A New Wave of Brand Gating Reminds Sellers to Diversify Risk

A wave of brand gatings and Section 3 suspensions happen every year in Q1 and early Q2 (and again in Q3 just before the holiday rush). In today’s increasingly complex Amazon marketplace, sellers are facing a growing challenge with brand restrictions. 

Over the past few months, we’ve witnessed an unprecedented surge in brands “gating” their products on Amazon, effectively locking out sellers who don’t meet strict authorization requirements. This trend has serious implications for all Amazon sellers, but particularly for smaller operations that have traditionally focused on a limited brand portfolio and limited stock.

The Ungating Challenge

If you’re an Amazon seller, you’ve likely encountered this scenario recently: You attempt to list a product from a brand you’ve previously sold without issue, only to discover that Amazon now requires brand approval. To become “ungated” and regain selling privileges, you must produce an authorized invoice for quantities ranging from 100 to 500 units.

For established sellers with deep supplier relationships, this might be manageable. But for smaller sellers or those just starting out, these requirements create a nearly insurmountable barrier. Purchasing hundreds of units of a single product represents a significant capital investment and inventory risk that many simply cannot afford to take.

Concentration Risk: Lessons from Amazon

I worked at Amazon for five years, between 2014 and 2019. During my time at Amazon, one principle was hammered home consistently: any category, segment, or customer that drives over 10% of the business needs to be “derisked aggressively.” This wasn’t merely a suggestion—it was a fundamental operating philosophy that guided strategic decisions at every level of the organization.

At Threecolts, we’ve adopted this same thinking. We constantly evaluate our business for concentration risks across customer segments, product portfolios, and channels. 

In 2021, we derisked reimbursements revenue by acquiring businesses with subscription revenue. In 2023, we derisked seller revenue by going upmarket to enterprise customers. In 2024, we derisked the Amazon channel by acquiring 3 multichannel software businesses and building Walmart functionality.

The Diversification Imperative

The message is clear: selling a single brand on Amazon is no longer a viable strategy. The increasing frequency of gating events means that your entire revenue stream could be cut off overnight with little to no warning. Diversification isn’t just smart business—it’s essential for survival.

But how do sellers, particularly those with limited resources, achieve this diversification quickly and efficiently?

Practical Solutions for Brand Diversification

Retail Arbitrage

Retail arbitrage—purchasing products from physical retail stores at a discount and reselling them on Amazon—offers a practical path to diversification. Tools like ScoutIQ and Scoutify can help you identify profitable opportunities across numerous brands and categories. The beauty of this approach is that it allows you to test new brands with minimal investment while building a more diverse product catalog.

Online Arbitrage

For those who prefer to source products without visiting physical stores, online arbitrage presents an attractive alternative. Software solutions like Tactical Arbitrage enable you to identify profitable items across numerous online retailers. This approach allows you to source from multiple brands simultaneously, spreading your risk effectively while maintaining healthy margins.

Building a Sustainable Strategy

Regardless of which sourcing method you choose, the key is consistency. Make it a habit to regularly source new brands, even if your current portfolio is performing well. Consider implementing a rule that no single brand should represent more than 10-15% of your total inventory or sales.

The Threecolts Approach

At Threecolts, we understand these challenges intimately because we face similar strategic decisions in our own business. We methodically derisked the business to diversify risk and survive (and hopefully thrive) as a long-term business.

Our software solutions are designed with this reality in mind, helping sellers identify new opportunities across multiple brands and categories. We’re committed to providing tools that make diversification not just possible but practical and profitable.

Looking Ahead

I say this phrase often: “Hope for the best but prepare for the worst.”

I can see a world where brand gating slows down as Amazon realizes it’s hard to stay in stock with the tariff uncertainties. 

But sellers need to prepare for a trend toward increased brand restrictions. More brands will seek to implement gating requirements as they seek greater control over their distribution channels and brand representation on Amazon.

For sellers, this means that brand diversification isn’t a one-time adjustment but an ongoing business requirement. Those who embrace this reality and build diversity into their core business strategy will be better positioned to weather future restrictions and thrive in the increasingly complex Amazon marketplace.

Final Thoughts

As Amazon sellers, we operate in an ecosystem we don’t control. The platform and brands can and will change the rules of engagement, sometimes with little notice. Our success depends not on fighting these changes but on building businesses resilient enough to adapt to them.

Brand diversification is no longer optional—it’s essential. And while it may require changes to your sourcing strategy and business model, these adjustments will ultimately create a stronger, more sustainable Amazon business.

At Threecolts, we’re committed to helping sellers navigate these challenges. Because when it comes to business risk, the old adage holds true: don’t put all your eggs in one basket—especially when someone else controls the basket.