There are a lot of questions circulating around the clearance listings promoted under the brand “Amazon Warehouse Deals” (AWD). While many vendors, sellers, and brands selling on Amazon have only recently started paying attention to AWD, it’s becoming more and more apparent that this entity is making a big impact on other brands selling in the Amazon marketplace.
A simple Google search will reveal that there is still some confusion about what AWD actually is – both from brands AND customers looking for discounts.
Are they an extension of the Amazon entity? Or simply a large, external third-party seller?
And most importantly – what does this mean for your brand competing in the same market?
While both customers and brands are still figuring out exactly how AWD works, Amazon is fairly transparent about the entity, expressing straight on their website that Amazon Warehouse Deals is a part of the Amazon.com group.
Amazon created AWD to sell used, opened, returned, warehouse-damaged, or refurbished products that do not fit their standards as “new,” but are still in good condition. While they operate in a similar manner to other third-party sellers, they do so with the added advantage of tapping into Amazon’s extensive resources since they’re an extension of the main brand.
Image source: amazon.com
It’s important to understand how AWD works since these clearance deals are frequently winning the Buy Box, and clearly this has a big impact on brands who are losing sales from returns or disposed items. We’ll dig deeper into how AWD swipes the Buy Box consistently, but first let’s take a closer look at how AWD works.
How does AWD work?
While there are many ways a product can end up as an AWD offer, most items are taken from sellers, vendors, and brands who relinquish possession of the unit. Amazon then inspects the quality of the item and relists it on AWD at a discount.
For example, if a customer returns an item and the seller tells Amazon to dispose of it, then Amazon will often inspect the product for damage, assign it a level of quality based on its condition, and relist it at a deep discount on Amazon Warehouse Deals.
In other cases, Amazon takes possession of the product after the brand is reimbursed for either a warehouse-damaged item that is still in good condition, or an item that was “lost” then refound at a later time.
Image source: amazon.com
These listings are rated according to the condition of the item from Acceptable, to Good, Very Good, and Like New (a.k.a. “Open Box” items).
Customers love the idea of AWD because they can purchase products at heavily discounted prices, and still receive the benefits of Amazon’s standard customer service, fulfillment process, and guaranteed return policy.
Although we’re seeing that this rating system does cause some confusion when customers purchase a “like new” item not realizing that what they’re purchasing isn’t actually brand new.
But what does this mean for brands competing in the same market?
How can AWD impact my brand and business?
Brands have reported seeing their exclusive products listed on AWD without granting permission to any third-party sellers. Many business owners have expressed concern over this issue since they’re essentially competing for the Buy Box on their OWN products.
At first glance, this may look like a simple issue of an unauthorized seller, but how do these offers get listed in the first place?
As established brands know, when an order is unable to be fulfilled and Amazon is at fault, such as in the case of lost items or damaged packaging in the warehouse, then Amazon offers to reimburse the brand for the order.
When Amazon reimburses you, they pay you the amount that they believe you would receive if a customer had purchased the item for you. The company uses several factors to determine this amount, including the average selling price, your sales history, and the sales history of the particular ASIN in question. If they can’t collate enough information to determine the value of the item, then they offer a default reimbursement amount based on the category or similar items.
When an order is deemed unfulfillable and reimbursed, the default setting in Seller Central is to allow Amazon to repackage the product. These units are first inspected by Amazon to make sure they’re in good working order, and then listed again for sale at a large discount.
This is how AWD gets the bulk of their inventory.
On the surface level it would seem that this is beneficial for brands since they make a profit regardless of whether or not the unit was actually sold to a customer – and at the same time – avoid dealing with the hassle of returns.
At the very least, brands are reimbursed for the item. So even though Amazon is making a profit, the brand does as well.
The challenge is that brands then lose control of the customer experience when the item is sold through AWD.
Customers may not understand that they are purchasing an item that is not brand new or has been previously opened. And as any established brand knows, it’s common for buyers to take the “complain now, ask questions later” perspective. This often results in bad reviews for the item due to unmet expectations.
An additional concern related to the customer experience is that Amazon’s quality control system isn’t always 100% accurate. So if Amazon repackages a product and rates the working condition of a product as “like new,” customers may get frustrated at the disparity between a product that is actually opened or used.
