What Is Sold by Amazon (SBA) Program?
Sold by Amazon (SBA) program provides a different selling experience. In essence, if you opt for this feature, Amazon will handle the pricing for you. In turn, for the products enrolled in the SBA, Amazon will automatically set the prices. However, it’s available only if you meet the Amazon requirements.
This option was an initiative of Amazon aimed at increasing sellers’ trust in the company as a good business partner that seeks to protect the interests of both buyers and sellers. However, the sellers are still distrustful of the program and believe that participation in it can harm in the long term. Let's try to figure out if this is really so.
How Does Sold by Amazon (SBA) Program Work?
One of the main benefits for any Amazon seller is competitive pricing. This is exactly what the SBA program offers. If you participate in the program, you allow Amazon to set the price of your item as it sees fit. At the same time, control over the listing remains in your hands. Let's take a closer look at what this means.
When you confirm your participation in the program and select the products that you want to sell in this way, the Amazon algorithm starts its work. Amazon recalculates the prices using the dynamic pricing engine in real-time. By analyzing the prices of competitors and your price, it sets the Minimum Gross Proceeds (MGP), which you will receive anyway after the sale of the product. This is a guaranteed payout that Amazon will provide you regardless of how much the product was actually sold for.
If the product was sold at a price higher than the MGP, the seller is paid that higher price.
Don’t forget that you pay all the seller's commissions anyway. Therefore, the amount of actual payments will be less than the value of the goods sold.
The good news for you is that Amazon covers all taxes. So, you don't have to think about it. When you join the program, the listing will be marked as "Ships from and sold by Amazon.com" in the Buy Box block. When customers will add a product to the cart, they will see it. This will give an additional boost to sales. After all, sellers trust the marketplace.
How to Enroll in the Sold by Amazon (SBA) Program?
You are eligible to participate in the Amazon SBA program if you are:
- Registered with the Amazon Brand Registry.
- Having a Professional Amazon Seller Central Account.
- Enrolled with the Fulfillment by Amazon (FBA).
If you meet these criteria, you can join the program. Just log into your Amazon Seller Central Account and find the appropriate section in the Settings. If it is not there, it is likely that this program is not available to you yet.
If you want to add several products to participate in the program, you will have to add each of them separately.
If you want to add several products to participate in the program, you will have to add each of them separately. Listings with the proposed Minimum Gross Proceed will be available in the Manage Inventory block.
Remember that no one obliges you to join the program if you do not like the MGP that Amazon offers you. Look, evaluate and leave if you are not ready for such a value of your product.
Pros & Cons of Sold by Amazon (SBA) Program
At first glance, it seems that the program is ideal for any Amazon seller. After all, automatically changing the cost depending on the prices of competitors is a winning strategy. Many sellers use special third-party tools to monitor prices and change them based on market pricing factors. Amazon offers to do this for free and guarantees the minimum unit cost that the seller will receive after the sale. But not everything is as perfect as it seems. Now, let’s round off the pros and cons of this program.
Pros of Sold by Amazon (SBA) Program
- Joining the program is free of cost.
- Sellers have complete control over listing.
- Sellers choose the SKUs to enroll.
- You can suspend your participation in the program at any time.
- Ideal for high-volume sellers.
- Amazon handles the rest of things, such as taxes, shipping, etc.
- The price of the product will be competitive due to constant monitoring of the competitors' products costs.
- Sellers can use Amazon PPC to drive sales and control it to get the best results.
- Ships from and sold by Amazon.com badge for some customers will add value to your product.
- You can calculate the minimum return on sales as Amazon sets up the MGP.
Don’t assume that such a sales model will suit absolutely all Amazon sellers and will be beneficial for everyone. It also has disadvantages that you should be aware of.
Cons of Sold by Amazon (SBA) Program
- It might lead to the devaluation of your brand.
If you are planning to grow your brand, you should be wary of this Amazon initiative. Its goal, in this case, is to bring as many sales as possible by reducing the cost of goods, sometimes even below MGP. However, if customers get used to the low cost, they will later associate your brand with the low price. And if you want to exit the program and start fighting the competition on your own, you may lose. You will need to increase the cost of the item, but buyers will be very suspicious of this and will probably not want to buy it. You will win in the short term, but you will lose in the end. Think about whether you are ready for this.
- Amazon has the autonomy to specify the MGP.
This means that you either accept it or leave. You cannot influence MGP, so you cannot increase the minimum revenue you receive in the end. Sometimes Amazon sets MGP so low that participation in the program for the seller becomes simply unprofitable due to the minimum margin that he pledges.
- Amazon can still reconsider your MGP.
Even if Amazon sets an acceptable MGP today, it may change it again in 6 months. And there is no guarantee that its new level will suit you. Meanwhile, it will be much more difficult to interrupt participation in the program and compete independently on Amazon.
- No guarantee of sales to exceed.
The SBA Program is just an opportunity to get sales. But it doesn’t guarantee that you will actually have them. You should take care of this yourself and attract advertising, optimize your listing, do keyword research to attract customers.
- Amazon doesn’t take into account the MAP agreement when setting the price of an item.
If you sell products of other brands, you are probably familiar with the concept of MAP (Minimum Amount Price), below which you cannot set a price. Therefore, if you agree to participate in the SBA Program, you are knowingly agreeing that the selling price may not be in line with the MAP. This can be a real problem for you if the brand company notices it.
How Much a Seller Gets with Sold by Amazon (SBA) Program?
The seller gets the minimum price (MGP) set initially, even if the product was sold for a price that is lower than MGP. However, if Amazon sells the product at a higher price than the MGP, the seller gets these higher costs.
Let’s say you sell a product enrolled in Sold by Amazon (SBA) Program for $25. Amazon Set up MGP as $20. The actual amount of the deal is $18. So, you’ll get $20 because Amazon guarantees, that the seller will get no less than MGP which was set up for this product.
Now let’s pretend that you sell your product for $25. Amazon will pay you $25 because this amount is higher than MGP.
But don’t forget about fees which you need to pay according to Amazon marketplace rules. Therefore, the total amount you will receive in both cases will be lower.
Should I Participate in This Program?
The only way to know is to dive straight into the program. You can experience and know how it will turn out in the long term. Plus, you can opt out at any time. This program is one of its kind. However, there are a few things you need to know. There is a downside for sellers. Please know that Amazon has the right to change your MGP. The main motive behind SBA is to make Amazon more attractive for buyers. For this, Amazon might even drop the prices, keeping MGP in mind. Still, you will get the guaranteed payouts set initially. That means it can also turn out to be very profitable. In a word, it is worth taking a shot and trying it.