Man checking a mac laptop in a hardware store

Retail is already a hyper-competitive field, but the holidays tend to ratchet up the competition to a frenzy. Sellers hear stories about sellouts, so they increase their stock, and then they have to sell that stock more aggressively… which leads to sellouts. And the pattern continues.

This phenomenon is an example of a positive feedback loop, and the pressure to sell more during the holidays at any cost can have unintended consequences. As sellers intensity their seasonal promotional efforts, sales strategies range from the ingenious to the harebrained. In the latter case, a retailer can hurt its long-term relationships with partners and customers.

It turns out that not even Amazon is immune from Holiday Discount Disorder. As you may have read, the e-commerce giant is implementing a new price strategy to compete with other large markets this holiday season: Amazon is offering discounts on third-party listings to buyers and making up the difference itself by paying the seller the remainder. For example, if you list a pair of gloves for $10 on Amazon, the platform may actually sell the product to a buyer at 10% off (for $9), and then pay you the remaining dollar out of pocket.

According to the Wall Street Journal:

“[D]iscounts appeared to be less than 10% and applied to items from sellers using Amazon’s in-house fulfillment option. The special offer frequently disappeared within days. It’s unclear how Amazon selects which prices to lower. Sellers said they weren’t notified of the change.”

Why Using “Discount Provided by Amazon” May Be Risky for Sellers
The discounts customers are seeing could devalue brands’ products. Some sellers have agreements with manufacturers to use minimum advertised prices (MAP), and Amazon’s decision to undercut those prices could damage the company’s relationship with big brands such as The North Face and Nike—not to mention its relationships with smaller sellers.

Which Sellers Are Affected?
Anyone who sells on Amazon may be affected. Amazon representatives say the company will pick and choose which sellers to add the discount to, but as of this writing, there’s no information available about algorithm they’re using to select sellers.

What Can Sellers Do?
As the WSJ article mentions, sellers have the option to opt out of the “Discount Provided by Amazon” program. Right now, it appears that the only way to do so is contact Seller Support and request to opt out.

Remember: We here at SellerActive will not change your Amazon listing prices without your involvement. Unfortunately, you cannot opt out of “Discount Provided by Amazon” or change the associated prices through SellerActive. We’ll make sure to update this blog post as more information becomes available.