E-Commerce is an ever-growing avenue for the sale of durable consumer goods.  In fact, the U.S. Department of Commerce reports that E-Commerce sales, as a percentage of overall retails sales in the United States, has risen steadily in each quarter for the last three years.  In Q4 2013, E-Commerce generated $69.4 billion in sales, which accounted for 6.1% of overall retail sales in the United States.  In Q3 2016 (the most recent quarter for which data has been released), E-Commerce generated $101.3 billion in sales, which accounted for 8.4% of the overall retail marketplace.  By 2020, the U.S. Census Bureau predicts online sales will exceed $600 billion annually.

Of all the online retail hubs, Amazon is the largest and most well-known.  Wall Street analysts estimate that Amazon sales account for some 40% of the E-Commerce market — and its sales continue to grow year after year.  Online retail industry watchers report that in Q2 2016, Amazon sales totaled $27.52 billion, up 28.8% from the same quarter in 2015.

What many consumers do not know, however, is that Amazon is the actual seller of a relatively small percentage of the products offered via its website.  Studies suggest that third-party sellers, (many of which are unauthorized) account for at least 83% of Amazon sales across all product categories.  In some categories, such as patio and lawn furniture, third-party sellers make up over 90% of Amazon sales.

The third-party seller phenomenon is not itself a problem.  In fact, conducting sales via online platforms like Amazon is a low-risk, low-overhead way for many new retailers to start generating sales.  A big problem arises, however, when unauthorized sellers flood the marketplace.

The Unauthorized Seller Problem

Unauthorized sellers come in many forms.  Some are innocent, one-off sellers, such as the teenager who purchases a new pair of shoes online, finds that they do not fit and offers them for sale in brand-new condition on eBay.  Generally speaking, these types of sellers are not a cause for concern.

Problem sellers are those who disrupt the market place by virtue of their purchase and resale tactics.  In extreme cases, unauthorized sellers purchase products with stolen credit cards with the express intent of reselling them online at 100% profit.  Others obtain goods via the grey market (i.e., products are purchased in a foreign country where prices on that product are significantly lower than in the U.S.).  The products are then shipped back into the United States and sold for a profit.  In other cases, unauthorized sellers purchase large quantities of products from authorized distributors (negotiating lower prices in exchange for quantity) and then resell them in online marketplaces.

Regardless of how the products are obtained, they are usually resold in online markets at prices below the manufacturer’s Minimum Advertised Price (“MAP”).  This has several negative impacts on the manufacturer.  First, it puts the manufacturer’s relationships with authorized distributors and resellers at jeopardy.  While those honest sellers are generally bound by the manufacturer’s MAP policies, they are forced to compete with illicit retailers who do not concern themselves with MAP.  This drives sales away from law-abiding sellers and, predictably, hurts their bottom line.

Additionally, unauthorized sellers rarely honor the warranties, money back guarantees or customer service standards intended by the manufacturer.  Thus, consumers who purchase products from unauthorized sellers can be left with a negative impression of the manufacturer’s brand.

Unauthorized Sellers Can Be Hard to Stop

As noted above, online sales of durable consumer goods is a profitable enterprise.  Thus, unauthorized sellers have great incentive to hide from manufacturers and authorities.  Meanwhile, online marketplaces get a cut of each sale made on their platform regardless of a seller’s status as unauthorized, and thus have very little incentive to disrupt illicit sales.

That said, most online sales sites do offer in-platform methods allowing manufacturers to notify illicit sellers that they must cease and desist from making unauthorized sales (often called “E-C&D Notices”).  These e-notices are often of little concern to problem sellers, however.  In fact, many notices either go ignored or the offending business brazenly reorganizes with a new business name and continues making sales as before.  Dishonest sellers may also simply change platforms for a time before returning to major outlets like Amazon.  Nonetheless, the initial E-C&D Notice is an important first step in a graduated, consistent enforcement strategy aimed at stopped unauthorized sellers in their tracks.

Determining the Size of Your Company’s Problem

Before deciding how your business is going to combat unauthorized sellers, you first need to understand the quantity of goods being sold via unauthorized channels.  Luckily, quantification is the easy part.  Many tools currently exist for tracking illicit sales.

For example, MAP Monitoring Services will alert your business any time your products are being sold below MAP on the internet.  There are also helpful tools for monitoring product SKUs and the volume of sales for any given SKU at any particular time.  Manufacturers can monitor online sales by seller type; for example, whether a seller is professional (i.e., a business) or private (i.e., an individual).  Tracking this data for even a short period of time will provide a valuable snapshot of your company’s overall problem.

Tackling the Problem

As explained above, in-platform e-C&D Notices are an important first step in stopping unauthorized sellers.  Even if they do heed this initial warning, down the road they will likely either change business names, move platforms for a short time, or both.  In other words, unauthorized sales are unlikely to cease for good, and your MAP Monitoring tools will reflect as much.  Monitoring MAP violations, while useful, is very different from MAP Enforcement.

An E-Enforcement team will take your business to the next level.  E-Enforcement teams have the expertise and proprietary know-how to identify the people behind the sham businesses.  They have databases that track these crooks by their business names, selling techniques, open source information, breadcrumbs and modus operandi.  Their databases are replete with names, last known addresses, sales volume histories, favored products, selling tactics, platforms and the methodologies they use to obfuscate their identities.  Additionally, E-Enforcement companies have access to law enforcement databases that are simply not available to other professionals who operate in this space – MAP Monitoring Services, tech companies and law firms among them.

More Importantly, a professional E-Enforcement Team knows how to escalate pressure on the seller utilizing a variety of other enforcement tools. Those tools include: (1) the initial E-C&D Notice; (2) Notices of Non-Compliance; and (3) tracking of the sellers’ every move online.  These actions send a clear message that the gig is up with respect to the brand they are selling unlawfully. If the seller still is in non-compliance, E-Enforcers, in conjunction with your company’s legal team, will simply file a lawsuit against the individuals and notify them of the Case Number.  This typically puts an end to a company’s unauthorized seller conundrum.  The key to this level of enforcement is having the expertise, knowledge and access to proprietary tools that let’s your E-Enforcement team root out illicit sellers personally and graduate the pressure on them to stop.

As E-Commerce continues to grow, the unauthorized seller problem will follow suit.  If your business has already been hit by rogue sellers, the time is now to hire the right E-Enforcement team to nip the problem in the bud.

For more information, contact E-Enforce enforcement team at sales@e-enforce.com, or call us at (800) 892-0450. You can follow us at e-enforceCIS@twitter.com, Ecommerce Enforcement Group On Linkedin and E-Enforce.com.

Sources

http://www.slideshare.net/BrunoSanlaville1/the-everything-shipper-amazon-and-the-new-age-of-delivery-by-bi-intelligence

http://www.onlinesellerenforcement.com/2016/07/1179-sources-of-unauthorized-online-sales-five-most-common-types-of-unauthorized-sellers-on-ebay-amazon-other-third-party-websites/

https://www.internetretailer.com/2016/10/05/amazon-drives-80-web-growth-publicly-traded-retailers

http://www2.census.gov/retail/releases/historical/ecomm/16q3.pdf

http://www2.census.gov/retail/releases/historical/ecomm/14q4.pdf