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How Amazon’s deal with Apple puts the hurt on small sellers

About five years ago, Page Weil needed to make some extra cash to support his wife going to nursing school and help pay for costly surgery she needed. He turned to Amazon’s marketplace for help.

He started listing used electronics through the site, finding particular success selling used and refurbished Apple products, including discontinued keyboards and iMac desktops. In the past year, he sold roughly $300,000 worth of mostly Apple products on Amazon, for an after-tax profit of about $40,000.

“It was really a great thing for our family,” the 35-year-old consulting engineer from Colorado said, adding that the side business helped him pay off the medical bills, nursing school and existing student loans.

But that was then. Weil is now among a group of Apple sellers on Amazon who are about to see their business dry up. Amazon this month signed a deal with Apple that will allow it to directly sell many more of Apple’s new devices, including the iPhone XS, iPhone XR and iPad Pro. The new inventory will arrive in the coming weeks. As part of the deal, any merchants that aren’t authorized Apple resellers will be barred from selling any more Apple products starting Jan. 4.

“I feel our business is not being treated fairly and there’s nothing we can do about it,” Weil said, “and that’s what’s really frustrating.”
Weil’s situation illustrates the risks that independent sellers often take in building up a business on Amazon, where deals made by the company can shift the ground from under them. It also highlights how Amazon over the years has routinely marketed itself as a friend and partner of small businesses on its site, only to take actions that contradict that positive image.

The Apple deal also points to Amazon’s work to make its site more welcoming for major brands. It signed a similar agreement with Nike last year, and made it harder for small merchants to sell products if they aren’t working directly with the brands they list. At the same time, Amazon needs to keep finding ways to support its 2 million independent sellers worldwide, many of them smaller sellers like Weil. More than half of Amazon’s sales now come from its marketplace and not direct sales.

While some sellers will lose revenue, most Amazon customers will likely benefit from the deal. The e-retailer currently lists only a smattering of many new Apple devices through its independent sellers, who offer items at varying prices and conditions. The deal will give Amazon a lot more inventory and shoppers greater selection and standard pricing.

Goodbye, gravy train

There’s always a risk for smaller sellers working with Amazon, since the company is so much bigger, often competes against independent merchants on its site, and it has data on the most popular products a seller offers, said Forrester analyst Sucharita Kodali.

“The gravy train is not going to last forever,” she said. “You take advantage of it while you can.”

Asked about those sellers who’ll lose out from the Apple deal, an Amazon spokesperson said: “Sellers are incredibly important to Amazon and our customers, and we are notifying them now so they can prepare for this change.”

An Apple representative didn’t respond to a request for comment, but the rep previously said it’s “working with Amazon to improve the experience for Apple customers on their site.”

While Amazon and Apple didn’t comment on the timing of the agreement, it comes just ahead of the critical holiday shopping season. Both companies are likely hoping the new arrangement boosts their sales, especially as iPhone growth has stalled and Amazon posted weaker-than-expected revenue in its latest quarter.

Weil is far from the only one affected by the change. The owner of AceBeach told CNN the Apple deal was an “assault on third-party resellers.” Electronics refurbisher John Bumstead told Motherboard the change could impact hundreds, if not thousands, of small repair businesses.

Credit: https://www.cnet.com/news/how-amazons-deal-with-apple-puts-the-hurt-on-small-sellers/