Will Trump’s Presidency Crush The Ecommerce Market?

picture of word TAX on computer to accompany a blog post about possible ecommerce tariff from TrumpA 45% tariff on all Chinese imports; that’s what Donald Trump promised supporters. Subsequently, U.S. ecommerce entrepreneurs who use Chinese manufacturers may be wondering: Are we about to be thumped by Trump?

What’s the answer? Will the ecommerce sector suffer under Trump’s administration?

(Can we be blunt? Good. Thanks.) Look, if you voted for the Republican candidate, you’re probably thinking, “Everything will be great, including ecommerce markets! Sellers have nothing to worry about!” If you didn’t cast your ballot for the real estate scion, your thoughts probably veer somewhere near, “It’s the end of the world as we know it, especially for ecommerce entrepreneurs!”

The truth, history consistently proves, likely rests between the two extremes. So, in that spirit, let’s chuck partisan rhetoric into the recycling bin and take a few minutes to dispassionately assess whether or not a Trump presidency will have a destabilizing effect on ecommerce businesses.

First things First: What’s A Tariff?

Are tariffs the same as taxes? Technically, a tariff is a type of tax; specifically, a tax on imported goods and services (in rare instances). According to Investopedia:

“Tariffs are used to restrict trade, as they increase the price of imported goods and services, making them more expensive to consumers. They are one of several tools available to shape trade policy.”

Tariffs are typically a per unit charge, remitted during international custom inspections, and have three primary purposes:

  • Increase the cost of imports, to stimulate domestic demand for the same product;
  • Shift currency appreciation values; and
  • Create government revenue.

Tariffs are not one-size-fits-all measures and have far-reaching financial effects.

(Housekeeping Note: Since we’re talking about the possible effects of Trump’s presidency on ecommerce businesses, the discussion will focus on issues related to imported goods.)

Second things Second: The Current State of the Ecommerce Scene

According to the U.S. Commerce Department, for the sixth year in a row, the ecommerce sector is skyrocketing. 2015 figures show that online product sales accounted for a third of the country’s retail growth — and that number jumps significantly if fuel and automobile acquisitions (which aren’t readily available to buy online) are struck from the calculation.

Last year, online sales totaled $341.7 billion, a 14.6% increase from the previous year.

In 2015, alone, Fulfillment by Amazon sellers shipped over a billion items to more than 185 countries. As such, traditional big-box retailers, like Wal-Mart, are beefing up their ecommerce offerings to compete with established third-party retail platforms like Amazon and Jet.

Ecommerce Exploding

Why is the online retail sector growing like bamboo? In a word: globalization. Anybody who is willing to roll up their sleeves, do the research, pick the right product, and exert some elbow grease can build an online retail operation.

Some people may ask, “But how? Doesn’t it cost a fortune to get products manufactured? Isn’t significant startup capital required?”

Not anymore, thanks to websites like Alibaba.com.

Alibaba.com: The Chinese Ecommerce Site Loved By U.S. Sellers

What’s Alibaba.com?

An online marketplace of out China, Alibaba is a popular supply chain stop used by throngs of U.S. ecommerce businesses. Think of Alibaba as an online Costco; users can purchase products, in bulk, for less.

Even more enticing? People with product invention ideas can shop for Chinese manufacturing services on Alibaba. Why use overseas fabricators? Cost. Items commissioned from Asian manufacturers are significantly less expensive than stateside alternatives.

The Catch-22 of Today’s Ecommerce Environment

So, as you’ve probably already surmised, the current ecommerce setup is a classic catch-22.

Globalization, technology, and the implementation of free trade principals have fueled entrepreneurism by lowering startup costs — which, in turn, has bolstered the economy.

But then there’s the flip side.

All those manufacturing jobs, which were once manna for a stable middle class, sailed overseas, leaving economically devastated regions in their wake.

So now, as a nation, we find ourselves saddled with a Sophie’s choice: Do we hamstring the aborning ecommerce market — and subsequently small business growth — by keeping import fees to an absolute minimum? Or do we hike tariff prices in an attempt to save traditional manufacturing jobs, in an increasingly competitive global market?

The President’s Tariff Power

What’s the next piece of this puzzle? Presidential privilege. Does the U.S. President have the power to impose tariffs without legislative oversight or approval?

If this were a shock jock podcast, we’d ominously answer, “Yes.” Because technically, yes, both the 1965 Trade Expansion Act and the 1974 Trade Act give POTUS significant leeway to negotiate import-export agreements, including tariff rate hikes.

But what, exactly, constitutes “significant leeway?”

How The Trans-Pacific Partnership Plays A Role

Enter the TPP, or Trans-Pacific Partnership. During the campaign we heard it mentioned — a lot — though typically in passing.

And it’s no wonder that the candidates didn’t dig deep into TPP on the trail.

An excruciatingly complex treaty, the agreement particulars don’t lend themselves well to stump speeches. But for this discussion, let’s turn our attention to the Trade Preferences Extension Act — a provision tucked away in the TPP. Passed in 2015, the statute allows sitting Presidents to draft and present trade bills to Congress. According to the edict, Congress can then either approve or disapprove the President’s measure, but not amend or filibuster it.

Which Way Will Representatives Role?

With a majority Republican Congress, the likelihood of legislators waving through a tariff increase, in the name of job stimulation, is high.

