Exclusive Features

Breaking Up Is Hard To Do With Amazon

By Jack Keough

Some manufacturers are fighting back against Amazon on several fronts in an effort to support its authorized distributors and retailers.

Wüsthof, a German-based manufacturer of knives and other related products, told its authorized distributors in June that it can no longer store its products in Amazon warehouses, according to the Wall Street Journal. These distributors still can sell Wüsthof products on Amazon but must fulfill the shipping orders themselves.

Wüsthof had taken the action because Amazon often commingles a manufacturer’s products, which are supposedly identical, in their warehouses from other third-party sellers.  It could mean that the products sold from the various third-party sellers may not actually come from the manufacturer and is not being sold by authorized distributors. The third-party sellers agree on a voluntary basis to commingle the products.

Amazon simply pools specific products such as these knives on shelves in their warehouses based on bar codes. They can then pull any product on the shelf that may-or may not be-from the advertised manufacturer or an authorized third party seller. Amazon uses this system to sort and ship products more efficiently, the Journal says.

It is not the first time Wüsthof, one of the premier knife manufacturers in the world, has taken action regarding Amazon. The company stopped selling its products to Amazon a few years ago because it was, in effect, competing against non-authorized third party sellers who were selling their products at below Minimum Advertised Prices (MAP) prices.

In Brad Stone’s book The Everything Store: Jeff Bezos and the Age of Amazon he wrote, “Wüsthof believed it needed MAP to defend the value of its brand and protect the small knife independent shops that were responsible for about a quarter of the company’s sales and were not capable of matching such discounts.”

MAP, he noted, requires brick-and-mortar retailers not to go below a certain price in their ads, and requires online stores like Amazon not to post prices lower than those on its product pages.

When Wüsthof cut ties with Amazon in 2011 it walked away from several millions of dollars in sales, a significant portion of the company’s business. When it announced it was withdrawing from Amazon, Wüsthof said it would cut its supplier base and focus on a reduced network of authorized distributors and retailers who support its pricing and branding strategies.  Myers said in a radio interview that it took four to five months to recoup most of those lost sales with its authorized distributors and, in turn, also strengthened the relationships that existed between them and the company.

He pointed out that the company had made the decision for the long-term growth of Wüsthof.

It actually was the second time that Wüsthof, which has been making knives for nearly 200 years, stopped selling to Amazon. It had ceased doing business with Amazon a few years before over the same issue.

“The steps we have taken in the last 18 months are the most dramatic efforts we have taken in the U.S. to further tighten our distribution, protect the integrity of our brand, and create a fair and level playing field for our loyal retailers,” says Todd Myers, Wüsthof-Trident’s vice president of sales.

In a strategic effort to protect the brand from unauthorized, third-party re-sellers on the Internet, and validate the authenticity of confirmed Internet retail customers, Wüsthof partnered with Channel IQ in launching its “Authorized Retailer Badging Program.”

Available to all Wüsthof Internet customers, the new authenticity program consists of a specially designed small badge (which includes Wüsthof’s logo) that cannot be duplicated, to communicate the Internet retailer’s legitimacy as an authorized retailer. The customized badge includes the tagline, “Verified by Channel IQ” to alert consumers that authorization is confirmed by a credible third party.

“We’re encouraging all of our Internet retail customers to participate in this state-of-the-industry authorized badging program, designed for us by Channel IQ, the leaders in solution-based brand management,” said Myers in a statement. “This distinctive, and easy- to-implement badging initiative delivers the exact tool needed by our Internet customers to validate their authenticity, effectively protect themselves from unauthorized, third-party sellers, and build valuable trust and brand loyalty with consumers visiting their sites.”

Despite requests, Myers refused to be interviewed for tedmag.com for this story to elaborate on his comments.

Channel IQ is a company that specializes in and uses software to crawl the entire web, including Amazon, and learn where a client’s products are being advertised and sold, and at what prices. Since its founding five years ago, Channel IQ has grown rapidly and reportedly has signed up more than 200 manufacturers.

Those third party sellers are then warned by the company and if such practices continue, Wüsthof could pull its line from authorized distributors that do not comply, restrict cooperative advertising dollars or possibly engage in legal action.

But when unauthorized distributors or retailers obtain those products through leaks in the supply chain and sell them below the MAP, it becomes much more difficult for manufacturers to enforce.

Wüsthof had reportedly been complaining to Amazon about those third party merchants selling its products below the MAP but apparently got little satisfaction.  One reason for Amazon’s reluctance might be it reportedly receives an estimated 40 percent of its business through third party sellers.

Amazon is known to be tough when working with its vendors.

Stone writes that when Wüsthof cut its ties with the e-retailer, Amazon not only said that they’d continue to sell Wüsthof knives through other distributors, but also said they’d show advertisements for competing knife companies when a customer searched Amazon for Wüsthof knives.

Jack Keough was the editor of Industrial Distribution magazine for more than 26 years. He often speaks at industry events and seminars. He can be reached at john.keough@comcast.net or keoughbiz@gmail.com.

Tagged with

Comment on the story

Your email address will not be published. Required fields are marked *