Is Price Parity Still on Your Radar? Because It’s on Amazon’s!

July 22, 2014

Marketplaces ChannelAdvisor By ChannelAdvisor

Life is a lot about cycles. Ebbs and flows. Action and reaction. It looks like Amazon’s price parity is in one of these cycles that’s approaching a “high visibility” era again. So let’s talk about it and make sure you’re ready for the increased attention it seems to be getting.

First, what is price parity? According to Amazon’s General Pricing rule, the company requires that the total price offered on Amazon  (which includes item price, shipping and discounts) must be at or below the lowest total price offered on any other online sales channel. At ChannelAdvisor, we refer to this rule as the price parity clause.

Additionally, some sellers who are on a Professional selling plan with Amazon (or other similar programs) will sign special revised agreements with Amazon. Such agreements could give the seller benefits like reduced selling fees, more frequent payments from Amazon and more. It’s common for these individual agreements to have a parity clause as well, which varies in scope and requirements from the General Pricing rule.

The implications of price parity are huge.

Amazon is guaranteeing that its sellers are going to present their best offer to Amazon shoppers, which in turn gives buyers a very compelling reason to make Amazon their purchasing destination. Cause and effect. (Could this be one reason for the decline in comparison shopping site traffic, as Amazon has become the comparison shopping destination?)

Essentially, Amazon has guaranteed that it will have (or match) the lowest price for a huge percentage of its catalogueueue. Well played, Amazon.

Before we go any further, let’s be clear that a) not all sellers have parity requirements, and b) these requirements might vary by seller. For example, the Amazon parity policy varies around the globe, with UK and European sellers being completely exempt after Amazon withdrew the requirement in 2013. (Note to readers: This post applies only to Amazon sellers in the US.)

Price Parity and You

In recent months, we’ve seen an uptick in the number of sellers reporting listing violations caused by price disparity. In a good number of those cases, sellers’ accounts were suspended. If you fall in that bucket, check out our recent post on how to recover from an Amazon account suspension. If you haven’t run into violations for price disparity, then take that as a sobering reminder to audit your pricing strategy for anything that might get you in trouble with your Amazon terms agreement.

Surprising Parity Conditions for Revised Seller Agreements

If you have a revised Amazon agreement (and you’re not in the UK or Europe), take some time to pull out the document and locate the section related to parity. Be aware of what your specific agreement requires so you can ensure your compliance. If you’re like most, you may have overlooked (or forgotten about) some surprising conditions that many parity clauses require. Here are some powerful requirements we’ve heard of from customers:

  • Price parity extends to products purchased offline

  • Price parity extends to variations (like colour, size, etc.) — meaning that if you offer a blue version on Amazon, your red version can’t have a lower price elsewhere.

  • Price parity refers to the “all in” price, so any rebates, product-specific discounts and shipping charges/discounts must have “all in” comparable price parity on Amazon as well.

  • Parity extends to customer service, returns and refund policies.

  • Parity extends to data completeness and quality — meaning you should be sending Amazon your best and most comprehensive product data.

  • Price parity requires sellers to make refunds to customers when disparity is discovered.

As we said, pull out your agreements and see what terms you’re being held to. All of the conditions above could have far-reaching effects on your cross-channel strategies, so you’ll want to give them serious thought.

Where Do Sellers Go Wrong?

We wish we could say that we don’t see price parity resulting in account suspension, but that’s unfortunately not the case. To keep your business protected, here are the ways we’ve seen retailers end up with price disparity that got them kicked off Amazon:

  1. The “Black/Gray Hats”: Check out our recent blog post on this topic here, but these are the sellers that are deliberately skirting the rules. Amazon uses automation and algorithms to detect price gaps, so don’t be surprised when it catches disparities.

  1. Employees Uneducated about the Policy: Anyone on your team involved with pricing needs to be briefed about the parity clause. Everyone should be clear on how to stay compliant and what your cross-channel pricing strategy is.

  2. Managing Marketplaces in Silos: Sometimes retailers manage Amazon separately from their other marketplaces, which opens the door to gaps and inconsistencies in data and pricing. This could lead to your Amazon price being inadvertently higher than your eBay, webstore or other price. Systems like ChannelAdvisor can help you consolidate your multichannel efforts and avoid these situations.

  1. Isolated Repricing Automation: Some sellers use repricing systems that hum along happily, optimising Amazon prices — without a care in the world about other e-commerce channels. This is a dangerous scenario, and any price determined by a repricing solution should have checks built in so that prices aren’t raised above other sites and channels. ChannelAdvisor can keep this in check for you with our Repricer with Pricewatch, so reach out to our Sales or Support teams if you’d like more information.

Next Steps

Lately, we’ve given you a lot to think about in terms of your compliance with your Amazon agreements. I know there are many more things you need to fit in your day than making sure you’re following rules. But just as I’m sure you want to avoid an IRS audit after tax season, I hope that a suspension notice from Amazon is something you also want to avoid — especially as Amazon goes through a season of house cleaning, which it appears to be doing now.

 

Blog post by Rachel Miller, product marketing manager, ChannelAdvisor


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Read up on other tips to avoid being suspended on Amazon in our white paper, “13 Ways to Get Kicked Off Amazon: Are You Guilty?” with 14 ways to stay in good standing.