HOWEVER — and it’s a big however — representatives of both the Republican and Democratic persuasions are beholden to donors — donors with serious commerce interests. And a sizable portion of corporate America is more concerned about keeping free trade avenues open than bringing manufacturing jobs back to the U.S.

But at this point, all we can do is speculate. It’ll certainly be interesting to see how the Congressional vote breaks if the new administration does present a trade agreement early on.

War, Emergencies, and National Security Issues Give POTUS More Tariff Negotiating Powers

Section 122 of the 1974 Trade Act also allows for a 150-day (5 month) window wherein the sitting President can enact an “across-the-board” tariff, on all imported goods, for national security purposes. After the 150 days, however, Congress must approve the measure or it becomes unenforceable.

The ’64 trade act is also teeming with executive trade privilege. Under the statute, presidents can:

  • Unilaterally impose any tariffs “during time of war.” And no, “war,” in this context, doesn’t mean a widely recognized world war. In fact, in 1971, nearly 20 years after the Korean conflict had ended, Richard Nixon evoked the privilege, on a flimsy administrative thread, to enact a blanket 10% tariff hike. Pundits seem confident that Trump could cite U.S. Special Forces in Lybia and Syria to warrant the “war tariff.”

 

  • Levy tariffs, on specific goods, during a “national emergency.” And again, in this context, an issue of national security could be something as simple as “we’re losing jobs.” These types of tariffs usually target specific goods. For example, President Obama enacted a 35% tariff on Chinese tire imports after taking office, and China countered with its own tariffs.

So while Trump’s ability to impose economic measures, unilaterally, may be limited, circumstances allowing, he could impose tariffs (as high as 45%) by arguing that China’s actions were causing economic harm in the U.S.

But if Trump did do that, would the impact be disastrous?

Trump’s Potential Tariffs: Possible Impact

So now that we know what can and can’t happen, let’s look at the potential impact.

If Trump imposed a 45% tariff on certain goods, like electronics or steel, then the price of imported electronics or steel from China would likely rise.  Importers would then be faced with a choice: produce the goods domestically or look elsewhere. And depending on the product’s makeup, reproducing it domestically may not be possible.

Regardless, if the cost of any given product rises, consumers will be forced to choose between a) spending more on the product and less on other things, b) not buying the product at all, or c) finding an alternative.

But remember, it works both ways; if the U.S. imposes levies on a product from a specific country, and said country responds with their own tariffs, their citizens will also be faced with the same dilemma as stateside consumers. It’s the ultimate game of chicken.

It All Depends On Your Product

Bottom line: for ecommerce sellers, the potential impact of a Trump tariff really depends on the product and where its manufactured.  Targeted goods could see a hike in customs fees, which would likely be passed on to customers in the form of a price increase, and depending on the good, could lead to a drop in demand.  The scenario may be a bit nerve wracking for Amazon sellers that have private label products produced overseas and imported from China.

Diversify To Survive

In the event of a tariff hike on goods imported from China, Sellers in countries not saddled with the tariff (for arguments sake, let’s choose Malaysia) could — and would — swoop in and undercut American sellers.  Because of this, we always recommend having back up manufacturing plans in other countries (or at least get the balls rolling).

To further gird against potential fee hikes, ecommerce sellers should consider stocking up on products before the tariff lands or finding a tariff-free substitute.  Unfortunately, predicting replacement goods may require swami-like skills.

Lastly, look to expand sales in other countries.  If Brits and Canadians aren’t burdened with tariff cost concerns, they may just prove to be the perfect new sales stream.

Tying It All Together

Let’s recap.

  • Trump vowed to slap a 45% tariff on all Chinese imports as part of an economic stimulus plan.
  • Many U.S.-based ecommerce businesses use Chinese suppliers for cost-saving reasons.
  • The Executive Branch does enjoy significant trade privileges, which Trump could, conceivably, use to make good on campaign promises.
  • The only obstacle to a White House imposed tariff hike is Congress. And at this point, it’s anybody’s guess as to which way it will swing. Lest we not forget, Trump’s road to the Oval Office involved a lot of anti-establishment threats; rank and file representatives could prove to be less than enthusiastic about flying the Executive Branch’s banner.
  • Politicians must also answer to donors. And in many cases, those donors have a vested interest in keeping Sino-American trade avenues wide open.

Will Trump’s administration likely brandish its trade privileges during negotiations? Sure. They’re bargaining chips. In a way, he’d be a fool not to. But at some point, restraint will probably prevail, because neither the Executive or Legislative bodies want to be responsible for hurling the country into a Great Recession on account of an ill-considered, quickly implemented tariff hike.

Final Thoughts: Best Tactics

So, what’s the best tact for ecommerce entrepreneurs at this juncture? If you want to play it safe, consider moving monies to your shipping / import budget, regionally diversify your production, and start targeting buyers in other countries.

In the short term, the worst case scenario is a 45% tariff on specific goods from specific countries. In the coming months, as Trump continues to build his transition team and Cabinet, we’ll all have a clearer picture of the administration’s ethos and its likely impact on the ecommerce industry.

Amazon Sues Over Fake Reviews: FBA News

Picture of fake dollar bill to accompany a blog post about Amazon sues over fake reviews

Amazon Does Not Suffer Fools Fake Reviews

Amazon sues over fake reviews, and actively engages courts to enforce its “zero tolerance” stance. Recently, the company filed yet another lawsuit against several phony feedback facilitators.

