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How Amazon's deal with Apple puts the hurt on small sellers

The new deal should benefit plenty of customers, but pulls the rug out from under many Amazon merchants.

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The new iPhone XR, which Amazon will start selling directly soon.

CNET

About five years ago, Page Weil needed to make some extra cash to support his wife going to nursing school and help pay for costly surgery she needed. He turned to Amazon's marketplace for help.

He started listing used electronics through the site, finding particular success selling used and refurbished Apple products, including discontinued keyboards and iMac desktops. In the past year, he sold roughly $300,000 worth of mostly Apple products on Amazon, for an after-tax profit of about $40,000.

"It was really a great thing for our family," the 35-year-old consulting engineer from Colorado said, adding that the side business helped him pay off the medical bills, nursing school and existing student loans.

But that was then. Weil is now among a group of Apple sellers on Amazon who are about to see their business dry up. Amazon this month signed a deal with Apple that will allow it to directly sell many more of Apple's new devices, including the iPhone XS, iPhone XR and iPad Pro. The new inventory will arrive in the coming weeks. As part of the deal, any merchants that aren't authorized Apple resellers will be barred from selling any more Apple products starting Jan. 4.

"I feel our business is not being treated fairly and there's nothing we can do about it," Weil said, "and that's what's really frustrating."

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Page Weil, a 35-year-old consulting engineer from Colorado, will likely see his side business selling Apple products dry up in early January.

Courtesy of Page Weil

Weil's situation illustrates the risks that independent sellers often take in building up a business on Amazon, where deals made by the company can shift the ground from under them. It also highlights how Amazon over the years has routinely marketed itself as a friend and partner of small businesses on its site, only to take actions that contradict that positive image.

The Apple deal also points to Amazon's work to make its site more welcoming for major brands. It signed a similar agreement with Nike last year, and made it harder for small merchants to sell products if they aren't working directly with the brands they list.  At the same time, Amazon needs to keep finding ways to support its 2 million independent sellers worldwide, many of them smaller sellers like Weil. More than half of Amazon's sales now come from its marketplace and not direct sales.

While some sellers will lose revenue, most Amazon customers will likely benefit from the deal. The e-retailer currently lists only a smattering of many new Apple devices through its independent sellers, who offer items at varying prices and conditions. The deal will give Amazon a lot more inventory and shoppers greater selection and standard pricing.

Also, the deal should curb counterfeit Apple product sales on Amazon, an issue Apple raised in a lawsuit against the online retailer in late 2016. 

Goodbye, gravy train

There's always a risk for smaller sellers working with Amazon, since the company is so much bigger, often competes against independent merchants on its site, and it has data on the most popular products a seller offers, said Forrester analyst Sucharita Kodali.

"The gravy train is not going to last forever," she said. "You take advantage of it while you can."

Asked about those sellers who'll lose out from the Apple deal, an Amazon spokesperson said: "Sellers are incredibly important to Amazon and our customers, and we are notifying them now so they can prepare for this change."

An Apple representative didn't comment for this story, but the rep previously said the company is "working with Amazon to improve the experience for Apple customers on their site."

While Amazon and Apple didn't comment on the timing of the agreement, it comes just ahead of the critical holiday shopping season. Both companies are likely hoping the new arrangement boosts their sales, especially as iPhone growth has stalled and Amazon posted weaker-than-expected revenue in its latest quarter. Notably, the partnership doesn't include Apple's HomePod, with Amazon holding off on selling several smart speakers that compete against its Echo devices.

Weil is far from the only one affected by the change. The owner of AceBeach told CNN the Apple deal was an "assault on third-party resellers." Electronics refurbisher John Bumstead told Motherboard the change could impact hundreds, if not thousands, of small repair businesses.

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Weil said the threat of a potential Apple deal was always in the back of his mind, but after it happened he hoped to get more support or guidance from Amazon. Instead he feels jilted by Amazon after selling $500,000 in merchandise through the site in the past two years, paying the company $80,000 in fees over the past three years and maintaining a superb seller performance record throughout.

"Sell until we decide to kick you off. That's the part that really gets me," he said.

He said he still has about $50,000 worth of Apple products in Amazon's warehouses. He has until Jan. 4 to sell those items through Amazon, then the company will remove those listings and send him back the goods at Amazon's expense.

Whatever goods he has left after the holidays he plans to liquidate on eBay, where right now he sells only about 10 percent of his merchandise. Amazon said its Renewed certified refurbished program won't be affected by the Apple deal. However, the program only lets in sellers who handle millions of dollars in Apple products, leaving out most smaller sellers.

An eBay spokesman said the company has already heard from several Apple sellers who will be affected by the deal and the company plans to offer them support, like promoted listings, to encourage them to bring more of their business to eBay.

"Our strategy is driven by what our customers want, which is a fair platform to purchase iPhones of all generations and prices, from sellers of all sizes," the spokesman said.

After clearing out his current inventory, Weil wants to sell other electronics on Amazon, hopefully diversifying away from just one brand.

"It'll really depend on what I can find," Weil said. "You have no guarantees that another brand won't come in and do the same thing."

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