Amazon is also an agent? Is it a benefit or a pitfall?

Amazon has always had the ambition to dominate all industries related to itself, from logistics to payment, and all the derivative industries of e-commerce must be handled by itself. However, there is one industry that no one expected Amazon to enter by itself, and that is Amazon agency operation.

But Amazon actually created its own SBA (Amazon Selling Program) to operate on behalf of the majority of sellers.

The SBA program was officially opened to third-party sellers a few weeks ago. Recently, some people have asked us about this official operation. Today I will explain to you how SBA works and whether it is worth using.

Official SBA service

To sum it up simply, SBA means that sellers can entrust Amazon to sell their FBA products on their behalf, but the pricing power is not in the hands of the sellers. Amazon will settle with the sellers at the MGP price (minimum gross revenue).

Now I will explain in detail how this system works.

First of all, the eligibility to participate is very down-to-earth now that SBA is officially open to third-party sellers. Any professional seller who has passed Brand Registration 2.0 can participate in the SBA program.

Eligible sellers can find SBA and register in "My Services" in their backend information. Please note that registering for SBA does not mean you are already using it, and Amazon will not automatically register your products. Instead, it is up to you to choose which products to participate in SBA.

After registering for the SBA program, you can manage SBA products in the inventory menu, where you can see eligible products (must be FBA) and the suggested price given by Amazon, which is the MGP price.

Please note that although MGP is nominally a suggested price, in reality the seller does not have much room for negotiation on this price . If you cannot accept this price, there is no way to start SBA.

The MGP price is automatically calculated by Amazon's algorithm based on statistics of product sales, revenue and other information. Amazon cannot modify it manually.

However, MGP refers to minimum revenue, which means that no matter what kind of promotion Amazon conducts and how low the final selling price is, the seller can get this money.

For example, if the MGP of a product is $20, but the daily selling price on Amazon is $21, then the seller’s income is also $21, the same as a normal FBA product (of course, commissions and FBA fees are still deducted).

However, if the product is sold at a lower price of $19, the Amazon seller can still get the minimum gross price (MGP) of the product, which is $20, and Amazon will make up the difference .

In general, if the selling price of a product is higher than the MGP, the seller’s income is the actual selling price. If it is lower than the MGP, the seller’s income is the MGP. Amazon will dynamically adjust the actual selling price of SBA products, so the MGP is a line of defense to protect the seller’s profits.

Do you feel that there is something wrong after reading this? Generally speaking, all the agents on the market will charge a commission, but in the above system, Amazon does not charge a commission at all.

Although SBA will lower the selling price, the seller still keeps all the money earned (after deducting FBA fees and commissions). Yes, Amazon officially stated that the SBA program is currently free and will not charge any additional fees.

Now that we have explained the working principle and methods of SBA, is this plan worth participating in? Let me analyze the advantages and disadvantages for you.

Pros and Cons of the SBA Program

There is a minimum revenue (MGP) guarantee, and there are no additional fees. Not only that, the SBA program is also very convenient to open and cancel, and there is no penalty. At most, the product may be temporarily unsaleable when opening/closing.

There are even many media outlets claiming that Amazon can cover the advertising and flash sale costs of products by participating in SBA. With so many perfect conditions, won’t sellers be scrambling to participate?

I would like to remind you that Amazon will not work for sellers for free! If a service is not charged, it must be making money somewhere else!!

In the case of SBA, sellers must sacrifice unit prices to get more orders, and Amazon earns FBA fees and commissions. Therefore, MGP will never set a high price for sellers. It is definitely above the cost line or even slightly below the cost, so sellers basically make no money.

Well, if Amazon helps me with advertising and flash sales, I can just treat it as a low-price fake order. If you have this idea, you will be fooled by the media that reports it randomly.

You don’t need to do your own advertising and flash sales, but that doesn’t mean Amazon will do it for you. In fact, Amazon’s backend terms and Q&A clearly state that Amazon will not be responsible for product promotion, and sellers cannot promote their own SBA products (whether advertising or flash sales) at this stage .

The product MGP is priced low and cannot participate in the promotion. What is the purpose of Amazon's event? It is easy to understand if we look at the scope of the entire Amazon platform.

1. Adjust the overall pricing range of the platform.

With the MGP price, Amazon can modify product pricing to gain more competitiveness. Sellers participating in SBA will not have complaints because of the compensation, but low selling prices will lower the overall pricing level of the product category.

When one company can no longer resist lowering prices, more and more sellers will adopt similar pricing ranges. Amazon thus achieves its goal of lowering overall pricing. In this way, Amazon can use low prices to gain more orders and market share in the increasingly fierce competition among e-commerce platforms.

2. Test algorithms and markets.

What kind of products are loved by consumers? In which price range is a product most acceptable to consumers? Amazon's algorithm has been studying these questions. The data brought by Amazon's own products is far from enough. Only with more actual data can the algorithm become more accurate.

So SBA was born. It is free and hassle-free. You can cancel it if you want. Amazon only wants to sell your products on your behalf to obtain product pricing power, so as to test consumers' price acceptance curve and further improve Amazon's own algorithm. It even uses dynamic prices to show different prices to different consumers.

Anyway, Amazon has no inventory pressure, and you can earn commissions and FBA fees by placing orders, killing two birds with one stone.

As for whether the sellers can make money or not... you can see that the leeks are growing well this year.

Of course, it would be a good idea to take this opportunity to clear out inventory, but due to official sales, the effect of clearing inventory may be worse than Outletdeal, and the price may be higher.

To sum up, it is definitely a fantasy to expect to make money from SBA . For special needs such as clearing inventory, it is still valuable to use it reasonably by referring to the disadvantages I mentioned above.

Of course, clearing inventory is also a comprehensive operation. In addition to reporting activities, there are many skills and points to pay attention to. I have summarized a stock clearance skills package for everyone. Scan the QR code below to find me to receive it~