Amazon Sues Over Fake Reviews

In the past year alone, the online retailer has already sued hundreds of businesses and individuals who create and deploy fake reviews. (You can read about other instances here, here, and here.)

Why Does Amazon Hate Fake Reviews?

Amazon — (and the Federal Trade Commission, for that matter) — views fake reviews as an act of unfair competition. Or, in legalese, buying fake reviews violates Section 5 of the FTC Act because the practice qualifies as an intentional attempt to mislead consumers.

Amazon explained its position to TechCrunch

“Our goal is to eliminate the incentives for sellers to engage in review abuse and shut down this ecosystem around fraudulent reviews in exchange for compensation. As long as this type of abuse exists, we will continue to take enforcement and legal action against sellers participating in fraudulent reviews.”

Discount-For-Review Programs Are Also Against Amazon Policy

The news comes in the wake of Amazon’s announcement to purge the site of incentivized reviews (exception: books).

What does this mean for e-commerce entrepreneurs? In all probability, traditional advertising will make a triumphant comeback.

Is Amazon Hamstringing Startups?

In addition to investor cynicism, Amazon’s recent crackdowns have sparked a concern flame in the e-commerce industry. Is Amazon, in a way, raising the barrier of entry way too high, by ultimately forcing startups to outlay a larger initial marketing spend?

Fake Reviews v. Discount-For-Reviews: Both Are Now No-Nos on Amazon

What is the difference between fake reviews and discount-for-review programs? The former conspicuously violates Federal marketing regulations; the latter is (perhaps, it’s now more accurate to say, “was”) an enormously helpful startup marketing tool — which also spawned an entire promotional services niche, feedback facilitation.

Or, to put it simply: discount-for-review programs helped grow the online business economy.

Difficult But Necessary?

On account of Amazon’s no-holds-barred approach to exterminating solicited reviews, a big e-commerce question now looms: Do Amazon’s actions fall into the “difficult-but-necessary” category? Did company quants crunch numbers and discover that its third-party selling programs were ballooning at a breakneck — and unsustainable — speed, flooding the platform with potentially problematic digital detritus?

Because here’s the thing: Amazon is currently the top-dog, and as such, greatly exposed. It must be careful. Other online retailers are patiently crouching in the tall weeds, waiting for the perfect opportunity to pounce — and that opportunity could be Amazon’s deteriorating respectability. After all, if the platform becomes synonymous with counterfeit goods and phony reviews, the public will start to look elsewhere.

Adjust To Survive

Now, does all this news spell doom and gloom for FBA sellers? No. Surviving amounts to adjusting. Brands and marketers should consider:

  • Launching products at a low price, along with a well-executed customer satisfaction email campaign, which encourages consumers to leave reviews.
  • Readjusting budgets to include other types of “Off Amazon” marketing efforts.
  • Adding an unexpected packaging surprise. Why? Because people are more likely to leave a review if they’re delighted by an unanticipated treat. This tactic also has the added advantage of acting as a counterfeit deterrent.

Need Advice From An Amazon E-Commerce Attorney?

Our firm helps business owners overcome online review challenges, in addition to other Internet business issues, like account suspensions, counterfeiting, and intellectual property troubles.

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Amazon’s New Review Policy: Big Changes

Picture of two business people on couch to accompany blog post about Amazon’s new review policy
Amazon’s new review policy crashed into Planet-Online-Retail, and now feedback facilitators are working round the clock to adjust business models.

Let’s take 3 minutes to outline the situation — in plain language — and examine how the change will affect Amazon sellers and reviewers.

How Amazon Reviews Used To Work

Before this e-commerce October surprise, Amazon let sellers offer discounts in exchange for product reviews, so long as the reviewer included proper disclosures. The system seemed to work and even spawned review facilitation businesses that helped vendors plan and execute discount-for-review programs.

But Amazon never seemed entirely comfortable with paid reviews, of any ilk. In fact, to combat the trend, platform engineers deployed a “learned algorithm that gives more weight to newer, more helpful reviews” and implemented stricter “verified purchase” badge requirements.

Amazon has even sued a few unlucky pay-for-review services, which you can read about here and here.

Amazon’s New Review Policy Points

So, what was the big change? In short: Sellers can no longer offer free products and discounts in exchange for a review. Here is a handful of specific points:

  • Sellers can’t use third-party services to loophole around the restriction.
  • The policy took effect immediately, but vendors shouldn’t worry about past posts. However, Amazon may remove old reviews “if they are excessive, and don’t comply with prior policy.”
  • Sellers CAN “continue to offer discounts and promotions as long as they are not offered in exchange for reviews.
  • Ignoring Amazon’s new review policy is grounds for account suspension.
  • Review facilitators can no longer require members to leave reviews.

Authors Are Exempt From Amazon’s New Review Rules

Which segment of Amazon World doesn’t have to worry about the new review guidelines? Authors. Giving away advanced copies of a book, in exchange for a review, is a publishing industry solemnity — and the online retail giant doesn’t want to disturb the ancient institution. In Amazon’s exact words, the company will “continue to allow the age-old practice of providing advance review copies of books.”

What’s VINE Got To Do With It?

Discount-for-feedback programs are strictly prohibited “unless […] facilitated through the Amazon Vine program.”

Wait, what?

