The next time you buy a PopSockets cellphone grip from Amazon, be forewarned: It likely won’t come with a manufacturer’s warranty — because it won’t be coming from PopSockets or one of its authorized sellers.
That’s one of the trickle-down effects of a power move that Amazon recently made against PopSockets and other brands that sell their goods through the largest online store in the U.S. Amazon is taking more control over where and how product manufacturers can hawk their wares on Amazon.
It wasn’t always this way for PopSockets. For several years, the company saw Amazon as an integral part of its business. The startup, which makes popular circular contraptions that can be used as a grip or a stand affixed to cellphones, sold its accessories at wholesale prices to Amazon, which then sold them at retail prices to Amazon.com shoppers.
But over time, the relationship with Amazon felt increasingly one-sided, with Amazon often dressing up requests about lowering prices or spending more on marketing as non-negotiable demands, according to PopSockets CEO David Barnett.
“It often does not feel like human beings over there,” said Barnett, who was careful to lay blame on the structure in which employees on the Amazon retail team are forced to operate, and not on the employees themselves. “It’s like a robot.”
Two months ago, the CEO had had enough: He decided that his company was no longer going to sell its goods directly to Amazon. PopSockets would still sell its gadgets on Amazon, but through a distributor called iServe, one of the largest product resellers on the platform.
Barnett’s thinking was that the arrangement with iServe would provide PopSockets with a partner more amenable to terms that both sides could live with.
But Amazon had other ideas. The e-commerce giant notified Barnett that iServe would be barred from selling PopSockets devices on Amazon, citing a new policy. If that wasn’t bad enough, it also became clear to Barnett that unaffiliated sellers of his merchandise — merchants with whom PopSockets does not have any relationship — would still be allowed to sell on Amazon.
Goods sold by these sellers do not come with a manufacturer’s warranty, nor have they gone through PopSockets’ quality assurance program, the CEO said.
But PopSockets did not flinch.
“We’re lucky [that] we’re not in a position where we can be strong-armed,” Barnett told Recode.
And so in early November, PopSockets’ more than two-year relationship with Amazon came to an end.
“Does Jeff Bezos really know what’s going on here?” Barnett asked rhetorically. “I can’t imagine he believes this is a good idea.”
The PopSockets situation at Amazon, for better or worse, is not a unique one, according to interviews with executives inside consumer brands, agencies that help brands sell their goods on Amazon and industry analysts.
Over the past few months, Amazon has applied intense pressure to consumer brands across different product categories — seizing more control over what, where and how they can sell their goods on the so-called everything store, these people say.
One apparent goal: To take more control over the price of goods on Amazon so the company can better compete with retailers. The power moves are also believed to be a prelude to a new internal system that Amazon has yet to launch called One Vendor. The new initiative will essentially funnel big brands and independent sellers alike through the same back-end system in a supposed effort to improve the uniformity of the shopping experience across Amazon on the public-facing side.
In the lead-up to that launch, this fall Amazon has been notifying brands that sell products in categories ranging from household consumables to fashion accessories that part of their business on Amazon would be shut down — with just 30 days notice.
“Amazon obsesses over the customer experience and your brand has opportunities for improvement that will be possible by transitioning your full business to Vendor Central,” read one email from Amazon to a brand. “As a result, we have made the decision to source your products for sale by Amazon only and your existing Seller Central account will be closed within 30 days of this email.”
Translation: Amazon is telling these brands that they can no longer sell directly to customers as an independent seller on the Amazon platform for third-party merchants known as the Amazon Marketplace. The advantages to selling on the Marketplace include the ability to control the sale price of the goods, run price promotions and get more data about how products are performing and who’s buying them.
Instead, the email is telling brands that they can only sell items to Amazon’s retail group at wholesale cost, and let Amazon act as the seller and determine the retail cost.
This policy is not completely new. For years, Amazon has had a policy that says if a brand sells its goods to retailers outside of Amazon and wants to also sell on Amazon, the company “expects” the brand “to give Amazon Retail the option to source those products at competitive terms for sale as Retail items only.” But it was not consistently followed — until now.
“The policy hasn’t changed but the enforcement is changing,” said Justin Leigh, a former Amazon product manager who for the last 10 years has run Ideoclick, a Seattle-based consultancy for brands that want to sell and advertise on Amazon.
An Amazon spokeswoman said the policy is intended to help reduce customer confusion.
But in addition to increased enforcement, an even bigger deal is a recent addition to the policy.
The new language not only bars some manufacturers and brands from selling their goods on the Amazon Marketplace if Amazon wants to sell the product itself — but also “their agents, licensees, and other representatives selling on their behalf.”
In the case of PopSockets, Barnett attempted to challenge Amazon’s ruling that its distributor iServe could not sell PopSockets goods on the Amazon marketplace. The CEO made the argument that since PopSockets is selling its items wholesale to iServe, and then iServe is setting the retail price, the distributor is acting independently.
Thus, the argument was that iServe should not be grouped within the catch-all of “agents, licensees, and other representatives selling on [PopSockets’] behalf,” as Amazon’s new brand policy states.
