As Amazon’s pricing policy is probed, it is testing a new control program for select third-party products that would offer sellers a minimum profit in exchange for allowing Amazon to cut prices at will, CNBC reported on Thursday (Aug. 8).
Sellers who sign up for “Sold by Amazon” (SBA) will trade pricing control for a guaranteed minimum payment called Minimum Gross Proceed (MGP).
“Sellers choose which products to enroll in SBA, and once enrolled, these products are priced by Amazon,” the company wrote in an invitation to sellers seen by CNBC. “To ensure peace of mind, for each SBA product, Amazon will provide a Minimum Gross Proceed (MGP) amount to protect your margins.”
The SBA program is designed to “save time and increase sales by automating prices so they can consistently and effortlessly offer customers great prices,” an Amazon representative told CNBC. It’s also meant to provide sellers with “peace of mind that they will never receive less than the agreed-upon amount for that product.”
The new program comes as Amazon’s pricing policy is being looked at for possible antitrust concerns. Although it got rid of questionable pricing clauses, its policies are still drawing scrutiny.
Marketplace consultants who spoke to CNBC said the program is promising, but more questions still need to be answered.
“Sellers are giving up full control over pricing, and Amazon is lessening their anti-competitive liabilities,” Blair Anderson, managing director of Anderson & Associates, a firm that helps merchants sell on Amazon, told CNBC.
The final price will be determined by Amazon’s pricing engine. There is no cost to enroll in the program, but the seller has to be the brand owner and must be part of Fulfillment by Amazon (FBA), the article said.
In response to antitrust inquiries, Amazon stopped preventing third-party sellers from hawking their products on other websites for a lower price. At the same time that lawmakers are shining a spotlight on some of Amazon’s business practices, the company is dealing with its move to pull out of New York as its second headquarters. Amazon had chosen Long Island City, but due to opposition from local politicians, it pulled its plans.