Yep, Amazon is now the only acceptable channel for early offer arrangements. But even that’s a slight misnomer because Amazon doesn’t “incentivize [Vine members to give] positive star ratings, attempt to influence the content of reviews, or even require a review to be written.”

Is Amazon Sticking It To The Proverbial “Little Guy”?

Amazon’s new review policy press release states that “when done carefully,” incentivized reviews “can be helpful to customers by providing a foundation of reviews for new or less well-known products.”

To put it another way: Amazon admits that “incentivized reviews” help online retail startups, but it’s outlawing the practice regardless? Apparently so.

Now, does this mean it’ll be impossible to start a successful FBA store? Not at all. Most review facilitators have already operationally adjusted to the change.

But beyond that, in the simple terms, people like reviewing products. Stick to an effective marketing plan — which includes follow-up e-mails and superior customer service — and you shouldn’t notice a seismic change in sales.

Online Retail Legal Reminders and Considerations

Before our 3-minutes are up, we wanted to leave you with 3 legally minded thoughts:

  • “Unfair and deceptive marketing” rules do apply. Adhere to them or risk and FTC investigation and fine.
  • In light of Amazon’s new review policy, feedback services should make a Herculean effort to contact their review-writers’ networks. Don’t forget, a review that includes something to the effect of “received at a discount for an honest and unbiased review,” is now non-compliant.
  • Account suspension is reversible in some instances. Talk with an online retail consultant who can help pinpoint the exact problem, and provide the best plan of action to restore your account.

Good luck with Amazon’s new review policy. If you have questions, get in touch.

3 Good Reasons To Start An FBA Business

FBA business happyThinking of starting a Fulfillment by Amazon business? Smart idea. In 2015 alone, FBA sellers shipped over a billion items to more than 185 countries, and experts predict it’ll be a multi-billion-dollar industry by 2020.

What Is an FBA Business?

FBA stands for Fulfillment by Amazon. How does it work? Here’s an (admittedly oversimplified) explanation.

  • Step One: Third party sellers (i.e., work-from-home entrepreneurs) either find or create a product. Typically, people source items from Chinese manufacturers because it’s infinitely cheaper than stateside options. Yes, most folks would prefer to use American manufacturers (understandably); but the price point is almost always too high for startups.
  • Step Two: Once the inventory is ready, the seller has it shipped directly to an Amazon warehouse.
  • Step Three: Sellers advertise their products on Amazon and elsewhere online.
  • Step Four: When a customer places an order through Amazon.com, Amazon handles the shipping and inventory logistics.

At first, it may sound logistically complicated, but, typically, after reading a few websites (and books) on the subject, most people are up and running.

The Benefits of Running an FBA Business

Starting an FBA business is a great decision. Not only is the profit potential high, but e-commerce ventures can, theoretically, improve your happiness quotient.

How? Let’s break it down.

Less Stress

Of course, no business is without its stressors. But by letting Amazon handle quotidian administrative duties — returns, inventory management, shipping — many typical headaches associated with running a retail business are removed.

More Money

In many ways, an FBA business is the ideal residual income opportunity because (depending on the product) it falls into the “set it and forget it” model. Now, of course, the more you market, the better your products will sell.

Fewer Responsibilities

Again, since Amazon assumes responsibility for shipping, returns, and warehousing administration, sellers have fewer logistical elements to administer. Plus, the e-commerce model is super scalable; you can start a business for as little as $400; plus, you don’t have to bother with fixed assets. In a statement, a company spokesperson explained:

“With FBA, we take care of the order fulfillment, customer service and product returns, so that sellers can focus on growing their businesses and sourcing products that delight customers. In 2015, sellers worldwide adopting the FBA service grew more than 50 percent year-over-year. We are getting a tremendous response from sellers and we will continue to listen to their feedback to make the FBA service even better.”

Less stress, more money, and fewer responsibilities is pretty much the recipe for happiness. So, there you have it, starting an FBA business CAN lead to a more comfortable, stable life.

We Can Answer Your FBA Business Questions

Interested in moving forward with an FBA venture? Need assistance with an e-commerce issue, like account suspension or counterfeit problems? If yes, get in touch today.

To read more about laws and news that affect the private label e-commerce space, head here.

Yes, Amazon Sues Fake Reviewers

Fake Review Law and Lawyer
The Legal Low Down On Fraudulent Feedback
Online Marketing Legal Reminder: Avoid using and writing paid reviews for Amazon.com. Why? You could be sued or banned!

Amazon is cracking down on phony feedback. Not only is it suing fake review services, but also suspending complicit seller accounts. In fact, just the other day, Amazon announced a lawsuit against a group of third-party sellers who used “sock puppet accounts” to post phony, positive reviews on their product pages.

Recent Action: Amazon Sued Phony Appraisal Services

A few weeks ago, Amazon sued five websites servicing the fake feedback “ecosystem.” An Amazon spokesperson explained:

“We will continue to pursue legal action against the root cause of reviews abuse — the sellers and manufacturers who create the demand for fraudulent reviews, as well as the ecosystem of individuals and organizations who supply fraudulent reviews.”

Ongoing Dragnet Against Fake Review Services

Amazon is obsessed with review integrity because customer posts fuel the e-commerce engine. To that end, last year, the company litigiously targeted parties that allegedly contributed to review corruption. Since then, the online retail giant has targeted about one-thousand phony feedback operations and forced many offline.

