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Amazon Uses Political Favors and Investor Capital to Pit Manufacturers Directly Against Retailers Under the Guise of The Amazon "Advantage" Program
Although the Amazon Advantage Program started off innocently enough- it has been revealed that the program has evolved into something much larger and involved than anyone had anticipated. The below program details are taken directly from the Amazon website in the public domain. The information is accessible to anyone who desires to receive it. The below program is written in vague terms to look as if it is some type of "limited" program. However, if you read the information for what it is, the intentionally specifically vague policies reveal a catastrophic consequence upon all manufacturer-retailer relationships. Please note the absurdly low annual participation fee- so that it appears as if it is a small-scale program & operation. This Amazon program has spun off into an entirely massive, economic destructive force that must be contained before it is too late.
The evolution has evolved into a masqueraded DROP-SHIPPING program for MANUFACTURERS. IT IS NO LONGER LIMITED TO BOOKS, VIDEO GAMES OR DIGITAL MEDIA. It has caused a disconnect and placed two previously symbiotic entities at odds with one another. Where manufacturers and retailers use to have a working relationship, Amazon has now put those two at odds.
Below is the aptly named Amazon "Advantage" Policy as it appeared from Amazon within the public domain. You may review their numbered list below or at least read the bolded text and then skip to the next heading(if you would rather not read the entire agreement). The manufacturer agreement differs slightly and due to confidentiality cannot be posted. We will use the actual simplistic example below to showcase where this program evolved into a problem.
Let's Read About the "Advantage" & Consider the Consequences
The following is the "Advantage Membership Agreement" posted within the public domain on Amazon.com It can be viewed at http://www.amazon.com/gp/seller-account/mm-product-page.html?topic=200339190
Advantage Membership Agreement - Updated January 29, 2008
End of "Advantage Membership Agreement" citation.
This Agreement contains the terms and conditions that apply to an individual's or an entity's participation in the Amazon Advantage program ("Advantage").
1. General Terms In this Agreement, "we", "our", "us", and "Amazon.com" mean Amazon Fulfillment Services, Inc., and its affiliates and "you or your" means you the applicant. "Product" means any product that you register to include in Advantage. In Advantage, we pay you for each unit of Product that you ship to us after it is sold to a customer. Your participation in Advantage is governed by this Membership Agreement, the Instructions and Rules and the terms, conditions, policies, guidelines, and other information on the Amazon.com website, each of which may be modified from time to time. In the event of any conflicts between any of this information, the terms of this Agreement control your participation.
2. Scope Amazon.com may sell the Products through any website or other online point of presence through which it or its affiliates offer, advertise or merchandise the Products. Currently, Advantage is limited to Products shipped to and from U.S. fulfillment centers.
3. Enrollment in the Program In order to enroll in the Program, you must submit a complete Program application, available here,and identify at least one Product for inclusion in Advantage. We will evaluate your application and notify you via email of its acceptance or rejection (which is in our discretion).
4. Membership Fee We charge a non-refundable annual membership fee of $29.95 for Advantage. We will assess and automatically debit this fee from your account each year in May; if you establish a new membership after the beginning of the account year, we will prorate the fee and automatically debit it from the first funds payable to your account. If your membership is canceled or terminated, or if this Agreement is otherwise terminated for any reason, you will not be entitled to any refund of the annual membership fee.
5. Operating Requirements Detailed requirements regarding ordering, inventory maintenance,shipping, returns and other aspects of the Program are contained in the Instructions and Rules. Failure to comply with any of the requirements may result in additional handling fees charged to your account, as explained in the Instructions and Rules.
6. Risk of Loss The risk of loss for each Product will transfer to us only when we accept the Product. You will be solely responsible for any loss of or damage to Product units that occurs prior to such acceptance. Each accepted Product will be stored by us or on our behalf until we purchase the Product from you, we return the Product to you, we destroy or liquidate the Product (as described in paragraph 7), or this Agreement is terminated. In the case of loss of or damage to your Products while stored by us or on our behalf, our liability will be limited to the price that we agreed to pay to you for such Products at the time of our order.
