Is Amazon’s deal with indie brands a Faustian bargain?
Amazon is offering a program to help upstart brands gain more support and visibility on its platform. The cost: Amazon gets the right to purchase the brand at any time for a fixed price, often $10,000.
Under the program, according to a microsite and AMZ Advisers, Amazon offers young brands:
- Onboarding support: Guided support and a free toolset of products to tell the brand’s story and track performance.
- Marketing services: A suite of marketing support from Amazon’s merchandising team, including social media and email marketing. Products with high ratings and reviews can receive additional placements across Amazon.com. Participants receive free Amazon Vine reviews (normally $2,500 per product for Amazon vendors).
- A venue to test and learn: The ability to easily test new products and get quick customer feedback, including access to a Seattle-based co-working space and participation with other brands in special projects such as co-branded pop-up stores.
Participating brands become exclusive to Amazon.
Amazon’s Accelerator program has existed for almost a year and is seen as a way for the e-tail giant to build its stable of exclusive brands. Amazon has said its private label products still account for only about one percent of total retail sales.
The Wall Street Journal, however, revealed that as part of the partnership, Amazon gains the option to purchase the brand’s rights for a fixed price on 60 days’ notice. A contract reviewed by the Journal granted Amazon the right “to acquire all of the right, title, and interest in and to each of the Exclusive Brands” for $10,000 per brand.
Under the contract, the original owner of the acquired brand remains Amazon’s exclusive supplier for two years. After that, Amazon can source products for the brand from elsewhere. A vendor can sell the same products elsewhere under different brand names, according to the agreement.
Some brands are open to losing the upside opportunity if their brand takes off and Amazon moves to purchase their brand, but others are balking at the tradeoff. An Amazon seller told the Journal. “It’s a pseudo-partnership that’s completely one-sided.”
- Join the Amazon Family of Brands – Amazon
- Amazon Offers Sellers a Leg Up, With a Catch – The Wall Street Journal
- You’ve Probably Never Heard of Amazon Accelerator. This Strange Contract Clause Could Be Why – Inc.
- Amazon Uses Accelerator Program To Lure Exclusive Brands – PYMNTS
- What is the Amazon Accelerator Program? – AMZ Advisers
DISCUSSION QUESTIONS: How open should start-up brands be to the Amazon Accelerator program, given the right-to-purchase tradeoff? Is this a smart path for Amazon to develop its own private label brands?