Online Marketplace Exclusivity: Protect Your Beauty Brands Now
Although still dominated by the retail sector, the Beauty & Cosmetics industry has made an undeniable shift to online marketplaces like Amazon, Walmart & eBay.
From 2020 to 2021, global revenue increased from $438 Billion to $511 Billion and numbers are expected to continue to climb, with an expected global revenue to exceed $716 Billion by 2025.
The catalyst for this growth in the US has been online sales.
Although e-commerce sales in the US have only increased slightly over recent years, the Beauty & Cosmetics industry is expected to grow by 48% in the US by 2023.
One word: EXCLUSIVITY…. You want to have online marketplace exclusivity to protect your brand IP.
The most successful brands on Amazon manage their distribution channels carefully.
Smart brand owners understand that to succeed, they must give consumers what they want – convenience and quality products.
While extremely important, price is not always the driving force influencing consumers to purchase a branded item.
The consumer experience has become vital to success on Amazon for brands of all sizes.
Consumers demand quality, support, fairness and selection.
Imagine ordering your favorite shampoo from Amazon only to open the packaging and find that the item is damaged and leaking all over the place.
As a consumer, you would likely feel frustrated / angered by the inconvenience (which could have been avoided). Even more, your experience with a brand you thought you loved has been hindered.
The result? You leave a scathing review on Amazon. What you do not know, however, is that this experience may not have been the fault of the brand.
This scenario is all too common for brands, especially the Beauty & Cosmetics industry. An industry where products are typically viscous liquids that require special handling and packaging to ensure they’re not damaged in shipping.
Brand owners sell their products directly to consumers and via properly managed authorized reseller programs. They work hard to ensure the products they sell online reach consumers in the condition they intend. However, they cannot control the haphazard practices typically employed by unauthorized sellers.
It goes without saying that an unauthorized seller will not take the same care in storing, packaging and shipping branded products as brands themselves. Authorized sellers adhere to heightened quality controls and engage in pre and post sale product education.
Most Beauty & Cosmetic companies offer products through various distribution channels. When branded products are sold through distribution and wholesalers, brick & mortar stores and online, there are a number of ways in which products can “leak” to unauthorized sellers.
As unauthorized sellers join branded listings on Amazon, the probability of a negative consumer experience and in turn, harm to the brand increases exponentially.
Unauthorized sellers only care about their own profits and not the long term success and reputation of a brand.
The First Sale Doctrine generally allows the resale of authentic products by any seller as long as the item matches “manufacturer” condition.
Many unauthorized sellers will improperly argue that the First Sale Doctrine protects them. This is because Amazon and other platforms do not take action in response to claims of violations of exclusive distribution agreements.
Courts all over the US have found that material differences can include whether the manufacturer honors their warranty / guarantee when products are purchased from unauthorized sellers.
Temperature & Humidity controls for storage of products;
Batch checks to ensure products are not expired, defective, or damaged;
Restrictions on Commingling of Inventory at FBA;
Restriction on use of the FBA repackage and return feature;
Customer service training;
Ability to receive notice of and implement recalls;
Packaging requirements (ex; pump lock, poly bog, secondary boxing);
Labeling requirements (batch codes;
Our data driven processes and focus on e-commerce has helped us develop one of, if not the largest index of Amazon sellers in the Beauty and Cosmetics industry in existence.
We conduct high level investigations of every unauthorized seller to ensure we are making the most effective communication possible when sending cease and desist letters.
We also work intimately with our clients and their brand(s) to ensure we understand their weak points and where products are being diverted to and from.
Our firm uses a cost effective approach to ensure unauthorized sellers are removed as efficiently as possible.
We know how to escalate the unauthorized seller situations properly with e-commerce platforms to take the decision to sell out of the unauthorized seller’s hands.
Copyright 2022 – Rosenbaum, Famularo & Segall, P.C., the law firm behind Amazon Sellers Lawyer – All Rights Reserved – New York – Illinois