Is Amazon Retail Arbitrage Over in 2024?
2024 has been a tough year for Amazon online and retail arbitrage sellers is an understatement. From Amazon fee changes negatively impacting sellers’ profits to the dreaded Section 3 account suspension, there is no denying that Amazon has already taken a different approach to manage the third-party sellers on its platform.
And the writing is on the wall after the several announcements made in Amazon Accelerate 2024, Amazon emphasized heavily on how Amazon is supporting brand and private label sellers with AI and how advertising and fulfillment can help brands succeed in reeling in more customers. Even the new seller central updates that were revealed in this year’s event catered towards the brand owners, or sellers who directly buy from a brand owner with written consent to sell on Amazon. The new seller central updates have also brought a string of compliance document requirements that will be front-loaded in the product listing process which may be another hurdle for resellers. This raises the concern that we often hear from the reseller community: Is retail and online arbitrage still viable after 2024?
Amazon’s War on Fraudsters
Amazon gets a couple thousands of new sellers joining its marketplace every day, and amongst these sellers, there are bound to be some bad apples. Amazon has been tackling the ongoing challenges posed by fly-by-night operators, fraudsters, and counterfeiters by introducing multiple programs to screen new or existing sellers on its platform in the past.
A slew of preventive measures like Know Your Customer qualification review and onboarding and verification programs are being carried out to protect both brands and customers by preventing suspicious accounts from being opened. Amazon also partners with law enforcement to identify and pursue bad actors to hold them criminally liable. In recent years, Amazon also took advantage of advanced machine learning and graph neural networks to proactively detect fraudulent, infringing, inauthentic, non-compliant, or unsafe products or fake reviews.
While Amazon is currently highlighting its efforts in preventing, detecting, and enforcing against bad actors, its track record remains less than exemplary. The most notorious source of counterfeiting and fraud comes from China. Despite the fact that Amazon’s heavy recruitment of Chinese sellers contributed significantly to this activity, Amazon is now hosting a new direct from China platform for Chinese sellers.
Many legit sellers have also fallen victim to the false positives caused by Amazon’s fraud detection algorithms: products have been suspended over incorrect price-gouging claims, and new merchants have had their accounts shut down due to malicious reports from competitors alleging counterfeit items.
Although Amazon heavily relies on its detection systems, it still lacks sufficient human intervention and careful judgment. A recent case involving Amazon Brand Registry revealed that individuals fraudulently obtaining invalid trademarks were able to enter the registry and submit numerous false infringement claims, resulting in the removal of legitimate sellers and their products from the platform.
These issues stemming from a flawed policing system indicate that Amazon needs to reassess its approach to maintaining trust and safety on the platform. The company has significant work ahead to better protect American small business owners. But what if Amazon is simply looking for the quickest solution to end counterfeit, fraud, and other forms of abuse on its platform?
Higher Fees, Brand Gating and Section 3
For the past couple of years, Amazon raised the FBA fees across multiple categories and introduced new additional fees like Inbound Replacement fee, Low stock fee, Category change referral fee, Deferred payments and Removal fee surges. In October this year, Amazon silently moved seller’s categories from books to toys or household goods to charge higher fees.
Moreover, many sellers are reporting their previously ungated brands being gated again and some were also hit with section 3 of the business solutions agreement violation along with account suspension.
Amazon is now enforcing their Policy Compliance seriously and they now work with regulatory bodies to proactively collect compliance documentation from sellers and compliance requests will also apply retroactively to even deactivated listings a year ago. Of course, this means sellers will have to manage compliance requests that emerge later on.
Where is Amazon Headed?
The future of third-party sellers on Amazon seems challenging largely thanks to Amazon’s evolving strategies that may push these sellers to extinction in the coming years. Amazon has become oversaturated with new sellers, many of whom are offering similar products. As a result, Amazon can afford to be selective, focusing on direct relationships with established brands, which suggests a diminishing role for smaller, independent sellers in the future.
From past events observed, Amazon increasingly favors products created or distributed by the brand owner while actively targeting third-party sellers who rely on retail arbitrage or wholesale distribution. The recent fee structure changes could make it harder for small merchants to stay profitable, effectively dismantling retail arbitrage or online arbitrage, possibly leading them to either utilize Fulfilled by Merchant (FBM) or move their products to alternative marketplaces like eBay or to exit the marketplace altogether.
Amazon’s long-term goal seems to be direct partnerships with brands, incentivizing them to bypass third-party sellers by offering better fee structures and leveraging Fulfillment by Amazon (FBA). This shift could ultimately weaken independent retail and force many small sellers out of business. Despite these trends, Amazon still relies on third-party sellers to handle the distribution of certain brands, as the company’s fulfillment operations face significant internal challenges. Amazon’s complex relationship with Chinese sellers also complicates the situation, as they often operate under different rules.
