Photo: Birkenstock
Will other brands follow Birkenstock in cutting off Amazon?
Birkenstock will no longer sell on Amazon.com, nor with third-party merchants that do business on the site, beginning Jan. 1. The reason given was a rampant increase in counterfeits and overall unauthorized selling on the website.
“The Amazon marketplace, which operates as an ‘open market,’ creates an environment where we experience unacceptable business practices which we believe jeopardize our brand,” David Kahan, Birkenstock USA’s CEO, wrote in an e-mail to the shoe manufacturer’s retail accounts. The letter called out “postings by sellers proven to have counterfeit Birkenstock products” as well as “a constant stream of unidentifiable unauthorized sellers” that show a “blatant disregard” for pricing policies.
Mr. Kahan added, “Policing this activity internally and in partnership with Amazon.com has proven impossible.”
Birkenstock has lately seen more counterfeits at a time when the brand’s sandals are undergoing a resurgence.
Amazon has also been facing more counterfeit complaints with much of the problems traced to third-party sellers. More than 40 percent of unit sales on the site are sold through Amazon Marketplace.
An article on CNBC.com in early August said the rise in complaints is the result of Amazon targeting Chinese manufacturers. But part of the problem is also that fake products often find their way into the Fulfillment by Amazon program, thereby legitimizing them. Amazon often bundles inventories at fulfillment centers, sometimes leading to counterfeit items from one merchant being sold by another. Fake reviews also support counterfeit sales.
Birkenstock’s policy is also aimed at legitimate sellers using Amazon’s third-selling marketplace to violate MAP (minimum advertised price) policies.
“We realize that many of our best brick and mortar retail partners play by the rules and have found incremental sales as third party sellers. We are appreciative of the way you ‘play the game’ and of the responsible support you have given to the brand,” wrote Mr. Kagan to retail accounts. “However, Amazon has made it clear that the only way to achieve a ‘clean’ environment (no counterfeits and no unauthorized sellers), is to sell our complete product offering to Amazon directly. We believe this decision does not align with the long-term health of our brand or your business objectives.”
- Birkenstock CEO: No More Amazon – Women’s Wear Daily (sub. required)
- Birkenstock will pull its shoes from Amazon over counterfeit sellers – Mashable
- Chinese counterfeit problem is getting worse – CNBC
- Birkenstock quits Amazon in US after counterfeit surge – CNBC
Discussion Questions
DISCUSSION QUESTIONS: Is Birkenstock making the right move by cutting its ties with Amazon.com? Do the counterfeits and unauthorized sellers on Amazon point to a fundamental weakness in its third-party marketplace model?
Poll
BrainTrust
Tom Redd
Global Vice President, Strategic Communications, SAP Global Retail Business Unit
Tom Dougherty
President and CEO, Stealing Share
I’m sure I’ll be in the minority on this but it is about time brands took back their distribution. We saw it last week with Coach and Michael Kors; luxury retailers like Omega have cut out retailers who discount. It doesn’t have to be an open market to all. Smaller retailers bemoan how brands they built have been dumped on sites like Amazon for much less than they can even buy them. I don’t believe it is trying to put the genie back in the bottle — most things shouldn’t be mass market if they want to stay in business.
After decades in the doldrums, Birkenstocks are hot again, yet they are about to cut off one of their top merchants. This does not make sense. We are not in the 1970s. The Internet and Amazon are not going to go away. Rather than cutting off Amazon, Birkenstock should work with the company to weed out counterfeit merchandise and should make its entire line available to the e-commerce giant.
Any manufacturer with a strong brand — a brand that matters in the purchase of their products — would never sell on Amazon. Amazon is not a brand-enhancing website. It places great products like Birkenstock next to $9 sandals from some shop in Botswana. That just is not the right way to market a brand. Smart move, Birkenstock!
Once again, if the price is too good to be true one should know that the item is more than likely a counterfeit. I think companies like Birkenstock and Coach have every right to protect their brand and stop the sale of their items on these sites including Amazon, eBay and others. Even the use of technology such as RFID to identify the real item is not working as expected. IF you want the real thing the consumer needs to go to the brick-and-mortar store or buy direct from the manufacturer. Birkenstock is making the right move.
