- It's not even with Amazon's rules, right?
It's like if you were going to go drive down the street
on the left hand side with like
no what on your cell phone with no like,
seatbelt or anything like that --
- In this video I'm going to be addressing the topic,
"Is selling Name Brand products
via arbitrage on Amazon illegal?
And is wholesale the actually only right way
and legal way to sell name brand products?"
Now, the short answer is, arbitrage is completely legal.
But before I go ahead and get into those facts,
I want to address a few things up front.
So the whole reason why I'm making this video is because
it's getting to the point where I'm getting messages
eight to nine times a week asking me,
"Is arbitrage illegal?
Am I going to get my account suspended?"
And the short answer I tell them is, no.
And I asked them, "Where do you hear this information?"
Like, why do people keep messaging me this?
And they say a YouTuber named Bo Crable keeps saying this.
So I want to say a couple of things is that
I don't think Bo is a bad guy.
I think I've watched his videos.
He seems like a genuine guy.
I don't know him personally but he seems like a good guy.
But that being said, I want to clear up some misinformation
and secondly is that, even though I'm singling Bo out,
this is an argument a lot of licensed distributors
are saying and I actually spoke with one at a trade show
a couple of weeks ago
and I'm going to get into that conversation
later on in the video.
And last thing I want to say is
this is not a video about arguing
whether what business model is right, arbitrage or wholesale
To give you guys a little bit of background about me,
I started with online arbitrage,
but my business right now is about
60 40 wholesale arbitrage respectively
and the wholesale ratio is probably
going to go up here in the next couple of months.
So I wanted to say that as well.
Now, before we actually get into the details
of the argument, I think it's first best to explain
what is actually wholesale and what is arbitrage.
So arbitrage is where a retailer will purchase items to sell
for a profit from other retailers or other institutions
that have already bought from retailers.
So to give you guys an example here,
I'm an online retailer, that would be like me
going to Walmart or Target or possibly garage sales
or thrift stores or maybe liquidation pallets
that are returned from Walmart
and buying these and then selling these
on Amazon for a profit, that is arbitrage.
Now, wholesale is where an online retailer
will buy from a manufacturer or distributor
and these manufacturers and distributors
have the rights to sell these brands on Amazon
and they pass those rights to the online retailer.
So I really want you guys to keep
this piece of information in mind
when I'm making my argument down the road is
is that they have the authority to pass that right
to sell those name brand products.
So when I'm making this argument in my head,
I'm thinking, okay, "Well how did Amazon start?"
And they started as a book company, right?
So they started as selling used and new books
and to me, it just didn't make sense
to have every third party seller
provide proof that they could sell every single book
from every author, from every publisher,
you would be submitting invoices all day.
Now, I'm not saying I'm building my argument around this.
I'm just thinking, this is what made me
want to do more research.
So now let's go ahead and talk about
how the gating system works on Amazon.
When selling on Amazon, a seller will encounter
gated categories and gated brands.
And the way that you can get ungated in these categories
and brands is by submitting invoices
from authorized suppliers to sell these items.
And then you will be allowed to legally sell these items.
Now, when you buy from Walmart or Target,
you can't submit receipts, receipts do not work,
because these retailers do not have the authority to pass
the right on to sell these particular brand name products,
only the authorized distributors and manufacturers.
Now, this is where things get a little hairy,
and where I build my case is
when an account starts establishing itself
in the Amazon system in terms of length of time opened
and dollar amount pass through,
you can start getting ungated in certain brands
without actually having to apply invoices
or letters authentication.
And this could be different for every brand.
So some brands it's your accounts been open for three months
and you request approval and you automatically get ungated.
Now, in this particular case study,
and what I'm going to reference today is, is Nike.
When your account reaches $100,000 in sales
and you request approval, at least at the time of this video
and assuming your accounts in good standing,
you will then gain access to Nike to sell those items.
This is where Bo and other distributors would say,
"That's not true, you cannot sell those items."
And this is where I say, that's not true, that's false.
So what I decided to do was, I contacted Amazon,
I spoke to customer support
and I got in touch with someone from the United States
who's familiar with gating practices on the Amazon platform.
And what he described to me was that
each brand has a partnership with Amazon.
And like I said, every brand is different.
But basically, in this particular case,
Nike has an agreement with Amazon where
when a seller has established $100,000 in sales
and who knows what else it is, that third party seller
now has the right to sell those items.
Amazon is passing those rights from them
to the third party seller and it's acting as an invoice.
That's the reason why the invoice isn't needed.