Even though Amazon’s latest direction may seem like it is squeezing small sellers, BQool still believes that the platform’s built-in traffic and exclusivity deals with suppliers can still offer lucrative opportunities, especially for new sellers. Retail and online arbitrage is still viable after 2024 but there are some caveats that you need to be aware of.
How to Navigate around Amazon’s Minefields?
Section 3 Appeal-
As a wise man once said: an ounce of prevention is worth a pound of cure. When anyone is doing business on Amazon, the person must ensure only genuine products sourced from an authorized distributor of the brand are being sold. Because Amazon operates under a “guilty until proven innocent” model, it is a good practice to ask suppliers to provide invoices, supplier information, letters of authorization, licensing agreements, etc. If a seller’s account is flagged and deactivated for section 3 of the business solutions agreement violation along with the unsuitable inventory policy and similar accusation, the person may contest that claim with the supply chain documents for the ASIN’s in question. However these invoices must be issued in the last 365 days and support the sales volume for that product.
There are the possibilities that the submitted documents will be denied or sellers are required to go through identity verification via a video conferencing with an Amazon representative. A good plan of action (POA) will also help the likelihood of the account being reinstated.
Here’s a summary of key points for your appeal:
- Understand Your Mistake: Identify what led to the copyright infringement and acknowledge it in your appeal.
- Express Remorse: Be genuinely apologetic about the situation without making excuses.
- Outline Preventative Measures: Clearly explain how you will avoid similar issues in the future, including any changes to your listing practices.
- Provide Documentation: While you may not have invoices, include any receipts or other relevant documentation to support your case.
- Stay Positive: Even if your first appeal was unsuccessful, persistence can pay off. Make sure your appeal is well-structured and addresses Amazon’s concerns directly.
If all else fails, it is advisable to seek legal assistance from a professional who specializes in Amazon appeals.
Ungating application-
Many sellers wonder why; despite following the same steps as others, they can’t get ungated for certain brands on Amazon. For instance, one seller may successfully ungate a brand with their invoices from a supplier, while another seller gets denied. Why does this happen?
The answer lies in Amazon’s consideration of individual account metrics when deciding whether to approve sellers. These metrics include:
- Account age
- Previous application history
- Account health score
- Total sales generated (Gross Merchant Value, GMV)
- Any past case logs, whether closed or ongoing
Amazon continuously improves its system, making account metrics unique for each seller. Here’s our top advice for increasing the chances of ungating approval:
- Ensure your invoice address matches your business address on Seller Central.
- Blackout pricing but highlight the quantity and brand name.
- Resubmit your application if needed.
- If you receive auto-denials or standard rejection emails, don’t start a new application. Instead, reply to the existing case ID and attach your invoice before submitting.
FBM, Diversify and Pivot –
It is generally agreed upon that the FBA fees now for some small businesses would not be sustainable. And that leaves these sellers to go with merchants fulfilled. FBM has its merit, sellers typically have more control with their inventory and shipping time as well, especially when it is close to the holiday season, but how much fees that can be saved also depends on the seller’s logistic scaling. There may be times when FBA would still be a cheaper option and saves you the headache of managing your own warehouse space. Some sellers now will also try to diversify their product portfolio and put their eggs into different category baskets to reduce the risk of brand gating.
Some sellers have expanded beyond Amazon, exploring platforms like Walmart, eBay, and TikTok, while utilizing Amazon’s Multi-Channel Fulfillment (MCF) to ship across these channels. The recent introduction of the Buy with Prime program extends Prime benefits to TikTok, allowing merchants to display the Prime badge and real-time delivery estimates in TikTok ads starting next month. When shoppers click the Shop with Prime button within these ads, they will be directed to the merchant’s website to complete their purchase.
Later this year, Buy with Prime merchants using Amazon MCF will also be able to showcase dynamic delivery dates on their websites, in Google Shopping ads, search results, and TikTok ads.
The Future of Selling on Amazon
Many have noticed that some prominent sellers are either stepping away from Amazon or not prioritizing the scaling of their businesses. It’s likely that some have encountered significant challenges with Amazon but are reluctant to acknowledge them. Every business faces risks and hurdles; it’s not designed to be easy. Traditional retailers also operate on thin margins, yet they still thrive. As the landscape becomes increasingly competitive, adaptation is essential to avoid failure. Unfortunately, some sellers are choosing to give up, whether due to forced exits or burnout.
Retail arbitrage (RA) and online arbitrage (OA) face stricter policies and rising fees and are under pressure as brands tighten control over listings and authorized sellers. It’s evident that Amazon aims to dominate the market, positioning itself as the preferred online boutique department store for consumers. While they profit significantly from third-party sellers, they may prefer to streamline their marketplace by focusing on larger, more established vendors.
So, Is retail and online arbitrage still viable after 2024? Absolutely—but only if you approach it with a business mindset rather than treating it as a side hustle. As challenges grow each year, a repricer like BQool is essential. Our AI-driven technology continuously monitors and adjusts prices, keeping you competitive and maximizing profits.
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