Why does Amazon sell below MSRP Price?
No doubt that Amazon vendors often sell below Manufacturer’s Suggested Retail Price (also called MSRP Price – the price recommended for the retailer’s sale).
But before jumping into the MSRP Price, what Amazon does as a business? Basically, Amazon is a multinational technology company. It provides customers worldwide with e-commerce, cloud computing (AWS), digital streaming, and artificial intelligence. Recently, Amazon announced entering the Polish marketplace which made a big buzz in competitor’s companies. As a big, worldwide player, Amazon has lion’s share on the market and its competitors in Poland (e.g. Allegro) awaits Amazon’s entry with concern.
By the effect of scale, Amazon is a really attractive e-commerce platform for the third-party resellers as it has plenty of them. The company treats its vendors by the strength of their brand. A lot of brands experience price erosion because there are many cheaper substitutes and used products as well as products that don’t have MAP policy and thus offer small margins.
If a third-party manufacturer doesn’t agree on the unfair treatment and is made to sell below the price they advertised, Amazon doesn’t lose much. This is why Amazon MAP violations will occur as well as the lack of respect for the suggested prices a manufacturer wants to sell for.
But adding to all that, Amazon has a powerful tool up its sleeve, too.