It's the same as an invoice and each brand is different.
So there are some brands on Amazon that have an agreement
to where it doesn't matter if you have sold
$7 million worth of stuff,
you will always have to submit invoices
and that will be the only thing that will suffice.
There are even some brands,
they will aren't even accepting applications.
So that's to keep in mind now I wanted to hear,
so that's great, I was like,
"Okay, that adds to my argument,
but I want to hear what Nike has to say.
What's Nike side of the story?
So I call up customer support at Nike.
They transferred me to corporate
and they then transfer me to another department
and I speak with this head of department.
And to summarize what he said,
he said the exact same thing the Amazon representative said,
now there are a couple of stipulations I wanted to add.
He said that they do not advocate this
so they can't really support this and they also said that,
if there's anything wrong with those Nike shoes
that the customer who bought from that third party seller
who got access via Amazon, the basically the customer is
won't be able to do anything about it.
Now, obviously anyone who sold on Amazon knows that
the Amazon covers their customers
better than any other marketplace out there.
So I mean the is still in good hands.
Now, I want to reference, coin that
I spoke with a distributor at a trade show I was at
a couple of weeks ago and he was selling some
Nike, Adidas, Converse, all these big name brand shoes.
And I go up to him and I were talking
and he asks, you know, "Do you saw online?"
And I tell him, "Yeah, that's primarily
where I'm selling right now."
And he told me, "If you sell these shoes online,
because I make you sign an agreement,
not only will I sue you,
but the name brand of the shoes will sue you as well.
So I want to clarify a few things here.
Now, this is where he's a little confused
in terms of if you have already have access
to sell those particular brands of products
from that supplier, you can sell them
and the brand cannot sue you.
However, if you sign an agreement with a distributor
or with a manufacturer to not sell online,
and you do sell those shoes,
not only will the distributor cut you off,
but they'll probably sue you.
So I'm not advocating that and I wanted to clarify that.
So I've made my points, that's great, but now you're saying,
"Okay, Chris, why are accounts still getting suspended
if arbitrage is 100% legal, like what's going on here?"
Now, there's three reasons why an account on Amazon
will get suspended and it all
has to do really I think with the buyer
and not arbitrage as a whole, as a process.
So I think the fault needs to go on
the actual individual and not the system.
So I'm going to give you guys three instances here.
First instance is when a seller
is using a third party system to list a product
that bypasses the gating process altogether.
So normally, when you go to list a product on Amazon
and it's gated, you cannot list it,
it won't even let you list it.
However, there are services like inventory labs
where it will allow you to skip this
and it will allow you to add that gated product
to your shipment, send it into Amazon.
And then you have a gated product
that you're not supposed to be selling
in Amazon's warehouse, flags will be raised.
They'll temporarily ban your account
until you provide invoices and obviously if it's arbitrage,
you're not going to have invoices to provide.
Reason number two, why an account will get suspended is
let's say you got ungated with one of those brands.
Not only did you meet the selling requirements,
but you had good selling metrics.
Now, selling metrics include, you know, return rate,
reviews, all of that kind of internal stuff
that keeps an account in good health.
And what could happen here is that
an account could fall below that certain threshold
when they got approved at this threshold
and it raises some flags and Amazon system to where,
let's see if this guy's actually,
you know, selling the right stuff,
the last for invoices that will get your account banned.
Now, the last reason and account will get banned
is the suspicion of counterfeit goods.
This is why when I talked to the Amazon representative,
he did say it's always good to have invoices
of whatever you're selling on Amazon.
And obviously if you can get invoices
for whatever you're buying, that is the way to go.
But to say a business model is completely illegal,
just because you don't have invoices,
I think is just a bit too much.
So I'm going to go ahead and close on this
closing fact guys, is that when you hear something online,
you should always question everything.
Ask yourself, "What biases are present?"
Is someone saying this just because
they want you to buy a four figure course?
What's going on here?"
Even with this video, ask yourself, "What are my biases?"
Do more research, I highly encourage you to do it.
Pick a different brand, do the exact same thing I did.
Maybe pick Samsung or Apple or something like that.
Do your own research and I'll just end with this as
what do you guys think?
Is arbitrage on Amazon illegal?
Is it bad selling practices?
Let me know your thoughts in the description below
and I'll see you guys next time.
(air whooshing) Hey everyone,
I hope you enjoyed this video.
If you did, feel free to like and subscribe.
You can also find me in the free Facebook group
in the description below.
Now, I also left a link to Bo's channel
in the comment section below, see you guys next time.
(upbeat music)