Often this causes customers to return the product again, and leave a low-star review. Which, of course, ends up hurting the original brand in the long run.
We’ve also seen AWD offers impact the pricing of the Amazon offer for the product – further reducing a brand’s control over the product.
The most frustrating part is – when Amazon Warehouse Deals lists your item as a special offer – it generally wins the Buy Box. The Amazon algorithm consistently recognizes AWD as the dominant seller just like it does for the main Amazon brand.
Not only does this take business away from your brand, but also means your products aren’t eligible for advertising either. Since only products that own the Buy Box are eligible for PPC, your ads will become inactive in the advertising section of your account, and will only become active again after you win back the Buy Box.
So the real challenge is – how do you fight this extension of Amazon in their own market and win back the Buy Box for your own products?
Competing in a market with Amazon Warehouse Deals
AWD is an entity that sellers and vendors are only just starting to pay attention to. While it flew under the radar until very recently, the entity is quickly gaining attention since it frequently trumps all other brands when it comes to securing the Buy Box for a particular product.
Everyone knows that Buy Box ownership can greatly impact performance of sales, and the biggest misconception that brands have had in the past is that AWD wouldn’t win the Buy Box because they’re selling used or re-packaged items.
We now know that this isn’t the case, and that since AWD is an extension of Amazon.com itself, they take priority to win the Buy Box. We’ve even seen cases where a brand’s sales on a particular product have completely stopped because AWD appeared perpetually on that listing.
For example, when working with one of our clients on the Vendor Central platform, we saw the sales of a popular product dramatically drop because Amazon awarded the Buy Box to the same product listed as “used” on AWD.
Not only that, but we were unable to advertise that product due to Amazon’s PPC rules regarding the Buy Box. So even though the vendor had a large advertising budget, they were unable to invest in advertising for their own product.
What can brands do to combat this unfair advantage?
If nothing else, brands can suggest changes to AWD offers on their products if they see inaccurate information listed. For example, if the product dimensions are listed incorrectly, then requesting changes to these details could help avoid dissatisfied customers. You can find this option under the “Product Information” section of any AWD listing as shown in the screenshot below:
Image source: amazon.com
More drastically, you can prevent Amazon from taking possession of any item in the first place by removing the option for them to repackage these relinquished items and restock them for sale.
In Seller Central, the default setting for returns is to allow repackaging of your products by Amazon. The first step we encourage our clients to take if they do not want their products to end up on AWD is to opt out of this default setting so that Amazon isn’t allowed to repackage unfulfilled items.
You can choose the option to have unfulfilled orders or warehouse-damaged units returned directly to you by Amazon instead of getting reimbursed for them.
This isn’t a perfect solution since it means you would wear the cost of the return, but you have a lower risk losing the Buy Box and gain more control over the customer experience. After weighing the cost of return shipping versus the potential lost revenue and brand control, you could also choose to liquidate these items at your discretion on another marketplace such as eBay or liquidation.com
Of course, it’s important to weigh all the factors involved before deciding which strategy works best for your brand. The best approach is to first determine how significantly AWD is impacting the sales of your products.
For example, if the AWD clearance offer appears on listings for an extended period of time, that means your Buy Box percentage is consistently low on that ASIN. This situation can lead to an inability to run PPC advertising, poor Buy Box metrics for Vendors, and of course, a negative impact on your sales.
In these situations where AWD becomes a persistent issue, the strategy mentioned above is well worth considering to avoid losing out on a significant amount of sales. But if AWD isn’t on the listing for long, then your chance of winning back the Buy Box is much greater.
In our experience, it’s better to disable AWD for your account if you’re concerned about your brand’s reputation or losing the Buy Box. While it may cost a bit more, avoiding the potential downside is well worth it.
As you can see, it’s clear that AWD has changed the way many brands consider automatic removal of unfillable units when planning their inventory management. Regardless of how you choose to approach unfulfilled orders, it’s important to be aware of the effect AWD has on the Buy Box for your brand, your sales, and your customers’ expectations so that you can plan accordingly for the future.