7. Rejection We may reject any Product you send to us that is defective, damaged, overage (meaning that we did not order it from you), not properly registered with Advantage, lacking a bar code, or otherwise fails to meet the requirements specified in the Instructions and Rules. At our discretion, rejected Products will either be (a) returned to you at your expense, and you authorize us to charge your freight account for such returns, or to withhold such shipping charge from payments due to you under this Program; or, (b) destroyed, liquidated or otherwise disposed of without compensation to you.
8. Pricing We will determine, at our sole discretion, the price at which we sell your Products to customers. However, you may choose whatever suggested retail price("List Price") you like when you register a Product, provided that the List Price is (a) at or below the suggested retail price at which you offer or sell that Product via any other online sales channel and (b)in any event does not exceed $999.99. You will have no security interest, lien or other claim in or to the proceeds that we receive from our sale of your Product(s).
9. Purchase and Payment When we receive a valid customer order for a Product, we will purchase a unit of the Product from your Advantage inventory (except as provided in Paragraphs 7 and 10). For each unit we purchase from you, we will pay you the percentage, specified in the Instructions and Rules, of the suggested retail price you chose when registering the Product. Legal title to each unit of Product automatically transfers to us at the time we purchase it from you. We pay for each unit purchased on a monthly basis, in arrears, in accordance with the Instructions and Rules. Reports on inventory and recent past sales are available online. We can also choose to purchase units of Product at any time, even if we have not received a customer order, by paying you the amount described above.
10. Customer Returns to Us We retain ownership of Products that are returned by our customers, and we may store those Products in our company-owned inventory. We reserve the right to fulfill customer orders for Products from our inventory of returned Products before we purchase or order additional Products from you.
11. Our Returns to You If we determine that there is insufficient customer demand for your Product, we may choose to no longer carry it. In such case, we will attempt to return all Products to you. You pay all charges (including packaging, insurance, and freight) incurred to ship each unit from the fulfillment center to your location. Also, if we have an outdated or incorrect address for you, or if we cannot charge to your freight account, we may liquidate the Products and keep the proceeds, destroy the Products, or ship the Products to you and deduct the charges from any payments due to you through Advantage. Please see clause 23 below for additional obligations with regards to returns from us to international addresses.
12. Limited License Grant to Descriptive Materials You grant to Amazon.com a royalty-free, nonexclusive, worldwide, perpetual, irrevocable right and license to (a) use, reproduce,perform, display, distribute and prepare derivative works from the Descriptive Materials (defined below) and (b) sub-license the foregoing rights. "Descriptive Materials" means all available information about each Product, including without limitation artwork and text for the packaging (including for example, cover, jacket, jacket flaps, spine and front and back matter); promotional photographs and descriptions, blurbs, author bios, Library of Congress information, title page information, tables of contents, indices, complete Product descriptions, reviews and any other materials concerning the Product. Aside from those portions of each Product identified in the preceding sentence, for the purposes of this Agreement, Descriptive Materials does not include the internal content contained in the Products, such as the text of a book or the recording or musical compositions contained within a CD.
13. License; Representation and Warranties You represent and warrant to us that (a) you have full authority to grant the licenses and permission described in this Agreement; (b) you have valid legal title to all Products and all rights necessary to distribute the Products and to otherwise perform this Agreement; (c) your sale of Products to us, and our promotion, distribution, and resale of them, will not violate any contract by which you are bound or any applicable law or regulation; (d) you will deliver all Products to us in new, merchantable condition; and (e) the Products, and our promotion, distribution, and resale of them, will not violate or misappropriate any copyright, trademark or other intellectual property or other rights of any third party. At our option, and at your cost, you will replace or accept the return of any Product that does not comply with these representations and warranties.
