Co-author: Alejandro Castro
Online sales platforms have made shopping more convenient for consumers around the world. Consumers can purchase goods abroad and receive them within days. This convenience, however, has not come without controversy. Recently, Amazon was publically shamed by a sandal brand for attempting to buy and sell sandals from authorized third-party dealers despite the fact that the brand explicitly stated that it did not want its products sold on Amazon. For years, Birkenstock sold its products on Amazon but severed its ties due to Amazon’s poorly enforced counterfeit policy. In efforts to keep the sandals available, Amazon began contacting authorized Birkenstock dealers and offering to purchase sandals at full price.
This is not the first time that Amazon has offered unwilling retailers full price for goods. While this behavior demonstrates Amazon’s dedication to consumers, unwilling vendors like Birkenstock may view the practice as bullying. Indeed, online platforms seem willing to eliminate their margins to keep popular products on their “shelves.” This can undercut the price that brands charge as well as the perceived value of their wares.
Here, Birkenstock vowed to punish any authorized dealer that sold to Amazon and also threatened to sue Amazon for interference with contractual relations. A quick search of Amazon’s online marketplace reveals that Birkenstock sandals are still available through third parties and are fulfilled by Amazon. Perhaps litigation is around the corner.
This scenario serves to further illustrate that with advancements in online shopping, brands are at risk of losing both customers and control of their product. In the past, brands dictated where their goods were sold. Now, online platforms are finding ways of obtaining product without the brand’s approval. This leaves brands exposed to unwanted dealings with online platforms.
Brands, specifically those who have their own retail operations, can mitigate these risks by amending their authorized dealer agreements to limit sales to online platforms. Brands should consider whether they will allow their authorized dealers to sell to online platforms as these sales could reduce autonomy and dilute the value of goods.
Conversely, online platforms should avoid encouraging authorized dealers to break agreements with brands which could lead to claims for interference with contractual relations.
Regardless of what comes of the Birkenstock-Amazon dispute, brands now have yet another challenge brought forth by online sales platforms. This challenge, while significant, can be overcome through strict monitoring of authorized dealers, tight contractual control and commitment to maintaining the value of a brand and product.