products along the way and (b) your paperwork is on point.
  • Communication is off between your back-end and front-end team. The person managing your E-commerce/Amazon business is often not the same person that is eventually sending off the product pallets to the Amazon warehouse. In order to meet Amazon’s strict deadlines, you must make sure that your team works like clockwork and communication is clear.
  • Your forecasting didn’t play out. Especially if you have no reference data, it is difficult to make accurate predictions about the demand for your product. But there are a few rules-of-thumb you can use to be prepared: use internal sales plans, your own cash flow and common sense to develop a sound forecasting system. Amazon Vendor Central is also of help, as the software provides you with a rough overview of how demand in your category is likely to evolve. Once you have collected a sufficient amount of data, make sure to learn from it, identify possible bottlenecks, and resolve them in the future.
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