14. Indemnification You indemnify, defend, and hold harmless Amazon.com, its affiliated companies, and their respective officers, directors, employees, and agents against any claim, loss, damage, judgment, settlement, cost, expense, or other liability (including, without limitation, attorneys' fees) arising from or related to (a) the Products; (b) your alleged breach of any representations or warranty contained in this Agreement;or (c) any content you provide (collectively, "Claims"). You will use counsel reasonably satisfactory to us to defend each Claim. If at any time we reasonably determine that any Claim might adversely affect us, we may take control of the defense at your reasonable expense and without affecting your indemnification and hold harmless obligations. You may not consent to the entry of any judgment or enter into any settlement without our prior written consent, which we will not unreasonably withhold.
15. Customer Practices Customers who purchase Products are exclusive customers of Amazon.com.Accordingly, all of our rules, policies, and operating procedures concerning customer orders, customer service, pricing, and sales will apply to those customers. We may change our policies and operating procedures at any time in our sole discretion.
16. Confidentiality During the course of your membership in Advantage, you may receive information relating to Amazon.com or Advantage that is not known to the general public ("Confidential Information"). Confidential Information includes, without limitation, information relating to sales consummated under Advantage. You agree that (a) all Confidential Information will remain Amazon.com's exclusive property; (b) you will use Confidential Information only as is reasonably necessary for your participation in Advantage; and (c) you will not disclose Confidential Information to any individual, company, or other third party.
17. Publicity You may not issue any press release or make any public statement related to Advantage, or use the name, trademarks or logo in any way (including in promotional material) of Amazon.com or any of its affiliates without our advance written permission, or misrepresent or embellish the relationship between us in any way.
18. Revisions; Continued Use We reserve the right to change any of the terms and conditions contained in this Agreement, including the Instructions and Rules, policies, guidelines, or other information on the site, at any time and in its sole discretion. Any changes are upon posting a change notice or a new agreement on our website or in your account page. You are responsible for reviewing the new agreement and any applicable changes or notices. YOUR CONTINUED MEMBERSHIP IN ADVANTAGE AFTER THE POSTING OF ANY CHANGES CONSTITUTE YOUR ACCEPTANCE OF SUCH CHANGES. IF YOU DO NOT AGREE TO ANY CHANGES TO THIS AGREEMENT, YOU MUST TERMINATE THIS AGREEMENT IN ACCORDANCE WITH SECTION 19.
19. Term a. Commencement. The term of this Agreement begins when you receive your notice of acceptance into Advantage and ends when terminated by either party. b. Termination by you. You may terminate this Agreement at any time, with or without cause, by giving us written notice of such termination. Your termination is effective 30 days from the date we receive your written notice. You must continue to accept, confirm, and fulfill all orders that we send to you prior to the effective date of termination. c. Termination by us. We may terminate this Agreement at any time, with or without cause, by giving you written notice of such termination, which is effective immediately (or on a later date as specified in the notice). d. Post-Termination disposition of copies. Following any termination, Amazon.com will have the option to either (1) purchase any or all Products in our possession at the price described in Paragraph 6, or (2) return the Products to you. Unless we terminate this Agreement without cause during the first six months of the term,all returns will be at your expense and subject to the provisions in Paragraph 11. All provisions that reasonably may be construed as surviving the expiration or termination of this Agreement will survive.
20. Relationship of Parties You and Amazon.com are independent contractors, and nothing in this Agreement creates any partnership, joint venture, agency, franchise,sales representative, or employment relationship, or any kind of exclusive relationship, between the parties. We reserve the right to purchase items from other sources, even if they are similar or identical to your Products, and the right to fulfill customer orders from inventory purchased outside of Advantage, whether from you or from third parties.
21. Limitation of Liability; Disclaimers We are not liable for indirect, special, or consequential damages or any loss of revenue, profits, or data arising in connection with this Agreement or Advantage, even if we have been advised of the possibility of such damages. Further, our aggregate liability arising with respect to this Agreement and Advantage will not exceed, at any time, the total amounts paid to you under Paragraph 9 of this Agreement during the previous 12-month period.
