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Amazon Disrupts Novelty Sellers’ Businesses

In what was supposed to be a break-out year for Ann Arbor T-Shirt Company, co-founders Jerry Kozak and Ricky Winowiecki ended up tightening their belts and laying off staff thanks to new restrictions from Amazon on novelty items. The t-shirt company had 6 million SKUs for sale on Amazon with plans to nearly triple that amount this year, but received notice in early February that Amazon was limiting the company to 100,000 SKUs.

Kozak and Winowiecki are not alone. Another large seller of novelty items who was also forced to lay off employees and who wished to remain anonymous forwarded a letter it received from Amazon stating in part, “We are limiting your listings because you have a large number of novelty or similar SKUs that have not received customer interest. After March 5, 2014, you will be required to keep the number of SKUs in your seller account at or below 100,000. Failure to do so may result in account suspension.”

The reason? “Our goal is to help customers more easily find what they are searching for by reducing the number of novelty and similar SKUs that do not receive customer interest,” according to Amazon’s email to sellers.

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EcommerceBytes first wrote about Amazon’s new limits on Novelty SKUs a week ago. Amazon spokesperson Erik Fairleigh said at the time, “We are always looking for ways to improve the customer experience. The change is to help customers easily find items they are looking to purchase and to encourage our Sellers to prioritize the most popular items that customers may have an interest in.”

But sellers like Kozac say it’s impossible to identify the “most popular” designs. If Ann Arbor T-Shirt Company sold 50,000 novelty tees in a month on Amazon, it would be a different 50,000 designs the next month, Kozak said. “It’s not a consistent 50,000 orders in a longtail business like ours. You can’t take a scalpel and cherry-pick.” How longtail? You’ll find Ann Arbor t-shirts featuring dinosaurs doing pushups and shirts honoring cities from around the globe, including Ukrainka, Ukraine; Samara, Russia; and Cisco, Texas.

Both of the merchants EcommerceBytes spoke to by phone who were impacted by the new policy said that between 30 – 40% of their Amazon orders are for low-order SKUs.

Ironically, Kozak had reached out to Amazon seller support in November explaining it was about to invest in new equipment and new employees and wanted to make sure it could continue to grow its SKUs on the marketplace. “They said absolutely, keep doing what you are doing.” In December, the company took out a quarter-million-dollar mortgage to invest in equipment, including new embroidery machines.

Kozak doesn’t disagree with Amazon’s decision in general. Print-on-demand can lead to a glut and can result in sellers throwing garbage on the site, he said, but was unhappy with the way Amazon went about it.

He pointed to another change Amazon had made requiring sellers to ensure images were a minimum 1000 pixels on at least one side, and said Amazon had given sellers 6 months to get into compliance. Amazon gave novelty sellers one month to analyze millions of SKUs to determine which ones to winnow down, physically delete them, and then upload the new files to Amazon. (Amazon notified sellers of the new restrictions on February 3rd and gave them until March 5th to get into compliance.)

“I do understand where Amazon is coming from,” Kozak said, but he said there was no review and no appeals process. “I’m very confident that if I could speak to a person in a judicial setting, I could make a case.” He said at this point, he’d be pleased if he was allowed to list just 2 million SKUs.

Ann Arbor T-Shirt Company gets 50% of its revenue from Amazon, Kozak said. As a result of the new limits on novelty SKUs, the company laid off its two artists who created designs, and put some other staff on reduced hours. This marketing video the company created demonstrates the process of creating custom designs.

Ann Arbor T-Shirt Company may sell one a year of any particular design. By “casting a wide net” in offering many designs, “it was working out really well for us,” Kozak said.

We asked Amazon’s Fairleigh a series of questions for this follow-up article, including how exactly a smaller number of Novelty SKUs would improve the buyer experience; why Amazon decided to limit by SKU rather than design or product page; and why Amazon didn’t give sellers more time to comply with the new policy.

We also asked if Amazon was aware that some sellers in the novelty category were laying off employees including designers and listers as a result of the new restrictions. Fairleigh told EcommerceBytes Thursday that Amazon had no further comments beyond his statement made last week.

A UK paper picked up the story Thursday and pointed to an Amazon discussion boardwhere UK and German sellers complained about the same novelty SKU restrictions in those countries.

Marketplace sellers have long noted the power that a marketplace has to disrupt merchants’ businesses with little time to adapt. But in this case, sellers on discussion boards say they are baffled about why Amazon would limit consumer choice when they shop for novelties on Amazon.

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Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. Send news tips to ina@ecommercebytes.com.


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