Is Amazon’s Review Integrity Initiative Working?

Are Amazon’s attempts to stomp out phony feedback working? Depends on how you assess the situation. Sure, more people now know about the company’s anti-fake review stance, prompting some marketers to stop using them. But, due to the pop-up-shop nature of review services, attempts at extermination have ultimately proven to be whack-a-mole level frustrating.

Need Help With An Amazon Review Problem?

User reviews are essential to the e-commerce success formula. For sellers, the quality and quantity of customer feedback can mean the difference between success and failure.

And unfortunately, unscrupulous marketers use disparaging reviews as a negative SEO tactic.

If you’ve been hit, and you’re ready to right a wrong, get in touch immediately. Our team of attorneys and techs has helped tons of people and businesses overcome various review issues. We can help you, too.

Don’t wait. The longer phony reviews fester, the more damage they can do.

Get in touch immediately to get back on a profitable path, free of fake review problems.

Did Louisiana Legislators Ruin The State’s Startup Economy With An Amazon Tax?

Amazon tax state laws

Louisiana officials may have destroyed the state’s startup economy.

Ok — granted — *destroyed* is a bit strong. But Louisiana’s legislators definitely made their state unattractive to e-commerce entrepreneurs by passing Act 22 — a.k.a. the Amazon Tax Bill.

Check out these figures:

  • In 2014, Amazon generated $79.48 billion in online sales.
  • Experts expect the online retail space to grow by 20%, annually, over the next several years.
  • Analysts predict it will be a $523-billion-dollar market — in the U.S. — by 2020.

Do you think Louisiana made the right choice?

What Is An Amazon Tax?

States can collect taxes from companies with a physical presence — or nexus — to a given state. Or, to put it a much simpler way: states can collect taxes from brick-and-mortar businesses, which raises their costs of doing businesses.

But here’s the rub: currently, in about 40% of states, online boutiques aren’t subject to the same brick-and-mortar charges. Internet retailers, in states without the online levies, don’t have to remit state taxes associated with online sales.

(The Amazon Tax issue is, of course, more complicated than the above explanation; but in this post we’re doing broad strokes. If you sell to customers in every state, get with an account or attorney to ensure compliance.)

Why Did Louisiana Opt For An Amazon Tax?

According to reporters, Louisiana legislators needed money to combat a “severe budget crisis.”

What States Have Online Sales Taxes?

At the time of this writing, 29 states have some sort of “Amazon tax.” They include:

Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, and Wisconsin.

Amazon Won’t Work With Affiliates From SOME States

Each state’s “Amazon tax” is different. For example, Arkansas’ Amazon law has caused discord between the company and state. But, a few jurisdictions away, in North Carolina, the opposite happened; before NC legislators ratified an “Amazon tax,” Amazon didn’t allow NC residents to operate affiliate accounts, but after passing the statute, Amazon added affiliate opportunities for NC residents. Go figure.

Is Amazon The Only Company Affected By Online Sales Taxes?

No, Amazon isn’t the only platform that needs to worry about Amazon taxes. They can also affect affiliate marketers, affiliate networks, online stores, and e-commerce platforms.

Extra Credit: Quill v. North Dakota SCOTUS Ruling Established *Nexus* Standard

In 1992, the Supreme Court of the United States established the “nexus standard” in Quill v. North Dakota. A tax concern case, the question at the center of Quill was whether or not North Dakota could collect levies from a company without a physical presence in — or nexus to— the state. In the end, SCOTUS ruled that “a state can only tax businesses with a physical presence in the state.”

Ultimately, the decision created profit opportunities for e-commerce companies.

Marketplace Fairness Act

Industry associations and traditional retail outlets want lawmakers to pass a federal Marketplace Fairness Act, which would effectively dismantle Quill by replacing the “physical presence” tax standard with an “economic presence” one.

Pro / Con of the Marketplace Fairness Act

Proponents of a Marketplace Fairness Act say it would level the playing field between online and offline concerns.

Opponents argue that states should abolish brick-and-mortar-only taxes to level the playing field.

Get Answers To Your E-commerce Business Law Questions

Kelly Warner is an Internet law firm that works with startups, marketers, and developers. In fact, we’re one of the first firms to concentrate on legalities associated with online marketing and selling.

Founder Aaron Kelly is a preeminently AV-rated attorney, with a 10-out-of-10 on Avvo.com; named partner Daniel Warner has a photographic memory; partner Raees Mohamed has won his fair share of David v. Goliath cases; associate lawyer Hansen Tong has a rocket science background. They’re an online business legal dream team.

Get in touch; let’s chat about your situation and start crafting a solution.

Article Sources

Guy, S. (2016, April 5). Amazon ends its affiliate program in Louisiana over a sales tax law. Retrieved May 10, 2016, from https://www.internetretailer.com/2016/04/05/amazon-ends-affiliate-program-louisiana-over-sales-tax-law

Mire, M. (2016, March 28). Louisiana’s New. Retrieved May 10, 2016, from http://www.thepelicanpost.org/2016/03/28/louisianas-new-amazon-law-raises-constitutional-questions/

Discounts For Honest Amazon Reviews Is Fine; Paying For Bogus Reviews Isn’t

Amazon Reviews Legalities
UPDATE: Amazon recently changed its policy; sellers can no longer offer discounts in exchange for reviews (in most circumstances). We decided to keep this article up for archival purposes.