22. Disputes Any dispute relating to this Agreement (including any actual or alleged breach here of), any transactions or activities under this Agreement or your relationship with us or any of our affiliates in which the aggregate total claim for relief sought on behalf of one or more parties exceeds $7,500 will be adjudicated in any state or federal court in King County, Washington, and you consent to exclusive jurisdiction and venue in such courts.
23. International Shipping Obligations You are responsible for all customs clearance obligations for any Products you ship to Amazon.com from an international address or we return to you at an international address. These obligations include, but are not limited to, the payment of all customs duties, taxes and other charges, and the the identification of yourself as importer and exporter of record, as appropriate. Amazon must not be listed on any documentation as importer, exporter, or consignee. Amazon reserves the right to refuse to accept the shipments that do not comply with these requirements and any costs assessed against or incurred by Amazon as a result will be deducted from your bank account or amounts payable to you at Amazon's discretion.
24. Taxes Any and all fees, expenses or reimbursements (collectively, "Amounts")payable by you pursuant to this Agreement are exclusive of all sales, use, inventory and other taxes, and must be paid to us without deduction or with holdings of any kind. All such taxes are your responsibility and for your account. If Amazon.com is required by law or by administration thereof to collect any such taxes from you, you will pay such taxes to Amazon.com. If Amazon is required to withhold any taxes on payments made by us to you, Amazon has the right to withhold such taxes and pay them to the appropriate tax authority; provided however, that Amazon will deliver a receipt for any such taxes withheld or other such documents necessary to enable you to claim a tax credit or deduction for the taxes withheld. Payment to you as reduced by such with holdings will constitute full payment and settlement to you of such amounts. You will be responsible for all other taxes (including interest and penalties) or fees arising from transactions and the documentation of transactions under Advantage.
25. Miscellaneous a. Choice of Law. This Agreement is governed by the laws of the State of Washington,without reference to rules governing choice of laws or the Convention on Contracts for the International Sale of Goods. b. Assignment.You may not assign this Agreement, by operation of law or otherwise,without our prior written consent. Subject to that restriction, this Agreement will be binding on, inure to, and be enforceable against the parties and their respective successors and assigns. c. No Waiver. Our failure to enforce your strict performance of any provision of this Agreement will not constitute a waiver of our right to enforce such provision or any other provision of this Agreement subsequently. d. Notices. We will send all notices and other communication to you at the e-mail address you listed in your Advantage application or, where applicable,via your Account Maintenance page. You must send all notices and other communication relating to Advantage to us by using the Contact Us form, available on any page in your Advantage account, or at www.amazon.com/advantage. e. Severability. If any provision of this Participation Agreement shall be deemed unlawful, void, or for any reason unenforceable, then that provision shall be deemed severable from these terms and conditions and shall not affect the validity and enforceability of any remaining provisions. f. Entire Agreement. This Agreement represents the entire agreement between the parties with respect to Advantage and supersedes any previous or contemporaneous oral or written agreements and understandings.
This Agreement only governs Amazon.com orders for Products that Amazon.com will sell through Advantage. If Amazon.com orders product from you outside of Advantage (as Amazon-owned inventory), those transactions will be governed by a separate agreement.
What This Unfair Advantage Means to EVERYONE
Mass Retail and Mom & Pop Shops Included
If you are a seller and curious how Amazon worked into such huge advantages so quickly- and curious how Amazon always seem to have nearly immediate restocks- it is because they now operate as a "receive & hold until called" shipper for manufacturers. Manufacturers ship product to Amazon and agree to not be paid for it until it is actually sold. The manufacturers in deepest with Amazon upload their products FOR Amazon. The data is there, waiting to be called when an item is actually or finally in stock. This relieves ALL of the duty of product creation and catalog maintenance for Amazon which frees up a tremendous amount of time and resources.
The manufacturers simply enter their "msrp" per the Advantage policy and Amazon is free to over-ride it as Amazon so chooses. Amazon also has total control over setting prices over the items. Many unscrupulous manufacturers are selling goods to retailers and are ALSO the ones actually causing pricing wars through Amazon.
