Amazon’s private labels aren’t hurting most sellers (AMZN)

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The possibility that Amazon will use its private labels to compete with its third-party sellers is a serious concern for merchants on its marketplace: 44% said they feared competition with the e-tailer, making it the most-cited issue, according to a study by Feedvisor.

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However, when those sellers were asked if they’re currently negatively affected by Amazon’s private-label brands, a solid majority (68%) said no while only 14% said yes (18% said they were unsure).

Here’s what it means: For most merchants, the benefits of selling on Amazon will far outweigh the possibility of competition from the e-commerce giant’s private labels.

Amazon accounts for more than half of total e-commerce revenue for the majority of sellers. A resounding 64% of merchants surveyed said that they derive 60% or more of their total e-commerce revenue from Amazon. Marketplaces that compete with Amazon came nowhere near these numbers: Just 3% of sellers said the same about eBay and only 2% for Walmart. The enormous role the e-tailer plays in these sellers’ online revenue is probably the main reason why Amazon is highly unlikely to face any serious seller flight in the near future.
Revenue and profits are on the rise for third-party sellers. Sixty-three percent of merchants said they saw their revenue on Amazon grow at least 20% over the last year, and 42% said they saw profits increase at least 20% as well. As long as there’s an opportunity for growth on Amazon, third-party sellers will be hesitant to pull their products from the marketplace, even if they fear competition from the e-tailer in the long run.

The bigger picture: Amazon’s in a position of security regarding its sellers right now, but there are some looming issues that could jeopardize this standing.

Its ongoing issues with counterfeiting could frustrate sellers. Amazon added a line to its annual report earlier this year warning that it may not be able to prevent sellers in its stores from "selling unlawful, counterfeit, pirated, or stolen goods." This is a serious problem, as counterfeits can cause sellers to worry about whether bad actors will sell copies of their goods at lower prices. However, Amazon’s been taking action, even launching a program dubbed "Project Zero" that lets brand owners delete listings they identify as counterfeits. While Amazon may be unable to completely halt counterfeiting activities, initiatives like Project Zero can at least make progress on the problem and help sellers feel that the e-tailer is looking out for them.
Third-party sellers could become alienated by some of Amazon’s policies. Amazon has several policies that merchants working with it can find frustrating, such as shutting down a seller’s account if more than 1% of its orders result in customers filing a claim or giving corporate customers 30 days to pay bills. The e-tailer should work to stay open about these policies and take seller feedback into account to keep its third-party merchants from getting frustrated and seeking more seller-friendly marketplaces.

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