Beauty & Wellness Briefing: Amazon's unauthorized beauty sellers are a 'pretty significant’ problem for brands

04 Jan, 2022

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In the first quarter of this year, Peace Out Skincare will join the growing ranks of beauty labels officially setting up shop on Amazon. While the move will undoubtedly expand the brand’s reach to a wider audience, there’s another major reason it’s launching on the platform. 

“We certainly see Amazon as a strong sales opportunity that will complement our existing channels. Yet, equally as important, we see this as a necessary step to help control our brand message and positioning,” said J.P. McCary, chief commercial officer of Peace Out Skincare. In the past year, the brand saw “an unprecedented amount of unauthorized resellers on Amazon,” according to McCary.

“We needed to take ownership and control back,” he said. 

Peace Out is not alone. When Amazon shoppers search for beauty products, there’s a good chance they’ll find what they’re looking for — whether a brand is officially selling it or not. Third-party sellers that don’t explain where they procure products can lead consumers to wonder where their items come from. In many cases, the brands are left guessing, as well. Beauty labels are making efforts to counteract Amazon’s gray market by opening official stores and, in many cases, taking legal action. 

“As brands increasingly take Amazon seriously and want to have a formal presence on it, they begin to ask, ‘Who are these other people selling my product, and how the heck did they get it?’” said Steve Strong, COO of distribution partner company SuperOrdinary, which is working with Peace Out on its Amazon launch. Originally founded to help brands sell in China, the company launched its Amazon arm a year ago. Its roster of indie beauty labels on Amazon now includes Herbivore, Biossance, Dr. Brandt and Good Light. 

Individual sellers often rely on retail arbitrage, buying products on sale or at discounted locations like Costco and then flipping them on Amazon or other marketplaces for a profit. For brands, the drawbacks of this practice outweigh any sales generated. 

“The downsides of unauthorized sellers on Amazon are that they can impact brand reputation and unfair discounting, and even result in getting products suspended or removed. They can create a lot of unwanted issues and stifle a brand’s growth and reputation,” said Rebecca Alexis, the vp of global sales at Biossance. Continued after ad.

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In some cases, even brands’ official distributors have been known to sell products on Amazon or to Amazon sellers at a discount, undermining the official retail price. The discounted prices can cause problems with brands’ official retail partners. 

Brands “need to control their own distribution more tightly than they did prior to the age of e-commerce,” said Whitney Gibson, partner and chair of Vorys eControl, a law firm focused on helping brands remove unauthorized sellers from Amazon and other marketplaces. When items are sold at discounted rates on Amazon, “it impacts the whole business, because retailers and distributors see the products being sold on the marketplaces. They’ll use that to go back to the brand and negotiate lower prices or claim they’re not going to sell the product.”

From a brand equity standpoint, quality issues and negative reviews can also impact business. 

“The problem for brands is pretty significant,” said Strong. “You spend all this money to build up brand equity and a story. And then, as a consumer, you go on Amazon and it feels like you’re going to a flea market.”

Items obtained illegally are especially problematic. According to a recent Wall Street Journal report, $104 million of goods stolen from retailers like CVS were found on Amazon in 2021. For major brands, counterfeit cosmetics on the platform are also a problem. Amazon has been taking measures to fight sales of fakes, reporting that it “seized and destroyed” 2 million counterfeit items across categories in 2020. The company also said it spent $700 million to fight fraud on the platform in 2020.

When brands can prove that items were obtained through illicit means, they can work with Amazon to get them taken down. And for any type of unauthorized seller, brands can take legal action. 

“People can generally buy a product and resell it, unless they’re selling a product that’s materially different or outside of the brand’s quality controls,” said Gibson. Brands argue that non-physical differences, such as warranties, customer service and quality control measures, also constitute “material difference.” Policies enacted to create a legal foundation, such as minimum prices, authorized resellers and quality controls, “typically give us a good legal claim against the unauthorized sellers,” Gibson said. 

Brands will also spend big money to keep an eye on who is selling their goods. SuperOrdinary uses scraping technology to track unauthorized sellers. 

“We’ll send a written notice — both in an email and a hard copy — to the seller, telling them they’re unauthorized to sell the product,” said Strong. “If that doesn’t work, the third step is getting our lawyer involved, and we send a formal cease and desist. That generally is really effective.” When it’s not, the next step is filing a lawsuit. 

In the past, brands have taken legal action directly against individual sellers. In 2020, Josie Maran Cosmetics filed a lawsuit against Amazon seller Shefa Group LLC, dba Morning Beauty for selling unauthorized products. A public release by the law firm representing the brand said the items are “coming from an unknown source and do not appear to be handled in accordance with Josie Maran’s stated quality controls.” In addition, the brand stated that because they do not come with the brand’s warranty, they cannot be labeled as “new.” A resolution to the case has not yet been reached.

Herbal skin-care brand Farmaesthetics has been selling on Amazon since 2017. In 2018, it joined Amazon’s “Transparency” program. As such, the brand attaches a QR code to all of its items, which are then verified by Amazon at the warehouse. Products without the code are rejected. The program has been “vital to our success on Amazon,” said Brenda Brock, founder and formulator at Farmaesthetics.

“We have seen many unauthorized sellers on Amazon, and this was one of the reasons we decided to list our products for sale as a brand on the platform. We wanted to take control of the listings and remove the unauthorized resellers. This can become a full-time job in itself, so we enlisted the help of an Amazon consultant to help us navigate,” said Brock.

Biossance, meanwhile, is part of the official Amazon Brand Registry, where it is allowed to report violations, IP issues and inaccurate information to the platform. 

“Even if you aren’t selling on Amazon, your brand is likely being sold through unauthorized sellers, and Biossance would rather have that control, rather than someone else, to create an experience we feel good about for the consumer,” said Alexis.  –Liz Flora, sr. beauty & wellness reporter

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