As Holiday season nears, battle with Amazon resellers looms.

Recent figures show that 40% of Amazon.com unit sales come from third parties. That is, Amazon brokers the sales on its website, but the sales are actually made through a different seller. Amazon calls this its 3P (third party) marketplace.

However, the product manufacturers have no control over the process, and too often the third parties are not authorized resellers of the products. They come by the goods through leaks in the distribution channels, or overseas “gray markets”, or simply wayward retailers trying to undercut legitimate operators.

When this occurs naturally in the marketplace, manufacturers take actions to shut down the unauthorized sellers. However, when they complain to Amazon, they are given a cold shoulder. Amazon doesn't feel it's their job to police the many resellers they do business with, and manufacturers are cautious in making demands that may damage their relationship with a company the size of Amazon.

Some accommodation needs to occur as the manufacturers affected can lose control of their distribution. The underlying issue comes down to pricing. The third party resellers are destroying the value proposition of important brands, by undercutting the market. Legitimate retailers will quickly shy away from brands when their distribution runs amok, and prestigious brands can wind up in the dollar store.

A potential solution to this is for Amazon to build strong relationships with well-recognized authorized resellers and limit their 3P marketplace sales to these firms.