But the Amazon employee assigned to PopSockets looked into the situation and came back with the same answer: PopSockets’ relationship with iServe is not allowed.
An Amazon spokeswoman declined to provide Recode with a detailed explanation of why iServe is barred from selling PopSockets goods even though it is acting independently of PopSockets by buying items from the brand at wholesale prices. She said, however, that Amazon’s policy does not apply to resellers, but only to brands and those companies that brands hire to sell products on their behalf.
“Amazon obsesses over our customer experience and we have policies for brands to ensure they are consistently meeting customer expectations,” she said in a statement. “One way we have ensured a great customer experience is by sourcing products directly from brands and selling them to customers in our store ourselves.”
The statement ended by saying brands with questions should contact Amazon. PopSockets already did, but has not gotten answers.
The recent tension marks the latest chapter in what is an often-tumultuous relationship between Amazon and the brands that stock its digital shelves. Last year, Amazon began engaging in a fierce pricing battle with Walmart that put a profit squeeze on some of the biggest consumer-packaged goods makers in the country. Brands also have to face the fact that Amazon is increasingly using the insights from the brands’ sales on Amazon to create Amazon-owned product lines that get prime real estate on product search result pages.
“I think the power dynamic has been flipped,” said Chad Rubin, founder and CEO of the e-commerce software startup Skubana. “If you have eyeballs, you have the power. Many brands don’t have power anymore.”
With what some perceive as another assault on brands, Amazon may be tempting fate.
“I don’t think Amazon understands how close they are to blowing themselves up,” said Eamon Kelly, a senior research analyst who tracks Amazon closely at Edgewater Research, where he is a partner.
Kelly cited brands like Birkenstock that have pulled themselves off the platform in recent years, and said he has had conversations with others that are ready to jump, too, if Amazon’s behavior doesn’t change.
PopSockets’ Barnett agrees.
“I don’t think it’s a sustainable model,” he said. “Maybe for controlling the small players whose business depends on Amazon. But to endure this kind of treatment? There’s a lot of great brands out there who can make that choice to leave.”
What’s worse, according to Barnett and others that do business with Amazon, is that while a brand and related sellers are getting kicked off the Marketplace, Amazon still allows other merchants to sell those brands’ goods, even if they are not directly affiliated with the brand.
“That set of double standards ... it’ll be interesting to see if someone chooses to challenge that in a court of law,” said James Thomson, a former Amazon employee who now runs Buy Box Experts, a consultancy for brands. “It’s no longer an open marketplace then.”
To understand the deeper significance of the policies, it’s helpful to understand how the Amazon retail platform evolved and how it works.
In its early days, Amazon started out by sourcing products at wholesale prices directly from manufacturers or suppliers, and then selling them at retail prices to customers.
But in 2002, the company introduced the Amazon Marketplace, a platform on which other merchants — whether big companies or one-person shops — could sell goods to customers on Amazon. The goal was to dramatically expand the product catalogue available on Amazon while outsourcing the risk of buying inventory. It worked.
To the average Amazon shopper, it’s not always obvious when a product is coming from Amazon or a merchant. And Amazon has worked to make sure it doesn’t really matter; in 2006, Amazon introduced a program for Marketplace merchants called Fulfillment by Amazon that allowed these sellers to pay Amazon to handle the storage, order fulfillment and customer service for the goods they sold on the platform.
The key to the program: It made it possible for FBA goods from Marketplace merchants to carry the Amazon Prime label — just like the items Amazon sources itself — and to be delivered to Prime customers within two days of ordering, for no extra shipping charge.
The numbers speak for themselves. Today, the Amazon Marketplace accounts for 53 percent of all physical items sold on Amazon, up from 41 percent in 2014.
But earlier this year, Amazon made moves to consolidate much of the decision-making for its retail platform under a single leader, Senior Vice President Doug Herrington, who has spent nearly 14 years at the company. Herrington comes from the Amazon Retail side of the business, where Amazon sources products itself and acts as a seller. That, brand leaders and consultants say, has influenced recent moves.
“We’ve been working for some time on standardizing the products, tools and services we offer to the brands and resellers that sell on Amazon, and have made some organizational changes as a result,” Amazon told CNBC in a statement at the time.
Analysts and the heads of brand consultancies say that the increased policy enforcement and new language mark a prelude to the eventual launch of an internal system at Amazon: One Vendor. One Vendor is expected to essentially treat the Amazon retail platform as a single online store rather than one that is separated on the back end into Amazon Retail and the Amazon Marketplace.
“The expectation is that creating one selling platform will create a cleaner customer experience and eliminate a sometimes-confusing layer of pricing/product ambiguity,” Edgewater Research’s Kelly wrote to clients earlier this year. “Our work suggests Amazon will take greater control over what platform — [Amazon Retail or Amazon Marketplace] — products will be sold [on] and will have greater influence on pricing for both channels.”
Amazon is now exerting that influence. It’s up to the brands to determine how to respond.
Update: This story now includes more information on which types of businesses are affected by the new policy.
This article originally appeared on Recode.net.