“I can’t win the game because you don’t play fair. So I’m just not going to play with you at all — even if your game is the retailing equivalent of the Olympics.” So — how did that attitude work out for you when you were a kid? Did the game stop? Did no one else show up to play just because you weren’t there? This sort of childish behavior will likely net Birkenstock a very similar result to what you experienced as a kid. Poor move. You have to fight where the fight is.
Amazon sounded like a great idea to brands in the early days (“let’s sell online!”) but the extent of its brand dilution is being seen now. (See Tom Redd’s entry below.) Brands like Birkenstock that want to cultivate an aura of exclusivity need to eliminate the perception that they’re ubiquitous too … it’s incompatible.
I agree with Max. It is strange that when Birkenstock’s sales were in the dump, Amazon was good for them. Now sales are better and, all of a sudden, Amazon has become the bad guy. I need you when I need you. But now I don’t need you so goodbye?
Counterfeit items are a huge problem for both Amazon and brands. Birkenstock is smart casting a light on this issue and I’d expect other brands to follow the trend. In the medium term, I’d love to see a significant effort by Amazon and brands to police counterfeit items far more aggressively than they do today. It is to the benefit of consumers, brands and retailers. The issue of unauthorized sellers of legitimate product, though, is stickier. It is not in Amazon’s interest to police this.
First off, counterfeiting can happen anywhere. Just take a look at the street corners in New York. Even if Birkenstock leaves Amazon that does not mean the knock-offs will disappear.
Secondly, I never thought of Birkenstock as being in the luxury or exclusive brand category like Coach. But if the consumer is all about the Birkenstock brand then they are not online shopping for the cheapest, now are they?
My thought is that if Birkenstock is trying to build their brand reputation back into being an exclusive or luxury brand then they have no place on Amazon. If they are simply trying to sell then Amazon is indeed another valid channel.
For my 2 cents.
Every year I see more and more discussions about this dilemma, and all I can say is welcome to my world. Now you are seeing how the internet giant Amazon can influence price and turn a high-end product into another commodity, and they have every right to do this because the internet is the wild, wild west of retailing and it is largely unregulated.
We as independent retailers have been fighting the below-cost selling of food for over a generation and, to this day, it has put many local stores out of business and there will be more to follow. The 800-pound gorilla, whether it is Walmart, Costco or Amazon, can control the conversation on what they buy and how much they are willing to pay, which has hurt not only food stores but appliance, furniture, computer and even travel agencies, all for the sake of rock bottom prices. Taking your product out of Amazon may solve the problem in the short-term but they are not going away and will find another partner in the high-end category, and push their product as soon as you’re gone.
Is nothing sacred anymore? No, and the genie is out of the bottle, so as a retailer you must be prepared to deal with how your pricing strategy stays competitive. The days of 8 to 10 percent bottom line gross profits will shrink in the future for sure, so make your adjustments now and focus on the creation of new and exciting products that can add to your bottom lines.
I am sure this was not an easy decision, nor a quick one for Birkenstock. On one hand you have a sales channel that is probably 25 percent of your total sales. Yet on the other, it accounts for 75 percent of your customer complaints and fraudulent activity.
Anyone who has run a multi-channel e-commerce business knows that not all marketplaces equate to the same economic value.
I applaud Birkenstock for choosing to protect their brand and customer experience. Whether this proves to be a good financial move should be interesting.
Amazon is going to have to address this issue. Just recently I was shopping for equipment for an upcoming camping trip. As a Prime member, by default I went to Amazon — largely because of the volume of reviews. However, after locating the equipment I wanted and seeing several recent “Fake Alert!” reviews I ordered those items from Dick’s and REI instead — retailers I know are buying their inventory directly from the manufacturer. And Dick’s actually had one of the items at a lower cost and with free shipping. Also, if Amazon’s practice of bundling inventory from multiple marketplace vendors results in legitimate vendors receiving negative reviews for fake products, they’re going to lose their vendor base.
Birkenstock is illegally pursuing price fixing and collusion with their select vendors who support this. By excluding Amazon and their marketplace suppliers, they are acting in restraint of trade, which had been illegal since the passage of the Robinson-Patman and Sherman Antitrust Acts of the 1930s. Welcome to America, Birkenstock!
This is all about Birkenstock’s marketing strategy — which apparently hinges on the brand’s presence in retail storefronts. By pulling the product off Amazon, Birkenstock expects retailers to respond by featuring the fact that they offer genuine Birkenstock products. They may lose unit sales in the process, but they hope this premium placement with retailers will compensate by increasing consumers’ perception of the brand’s value.
