Sneaker resale, like all resale, is one of the most misunderstood topics in business analysis. The Grey Market, or the place where retail arbitrage, bots and backdoors, operate to sell products for profit, is just that, grey. Consumers who hate resale and are unwilling to listen to any reasonable explanation for why it exists. Those consumers look at the worst aspect of the grey market and place all grey areas into the same compartment. Those consumers should be excited by the policies being created by Amazon to begin contracting that business… but the cheers shouldn’t be too loud because the grey market is often the location of innovation and expansion from one business to another. The changes to eradicate resale will have unintentional effects on all of small business.
Amazon is a trillion dollar business. Sneakers are a small part of the business. Seller Fulfilled marketplaces once dominated on these platforms. From Amazon’s acquisition of Zappos, to the recruitment of eBay sellers in 2010, Amazon learned the process of engaging the consumer looking for sneakers on the platform. As they’ve learned, the platform has become an early indicator of market trends in the segment. In many ways Amazon is like Nike and Apple. While those two companies are brands and Amazon is a e-retailer, when changes happen on these business platforms, they are eventually adopted by their competitors. As Amazon goes, so goes other e-commerce platforms; which has allowed for the growth of niche, more segmented e-commerce platforms. Amazon, however is implementing changes built to rid itself of what was once the lifeblood of the company, Seller Central Marketplace.
In the article above, I begin a dialogue about Amazon. This morning I got an e-mail further cementing why Amazon is a small business killer. Important point: Take sneakers out of this dialogue and apply it to any category. I use sneakers because that is where my experience lies in e-commerce.
As Direct-to-Consumer by brands and Brand Registry accounts on Amazon have become the norm in business, third-party marketplaces have begun to rely less on small business and sole proprietorship led companies to fulfill orders for the 100 million people ordering on Amazon. Amazon’s policies leave the seller in a position where they have to find every margin available in a transaction. Hence a readily available sneaker at retail has a considerably higher price on Amazon. I explained this in the article :
Sports Shoes On Amazon Are Not Cheap | A Case For Browsing Before Buying
I explained years ago that Amazon has deceived the consumer into thinking their prices are the best. The reality is Amazon has forced the Seller Central Marketplace shops to raise prices to the point where legitimate retail outlets, not in the grey market, are pricing themselves out of the market because browser extension programs are beginning to disrupt sales on the platform, but if you read the post above, you realize, that disruption is currently a blip, and here is where this post gets interesting. A factor in smaller sneaker shops under-performing in sales has been Amazon’s relationships directly with the brands years ago, and later the competition with online browser extension funneling sales to different marketplaces. I hope that’s clear… I need to get back on track.
I explained that Nike, Apple and Amazon are brands that lead changes in the marketplace. The title of this post says that Amazon continues to push sellers to new third party marketplace sites. How are these things tied together? Nike has completed what I call phase 1 of their market takeover. In the process they removed small accounts. This removal of small accounts also included the acquisition of large independent retail chains by larger sneaker retailers. Nike’s Consumer Direct Acceleration will continue to see contraction of locations carrying their brand. I explained this as the Apple Play in my books. Amazon, in a similar fashion, initiated the removal of Vendor Central and pushed Vendors to Seller Central. They also created Brand Registry. Amazon’s push is exactly the same as Nike’s CDA. To explain this requires much more space than a post allows, but here is why what Amazon is doing is pushing small business unable to build their own platforms and why sneaker resale is dying also:
- The push from Vendor Central to Brand Registry requires small brands to get a trademark. When most people think of resale, they fail to understand that all sellers affected by changes in the marketplace. When Amazon forced sellers to get trademarks, this is near too expensive for small businesses working on small margins.
- The push from Brand Registry to Seller Central. Brand Registry was great for brands. It allowed big brands to limit who sold their product on Amazon. Resellers couldn’t simply sell New Balance or ASICS without permission from the brand. Many mom and pop stores were directly affected by this. Yes, it stopped resellers, but it also stopped wholesale accounts who brands had limited from selling old product online.
- Seller Central policy adjustments. Refund on First Scan (which I discussed in the report above), Refund without Return, Return Period Past 60 Days. These are small things for businesses with enough capital. Resellers operate on small margins and wholesale accounts also have this problem. As much as the consumer wants resale dead, the strategies implemented to control who sales, doesn’t simply affect the reseller, once again it shapes small wholesale accounts. Yes, you read that right also… Refund without Return. Amazon is now allowing customers to keep the product and refunding the consumer. This will trickle down to Seller Central just as Refund on First Scan and 60+ Day Returns have.
- This morning I got another e-mail. “As of September 1, 2021, under section 9 of the Business Solutions Agreement, you must obtain and maintain at least $1 million of commercial general, umbrella, or excess liability insurance, within 30 days after exceeding $10,000 in gross sales proceeds in a month on Amazon or if otherwise requested by Amazon.” Now, because I have a business location I’m required to have business insurance. Most sellers don’t have this.
Number 4 will continue to move sellers to sites like StockX or back to eBay or to GOAT. While this sounds like it’s a good thing since resale is dying, it isn’t exactly as straightforward as it seems. It’s a grey area. Diminishing wholesale increases prices. This is what has happened with Nike’s CDA and it is what has happened with Amazon’s strategies. Ask almost any small biz person that has gotten bigger, and they all began in resale, not the bot grabbing version that is crappy, or the backdooring version that causes inflated prices of hyped products, but the resale rooted in arbitrage and small business. Catch all policies intended to remove assholes, has and is hurting small business. A number of the streetwear brands sneakerheads who hate resale love, began is small operations taking on old inventory and reselling it. Big businesses create policy and very rarely is that policy intended to protect the consumer. Policies are almost always intended to crush the small first.