Team members from BestReviews analyzed 360,000 consumer posts on Amazon.com. Their conclusion? Amazon is flooded with 4- and 5-star reviews, which raised the question: “Can Amazon reviews be trusted?” The answer: Yes, but be aware.

The team observed that:

  • 66.3% of Amazon user ratings are 4- or 5-stars;
  • A “verified purchase” doesn’t mean “full price purchase;”
  • 96% of people who got a free or deeply discounted product gave 4- or 5-star assessments, even though they weren’t required to post high-ratings, just honest ratings.

Can You Trust Amazon Reviews?

So, what does this all mean? Does it illustrate a flaw in Amazon’s review system? Are Amazon reviews worthless?

No, it’s not that drastic.

What the results DO prove is that recipients of free and discounted goods are more likely to give a positive rating than people who pay full price. Humans emotionally connect to money because it’s associated with survival. As such, the more dollars we part with for a product, the more likely we’ll be critical of its shortcomings.
What the results DO prove is that recipients of free and discounted goods are more likely to give a positive rating than people who pay full price.

How Algorithms Can Affect
Amazon Reviews

To balance the review field, Amazon’s rating algorithm gives more weight to reviews written by people who pay full price than those written by launch reviewers who likely got a free product.

Amazon Doesn’t Care If You Give Away Free Products In Exchange For Honest Reviews

(This policy has since changed.)

You’ve probably seen the words “honest review” in an Amazon post.  That usually means the author got the product for free or at a deep discount.

Yes, it’s against Amazon rules to pay for fake reviews outright. It’s fine, however, to give away free products in exchange for honest reviews.

An Amazon spokesperson explained that the company “does not allow compensation or incentive for reviews” except “when sellers provide a [free or discounted] copy of the product, in advance, in exchange for an unbiased review.”

Yes, it’s against Amazon rules to pay for fake reviews outright. It’s fine, however, to give away free products in exchange for honest reviews.

Amazon Explains Why It Loves User Reviews

When communicating with the BestReviews team, Amazon expressed its love of consumer feedback, explaining:

“We believe that all reviews, positive and negative, help customers make informed purchasing decisions. The fact that customers received the product at a deep discount or for free does not preclude them from having an opinion on the product that can be helpful to other customers. Customers indicate that the content of many of these reviews are incredibly helpful. These reviews often provide additional factual information, videos and photos of the actual product in use, and the reviewers often answer follow-up questions.”

Got Review Issues? We Can Help.

We’re review physicians who revive businesses hobbled by damaging feedback. How do we do it? Well, strategies are detail specific, and everyone’s case is different. Let’s talk about your situation and develop a plan that will get you back on track.

Article Sources

Agarwal, Kriti, and Rafe Needleman. “Can You Trust Reviews on Amazon?” Can You Trust Reviews on Amazon? 14 Mar. 2016. Web. 25 Apr. 2016. <https://www.yahoo.com/tech/can-you-trust-reviews-on-amazon-174800847.html>.

Four Important Legal Tips For FBA Sellers and Marketers

Graphic of computer and mobile phone with Amazon logos to accompany blog post about legal tips for FBA sellers

The Amazon FBA program is an excellent starting point for people new to the private label selling niche. Sure, Amazon grabs a percentage of each sale, though the benefits far outweigh the fees.

What are the important takeaways of Amazon’s seller terms? Let’s review four legal tips for FBA sellers — specifically focusing on accounts.

Legal Tips For FBA Sellers #1: Don’t Manipulate Reviews

“We have a zero tolerance policy for any review designed to mislead or manipulate customers.” ~Amazon.com Terms of Service Agreement

Why the hard line when it comes to review integrity?

User feedback is essential to Amazon’s marketing magic; reviews meaningfully engage consumers and serve as sales copy. In fact, Amazon is so concerned with review reliability that its algorithm doesn’t allow for multiple product reviews, from the same household, on any ASIN. That’s right, if your spouse loves the couch-2-fridge 3000 and you hate it, only one review can be posted from the home IP.  Moreover, (and allegedly), some people purport that an Amazon algorithm can pinpoint parties tied to a particular seller or brand.

Amazon is so concerned with review reliability that its algorithm doesn’t allow for multiple product reviews, from the same household, on any ASIN.

The Big List of Amazon Review Dos and Don’ts

  • Amazon doesn’t like it when people pay for praising product reviews. The company even has a history of suing fake review services and individual reviewers;
  • Don’t buy fake reviews that trash competitors’ products;
  • Do have reviewers disclose if they received free products in exchange for a fair review (we can draft an adequate disclosure for you);
  • Do encourage buyers to leave reviews, but don’t direct them off Amazon.com.

Friend & Family Reviews

Does that mean friends and family, who genuinely like your product, can’t leave an honest review? Of course not. They can share opinions – good and bad. Technically, yes, the ultra-cautious could tell friends and family to disclose their relationships in reviews. But really, it’s unreasonable to disallow people from posting; after all, they have free speech rights, too. In fact, many peoples’ first reviews are solicited from people they know.

Just don’t pay people to write fake, glowing reviews — it could get you kicked off the site.

Legal Tips For FBA Sellers #2: Whiners Don’t Live Long and Prosper

The FBA space is growing by digital leaps and branding bounds; so is the number of complaints fielded by Amazon’s seller performance department. With that in mind, consider presenting questions and concerns in a concise, easily digestible way . And above all, provide evidence; doing so makes Amazon’s job easier — and may speed your case in the long run.