Why would manufacturers start their own pricing war? Simply put - manufacturers are the only ones guaranteed to make money off of their costs. Lower consumer prices means easier sales which correlates into higher production numbers. Higher production numbers correlate to more profits, FOR MANUFACTURERS. While Wal-Mart, Target, etc... struggle to make a profit or often LOSE money on units- manufacturers are laughing. Amazon is laughing too- they receive their cut, notoriety for low prices on their site and immediate product fulfillment.
Manufacturers are helping to drive the competition out of business FOR Amazon, not because Amazon is assuming the financial risk and burden of doing it on their own.
When the Problem Comes Home To Roost...
Manufacturers & Investors Beware
Since manufacturers are now playing both sides- churning out as much product as they possibly can and throwing caution to the wind- these manufacturers are doing nothing but setting themselves up for failure through limitation of their distribution channel.
Any investor with common sense would also have to ask themselves- "If Amazon has been selling products without having to pay for them until actually sold- where is all the cash going and why are they barely turning a profit?"
The answer is simple. Having nearly unlimited inventory of the heavy hitting products- although only paid for in arrears, is starting to eat up costs at astonishing rates. The ability to have massive amounts of product in stock without financial accountability has caused rampant overstock problems. This is the recent push for "Amazon Warehouses" across the USA. Just another ploy to raise investor capital. Has Amazon informed investors that the majority of products in their warehouses are liabilities and not assets? What about the fact that they are stocking 30 to 100 times(YES, ONE HUNDRED TIMES) more product than they actually need? Those added costs are NEVER recovered.
If Amazon had to assume, and pay for, all of the inventory it currently "holds" then Amazon would cease to exist. We aren't talking 90 day terms accounts or even 6 months. It goes MUCH deeper than that. As Amazon and the manufacturers further entwine- both balance sheets further decline. The true & accurate balance sheet for Amazon would put MANY in jail.
A Simple Solution...
...Occam's Razor Anyone?
Is this program Amazon's brain-child or do all mass retailers enjoy such perks? Does Wal-Mart, Target, Costco, etc... enjoy the perk of not paying for merchandise unless it actually sells? Do only the largest of retailers enjoy this? If they do- what is the cut-off? Why is YOUR COMPANY NOT ENJOYING THE SAME PERK? If it is not usual and customary- why do so many retailers sit idly by and allow Amazon to manipulate manufacturers, and thereby the markets, into Amazon's "Advantage"? (Yes, the program is aptly named Amazon Advantage- ask yourself whose advantage it truly is. How smug can a company be?)
If mass retailers suddenly decided to level the playing field with Amazon it would likely be something as simple as this posed to manufacturers: "We are no longer carrying your product if you sell your products to Amazon."
It would not be price manipulation.
It would not be market manipulation.
It would be legal as retailers can CHOOSE which products they will carry.
Many manufacturers would not survive without Wal-Mart, Target, Toys R Us, etc... Manufacturers would survive, however, WITHOUT AMAZON. This would simply be returning the power to those that have used it responsibly in the past.
To ensure that mass retailers have plenty of products to sell, this tactic would not be levied on manufacturers all at once. It would be levied ONE manufacturer at a time. This show of force in solidarity would remind manufacturers that Amazon is not the reason for their existence- mass brick and mortar chains are.
Amazon is still not large enough to keep an independent manufacturer afloat. It takes Wal-Mart, Target, Toys R Us, Costco, Walgreens, etc...to keep product lines alive. The only reason most of those product lines exist are because of those massive retailers. Without the backing of mass retail, Amazon does not have that product line to sell. Do you think it wouldn't work? If even ONE manufacturer folded because of it- everyone else would fall in line. Which manufacturer would like to step up and be the example? Should an example REALLY be necessary? Have companies truly forgotten those who got them where they are?
The Ponzi scheme, that is Amazon, is running out of money. It will not be long until the investor line of lemmings follows Amazon off the cliff. The question is, how many manufacturers will be going down with them?