It may work out, but my own point-of-view on this is that it would’ve been smarter for Birkenstock to make Amazon an authorized retailer by selling them directly and ensuring their adhere to MAP and policing their site for counterfeits. This preserves the margin brick-and-mortar retailers depend on and gives Birkenstock a good reply to retailers who complain about the product being available on Amazon “If you can’t add more value than Amazon provides selling at MAP price, then what value are you to us as a retailer?” It also drives the brand’s visibility by ensuring a presence on what remains the world’s largest online storefront.
Very interesting. How much of a sales drop is a brand willing to endure to reestablish the purity of its brand presentation at retail? My inclination is to think Birkenstock should stay on Amazon.
Napoleon has a warning for Birkenstock: “The logical end to defensive warfare is surrender.”
Amazon is the new normal and more and more brands are going to have to play ball with consumers who see price as a brand equity. This is not the ’80s.
Consumers have more choices in the venus they shop and I’m afraid Birkenstock will end up on hind teat.
Agreeing with Tom completely here. Customers seek out and buy brands, as the brand promise is the purchase. Where they buy them is less important, as long as they are comfortable that the transaction is low risk and they will get what is promised.
I would argue that brands went to Amazon initially as a distribution channel because they did not have that online capability internally themselves, and their website transactional experience was not perceived as “guaranteed satisfaction” as is Amazon’s. That is changing in that consumers are more comfortable placing transactions elsewhere. I think Birkenstock won’t be the last brand owner pulling out of the Amazon marketplace.
Only Birkenstock has access to their numbers, so only they can begin to know if this is the “right move” (and of course even then there are a lot of unknowns).
The (almost casual) inclusion of MSRP issues, though, makes me wonder what the real driving force behind this decision is — whether it’s truly concern over counterfeits, or more of a brand-strengthening effort; much like the MK and Coach strategies we’ve been discussing lately.
Distribution [eyeballs] is everything. Birkenstock must feel that they can find replacement distribution through other channels. In digital, that actually can be Facebook … who I feel will ultimately be Amazon’s greatest competition.
This independent retailer applauds this action, regardless of the expedience of the circumstance. All merchandise sold online damages local economies, and removes all the capital from the monies circulating around the businesses and residents of each community they serve and/or belong to. None of the wise pundits out there give or lend any credence to this reality, that the “trees of the forest” are all being hollowed out, masked by the national picture that shows a rosy total scenario. So ANYTHING that detracts, however small, from the juggernaut that everyone so dearly loves is a wonderful thing.
To fully identify with this perspective, one needs to have experienced retail from the ’70s thorough yesterday, and to have watched market share collapse to fractional levels while national chains and internet companies proliferated. Individual companies can persevere by sheer will and excellence, but still nowhere near the levels once known before all of this began. And it is unlikely to steer monies back to local by Birkenstock as they sell online direct, so this is no real solution, but if it has the slightest chance of degrading Amazon, it gives at least me a small sense of satisfaction.
Any manufacturer that is going to stay away from Amazon needs to make sure it’s got great retail distribution that can compete with Amazon. Birkenstock has a powerful brand so it’s possible this will be a good move for them but for many others, and perhaps for Birkenstock as well, they will be not only biting the proverbial hand that feeds them, but perhaps cutting off their own.
MAP violations and counterfeiting can definitely be a problem, especially on marketplace like Amazon. And enforcing brand protection policies are a challenge, especially with Amazon’s limitations in helping brands. While cutting off Amazon may mean cutting off a large distribution network, if those issues are ultimately damaging the brand, it’s the right move.
Aside from Birkenstock’s strategic marketing decisions, there is another perspective to consider here: Amazon’s failure to control quality through its Marketplace platform. One of the key things that a Marketplace operator does is create a governance framework that establishes the rules sellers must play by. If, in fact, fake Birkenstocks are being sold by Amazon sellers, Amazon should be policing that and monitoring it via quality control metrics. Given the comments by Birkenstock’s CEO that “Policing this activity internally and in partnership with Amazon.com has proven impossible,” it would seem that Amazon is not willing to enforce these rules on sellers.
As Marketplaces continue to take off, Amazon will see increased pressure to ensure seller quality. A good Marketplace platform will monitor seller performance and quickly alert the operator to rules violations.