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3 Ways Amazon Sellers Get Burned (Avoid This)

If you feel your sales 'bombed' in 2019, this post is for you.

What's best to sell on Amazon? Avoid these traps

Some Amazon sellers report 2019 was their least profitable year to date

Those sellers had one thing in common: they all were sourcing clearance products mainly from stores and online ("retail arbitrage" and "online arbitrage").

And they all faced similar issues. Chances are, you did too:

  • Policy Warnings with Product Takedowns: Sellers can suddenly be restricted from selling an item; or the item disappeared entirely from Amazon, leaving the seller stuck with inventory he or she can't sell
  • Seller Saturation and Financial Loss due to hundreds of sellers jumping on the same product
  • Suspension from Customers' (False) 'Inauthentic' Complaints - when a customer complaint puts your Amazon seller account at great risk

In this blog post, I'll be exposing more of these seller traps.

You're probably asking "What can I do to avoid all these traps?" On January 27, 2020, I'll reveal a FREE, trusted resource that will teach you the best, safest, and most proven way to sell on Amazon. Sign up here, and I'll send you a short email reminder on that day.

But first, I want to be clear:

Retail arbitrage and online arbitrage are not dead. But some Amazon sellers who rely on those methods are finding it incredibly hard to make a decent profit and a viable long-term business. If you feel the same, this post is for you. There are alternatives to sourcing products for Amazon, so don't freak out.

Now let's take a look at some of those Amazon Seller traps:

Seller Trap #1: Policy Warnings With Product Takedowns

Some sellers have received an Amazon policy warning like this one:

A real policy violation received by an Amazon seller

Above: a real policy violation received by an Amazon seller (click to view entirely)

What happened: Those sellers purchased (in this example) a Mario Bros. Remote Control car from Walmart, intending to resell it on Amazon. The warning from Amazon statted the product had been entirely removed. Worse, Amazon said the actual seller may be "infringing on the intellectual property rights." Note that those sellers didn't even create the Amazon listing, they were merely one of the 3rd party merchants selling the product.

Why this happened: The parent company of the Mario Bros. product, Spinmaster, assumed the product on Amazon wasn't an authentic Spinmaster product. It appears to me they just did a "blind sweep" (filing Patent Infringements across a variety of products that they didn't authorize to be listed on Amazon.)

What's the risk: The Amazon sellers who responded to the Policy Violation - stating they were just re-selling an existing retail product - received instructions for an appeal from Amazon with "If you don't provide this information, you will continue to be restricted from selling the product." and "your account could be deactivated."

What you can do: No seller can control this and appeals to the manufacturer rarely help. That is unless you're authorized by the brand or manufacturer. I'll have a 'how-to' plan on that strategy, ready for you on January 27.

Seller Trap #2: Seller Saturation and Financial Loss

Many of my readers sourced clearance items online and in stores throughout 2019.

What happened:  Many Amazon sellers scored huge discounts - up to 90% off retail - on products online and in stores (e.g., Walmart) - only to find hundreds of other sellers jumping on the same listing. An example is this Harry Potter Minerva doll. In the Summer of 2019, Amazon sellers paid as little as $7 for these at Walmart. At the time, they were selling on Amazon for $20! Then this happened:

Amazon seller price decrease on toys

Graph made on Keepa.com. Click to enlarge

See, over 150 sellers - including Amazon themselves - flooded the listing during Christmas 2019. And after the sellers' costs, many incurred a net loss due to the drop in price and increase in supply.

Why this happened: It's simple: the same deal for this doll was available in all Walmarts. And all the data pointed to it being profitable for Amazon sellers. Yet the 2 variables those sellers can't control - the # of sellers supplying the item, including Amazon - couldn't be forecasted. Thus, seller saturation occurred, driving the price way down until sellers priced it low enough to clear out their stock. Let me repeat that: the # of sellers supplying the item, including Amazon - could not be predicted.

What's the risk: Sellers who engage in this type of retail arbitrage face the chance of losing money on an item. Simply put, there's no way to predict the competition they'll have on a deal they think is a 'score.'