Don’t drone on — and on — about a personal beef or how something or someone is unfair. Instead, clearly delineate your issue and explain how it breaks Amazon’s rules. The less emotional your appeal, the better; stick to a “just the facts ma’am” approach.

Legal Tips For FBA Sellers #3: Don’t Bribe Customers For Good Reviews

Is it OK to offer deep discounts in exchange for reviews? In the past, yes. Now, no.

Updated in 2016, Amazon’s TOS says that account holders can’t offer free products or discounts in exchange for a fair and unbiased review. Full stop.

Legal Tips For FBA Sellers #4: Amazon Holds A Lot Of The Cards

Here’s a simple but essential reminder: clicking the “I agree” box, is the equivalent to signing a contract that says, “Yes! I agree to play by Amazon’s rules.”. So, if Amazon makes a decision related to your account, like not choosing to use all the supplied keywords, don’t complain to Amazon that it’s being “unfair” or “impinging on your rights.” You agreed.

Now, that doesn’t mean you can’t work with the company to resolve issues, but don’t go into negotiations with guns a-blaze.

What’s Your Plan If Amazon Suspends Your Account? Work With An FBA Fixer.

The best way to avoid account suspension is compliance – compliance with both FTC and FDA guidelines, in addition to Amazon’s rules. Are you 100% positive your operation is on the up-and-up, regulations-wise?

Who are “we”? Kelly / Warner Law. Our mission is simple: affordably support online entrepreneurs using legal, technological, and marketing tools.

We help private label online sellers and marketers:

  • Navigate the account suspension process;
  • Shake off hijackers and counterfeiters;
  • E-commerce business formation;
  • Review your account for compliance with Amazon’s rules;
  • FTC / FDA / FCC / Shipping compliance;

If something goes awry with your Amazon account, you don’t have to go it alone. Protect your investment and work with one of our FBA fixers. Guidance from an ecommerce attorney probably costs less than you imagine – and it may ultimately put more money in your wallet.

Amazon Hijacking: 5 Legal Tips To Shake Counterfeiters

graphic of apple cut open to reveal watermelon accompanying a blog post about Amazon hijacking

Amazon Hijacking Article Brief:

E-commerce entrepreneurs often have to compete with counterfeiters. But sellers can protect their brand integrity by investing in intellectual property protection and customizing products. If you’re entangled with a sophisticated scammer, consider working with experienced e-commerce attorneys.

Product counterfeiters and listing hijackers are an e-commerce plague. These scammers:

  • First scour online marketplaces for easy-to-copy products;
  • Then occupy product listings;
  • And ultimately undercut the original price by selling inferior copycats. (Sometimes they sell exact product replicas acquired through supply chain leaks).

So, how do you shake a listing tick? Unfortunately, a silver bullet solution doesn’t yet exist, but you can do a few simple things to make your listings unattractive to product pickpockets.

Amazon Hijacking Prevention Tip #1: Vet Your Supply Chain Like Your Financial Security Depends On It (Because It Does)

Here’s the issue: overseas manufacturers may not care about you, your business, or U.S. laws. Their top priority is making money — and they’re often not beholden to stateside statutes.

So, how can you avoid a disastrous partnership? Again, no bullet proof method exists. But what you can do is vet, vet — and then vet some more. Scour the Internet for information about potential factories and manufacturers; read industry message boards; hire a translator if you must.

Also, adopt a Prime Directive attitude; share the names of quality supply chain vendors with other sellers. Why? Because mitigating counterfeiters makes financial sense for the industry, as a whole.

Amazon Hijacking Prevention Tip #2: Add A Little *Sumpin’ Sumpin’* To Your Product

Hijackers leech off industrious elbow grease. So, use their tendencies to your advantage.

How?

Simple: the more unique a product, the more difficult it is to counterfeit. Add a special feature or sub rosa engraving. Differentiating your brand can act as effective counterfeit repellent.

Amazon Hijacking Prevention Tip #3: Spruce Up Your Packaging

What is another great way to ward off hijackers? Add something special to your packaging. The gesture doesn’t have to be elaborate or expensive – it can be as simple as a note. The point is that it’s an unadvertised surprise.

Why?

Because packaging differences work as A-to-Z claim evidence. Also, if you have to track down a supply chain leak, you may be able to pinpoint the culprit if you can pinpoint the exact stage the duplication diverges.

Amazon Hijacking Prevention Tip #4: Brand Register & Maybe More

Take advantage of Amazon’s Brand Registry program. Though it’s not the same as getting a formal USPTO stamp of approval, Amazon brand registry does have its advantages. Importantly, it gives you more control over listing pages – which can be helpful when fighting hijackers.

Brand Registry As An Amazon Hijacker Repellent?

The more control you have over product listings, the more details you can add – and details are kryptonite to hijackers. Instead of trying to emulate a highly detailed product, with an accompanying detailed product page, counterfeiters and hijackers typically move on to easier targets.

Like citronella candles to mosquitoes, brand registry is not a cure-all; but it does repel a bunch of unwelcome pests.

Product Counterfeit Repellent Tip #5: Talk It Out, First

If you’re hit by a hijacker, keep calm; keep cool; keep collected. After all, maybe it’s a genuine, newbie mistake. So, before blowing a gasket, send a private message to the would-be hijacker. Try not to come across as litigious or hyper aggressive. No need for bad blood over an unintentional blunder.

