How Magnetic Poetry Went Head-To-Head With Amazon Resellers (And Won)
At its inception, Magnetic Poetry—the tiny fridge magnets that allow you to string together silly fragments—was solely a brick-and-mortar business. But that’s been shifting for years to about a 50-50 split. With the dawn of Amazon, the Minneapolis-based fridge magnet phenomenon was poised for a quick rebound after the strain of the recession. Instead, Magnetic Poetry was faced with an entirely new problem: the diminishing of its product’s value by Amazon’s reseller market.
“Like plenty other businesses our size, we had a lot of customers that resold our products on Amazon, and it seemed really great a few years ago because they were placing these big $10,000 orders,” said Magnetic Poetry president Becky Kapell. “But then our price became totally eroded and it was a mess.”
Its wholesale buyers—which locally include the Electric Fetus, Patina’s and the Walker Art Center gift shop among others—have always maintained a $20 price point for the Original Magnetic Poetry kit. However, as Magnetic Poetry was fulfilling bulk orders from mysterious buyers, it noticed that those same orders were appearing on the product’s Amazon listing with the price nearly halved.
“It seemed like sales were going down from our brick and mortar customers [as a result],” Becky Kapell said.
To combat the epidemic its business was facing, Magnetic Poetry hired Canopy, a Brooklyn, New York-based company that specializes in managing the Amazon reselling market for manufacturers. In fact, Canopy had emerged as a standalone business only two years prior from niche gift manufacturer, The Unemployed Philosophers Guild, which wrestled with the same predicament.
“What we realized was that Amazon was a store like any other,” said Stephan Shaw, operations manager for Canopy. ”Even though it’s virtual, they have a shelf where your product sits. So it doesn’t make much sense to allow 100 different sellers to compete for that space when you are the manufacturer. All it does is drive the price way down.”
Most commonly, product resellers on Amazon would buy thousands of dollars worth of product at wholesale price and then pit the product against other resellers on Amazon. To ensure a sale, these resellers would often implement an algorithm into its pricing procedure to automatically underbid the competitor by a penny. According to Shaw, many of these algorithms were built to refresh its price listing every minute, which ultimately created a “race to the bottom.”
“A lot of these Amazon resellers are commodity traders who don’t care how much money they are making,” said Shaw. “Even if they are making a quarter a sale, it’s worthwhile to them because it requires very little investment on their part.”
In face of what could be the demise of their business, Magnetic Poetry (with help from Canopy) created a new standard of practice to eventually tame the volatile Amazon market.
Magnetic Poetry inventor Dave Kapell said, “we sent out a letter [to all of our buyers] that read: “Nobody from this point forward will be allowed to sell on Amazon except us. And if we find out that you are selling on Amazon, we will not sell to you anymore.’” To continue flushing out the resellers, Magnetic Poetry also required buyers to fill out additional paperwork for orders of significant size. By enacting these changes of procedure, Magnetic Poetry believes it could save its business altogether.
“It has already helped immensely,” said Dave Kapell. “Our brick and mortar retailers are much happier with us and, as a matter of fact, our sales on Amazon have improved as well.”