What you can do: No seller can control this phenomenon, and it becomes risky and expensive to "hold" inventory for when the price recovers. A better alternative is for Amazon sellers to source products from manufacturers or brands who control their supply chain - and the # of sellers - on popular products that Amazon themselves can't buy. I'll have a 'how-to' plan ready for you on how to identify those products and brands, on January 27.

Seller Trap #3: Suspension from Customers' (False) 'Inauthentic' Complaints

What happened: When you're sourcing dozens to hundreds of different products in retail stores, each one is a 'time bomb' that carries a risk. One risk is that just getting a couple of customer complaints can boost your chance of suspension. It almost happened to me, for a retail arbitrage item I re-sold. I got a warning from Amazon years ago, for a retail arbitrage item I resold:

Amazon Trademark and Copyright Warnings

I narrowly missed getting suspended by Amazon for totally invalid reasons. Luckily, I 1.) acted fast and 2.) have additional income streams for "back up"

What's the risk: When sellers receive temporary/permanent suspensions, devastating financial losses can occur. Why? Because those sellers are relying solely on sourcing items in stores or online. When you're reselling products like this, there is always a risk of warnings or suspensions like the above. See, when a customer complains about authenticity, Amazon can - without a real person reviewing the complaint - automatically send a warning to the seller. What's worse, if a seller's response isn't "just right," that software can put a temporary hold on an Amazon seller's account. Even worse, if the Amazon Seller Support representative isn't astute - or if English is their 2nd language, and they thus misinterpret a seller's response - a full suspension can occur. Amazon sellers who get suspensions and/or warnings can recover, although the financial damage to their business can be staggering!

What you can do:  A better way is for Amazon sellers to source products from manufacturers or brands who control their supply chain - and the # of sellers - on popular products. I'll have an easy-to-follow plan ready for you on how to identify those products and brands, on January 27.

That's it for now. Remember: On January 27, 2020, I'll reveal a FREE resource that will teach you the best, safest, and most proven way to sell on Amazon, but you have to notify me here.

If you have any questions, post them below. Or you can contact me directly here.

{ 2 comments… add one }
  • Michael January 20, 2020, 8:11 am

    There is yet another seller trap, that can be very tricky to avoid. Our AZ account was suspended for 18 days during Q4, nearly shut us down for good. There are some unscrupulous sellers that are creating listings with branded products, trying rather successfully to rebrand these products as their own. Filing counterfeit claims against sellers, us. Amazon without doing any type of investigation suspended our account. We have recovered and have learned a very valuable lesson. Very costly lesson.

    • Jordan Malik January 20, 2020, 10:57 am

      Hi Michael. I am so sorry to hear this.

      The great news is you recovered, of course the bad news is that it (presumably) put a big dent in your business.

      I don’t know what you’ve done to reduce your risk in the future, but here are some ideas that should help you and/or other readers with their own private label brand:

      1.) Choose niche and/or bundled products that are harder to copy (from a manufacturing standpoint). For instance, I have a seasonal product that generates over $10,000 every summer. So it’s not a ‘blockbuster’ by any means, but it’s ‘small’ enough where an unscrupulous seller won’t bother to get the same thing manufactured. Plus, the item has a few different components to it that makes it discouraging for said unscrupulous seller to copy it.

      2.) Register your Brand within Amazon’s Official Brand Registry. This requires a little work (you have to have a trademark for your brand, and you have to verify you are the brand owner). But it makes it harder for any other seller to file a counterfeit claim against you.

      3.) Sell your product on other platforms like eBay and Walmart. You won’t replace your Amazon sales volume, but at least you’ll be making some sales while you work to get your Amazon account active again. (The majority of suspensions can be reversed).

      4.) Create a Facebook community around your product/brand. That way, you can direct your Facebook page’s Fans to another shopping platform (eBay, Walmart, Shopify, etc.) in case Amazon suspends you. Don’t let Amazon hold all the power! You can learn how to do this pretty inexpensively with Jim Cockrum’s Proven Audience Formula 2.0, which is coming soon. (The original Proven Audience Formula 1.0 course is no longer available.)


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