Now, if reasoning doesn’t work, and it’s clear you’re dealing with a seasoned scam artist, it may be time for reinforcements. That’s where we come in.

A Private Label Law Attorney May Be the Answer to Your Hijacking Headache

Unfortunately, hijackers are part of the e-commerce environment. They’ll never go extinct. Like cockroaches, hijackers and counterfeiters will adapt, survive, and multiply! But if you’re vigilant and play a few smart cards, the likelihood of being hit diminishes.

Deal with hijacking issues head-on, before they demolish profits!

Need smart advice about an e-commerce legal challenge? Contact Kelly Warner.

Will FBA Marketers Be Hurt By Amazon’s Move Into International Cargo Shipping?

FBA marketers cargo shippingAmazon is super-sizing, as the company’s Chinese arm entered into the freight forwarding business.

What does it all mean for FBA marketers and sellers?

Maybe nothing, maybe something; let’s take a snapshot of the situation and discuss.

Amazon Registered As A Freight Forwarder (Which Isn’t What You May Assume)

When news broke, some folks assumed Amazon bought a fleet of cargo ships to better facilitate overseas shipments. But that’s not quite accurate because Amazon registered as a freight forwarder, not an ocean liner.

Is the difference between ocean liners and freight forwarders significant? Sure is. In the simplest terms, ocean liners can operate fleets of ships. Freight forwarders, however, are considered “non-vessel operating common carriers” – meaning they can buy space on cargo boats at wholesale costs, but not run boats.

Will Amazon’s Move Into Freight Forwarding Hurt Stateside FBA Marketers? (Some People Think So)

Why did Amazon make the move? We can only speculate, but it seems like a long-term, cost-cutting maneuver. The change will likely accelerate the buy-to-delivery pipeline, which is ideal for both Amazon and its users.

Some people worry, however, that an insular, Amazon-run, Sino-U.S. supply chain has the potential to pummel stateside FBA marketers and sellers. How? Since foreign shipping times would decrease, the number of Chinese manufacturers marketing directly to U.S. buyers would probably increase, competition would stiffen, margins would narrow – and profits would be harder fought.

Are the concerns justified? It’s too early to tell. Right now, the freight forwarding registration is just another indicator that the private label selling and online marketing industries are on the rise.

Get An FBA Lawyer On Your Side

The FBA business can be lucrative; many FBA marketers make an excellent living; but beware: pitfalls abound. To avoid costly setbacks, consult with an Amazon private label lawyer. Attorney Aaron Kelly has been in the space for nearly a decade and understands the legal opportunities that may help your business flourish.

Get your FBA questions answered today.

Article Sources

Rey, J. D. (2016, January 14). Amazon Can Now Ship Packages From China to the U.S. by Sea. Retrieved February 28, 2016, from http://recode.net/2016/01/14/amazon-receives-ocean-freight-license-to-ship-packages-from-china-by-sea/

Amazon Sues Reviewers: An E-Commerce Case Study

Amazon sues reviewers
Amazon sued an alleged fake review facilitator.

From The E-Commerce Law Desk: Amazon Sues Reviewers

Amazon declared war on fake feedback — and the retailer’s litigators are hunting down pay-for-post services.

Amazon Sues Reviewers: The Feedback Industry In A Nutshell

A philosophical fence separates the online review industry: feedback facilitators are either on the “light side” or the “dark side.”

The Light Side’s MO

Reputable e-commerce marketing companies DO exist. They help Internet retailers market products, find audiences, and garner great reviews using above board tactics.

The Dark Side’s MO

The review company pays people to write phony – often glowing – missives on Amazon, Yelp, and other consumer platforms without ever trying the product or reading the book. These folks typically use underhanded tactics (like shipping empty boxes) to give posts an air of credibility.

The deceptive practice has gone viral quicker than a conga line of cats, but it’s slowly poisoning the digital economy.

Amazon Sues Reviewers: Fake Feedback Brokers

Amazon’s first paid fake review lawsuit targeted the operator of buyazonreviews.com, in addition to the John Doe(s) facilitating buyamazonreviews.com, bayreviews.net, and buyreviewsnow.com. Lawyers for the plaintiff are arguing trademark violations (some of the sites use unauthorized Amazon logos), unfair competition, and a smattering of other business-related torts.

From the “Amazon sues reviewers” lawsuit:

“While small in number, these reviews threaten to undermine the trust that customers, and the vast majority of sellers and manufacturers, place in Amazon, thereby tarnishing Amazon’s brand. Amazon strictly prohibits any attempt to manipulate customer reviews and actively polices its website to remove false, misleading, and inauthentic reviews.“Despite substantial efforts to stamp out the practice, an unhealthy ecosystem is developing outside of Amazon to supply inauthentic reviews. Defendants’ businesses consist entirely of selling such reviews.”

Amazon purports to have damning evidence against the defendant (whether it’s true or not is yet to be determined).

Speak With An E-Commerce Attorney

Kelly / Warner focuses on Internet law issues, including online reviews. To learn more about our work with Amazon sellers, head here. Read about our online reputation practice, by jumping here. To speak with one of our experienced attorneys, get in touch today.

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Kelly / Warner is an Internet law firm that handles online business matters, including e-commerce issues related to paid online reviews.