Here are two things that brand Executives worldwide have to consider:
1. Should they offer their products on Amazon?
2. If that is the case, what’s the best and most strategically sound approach for them?
Most executives don’t realize that their products might end up on Amazon whether they like it or not.
This is one of the core elements of the Amazon platform. Individuals can offer any product they have on their possession. The very nature of the platform dictates that every individual or company, regardless of their size, can become sellers on Amazon. This stems from the basic principle that more sellers means more products at lower prices, which equals better opportunities for all visitors.
The whole platform has been created so that you can set up and sell basically within minutes. During the registration process you don’t even have to prove that you have acquired your inventory through authorized vendors or manufacturers. As a result, all brands should assume that they might see their products being offered on Amazon with or without their consent and it becomes evident that the question is not if they should offer the catalog through this channel. The correct question to ask is when that would happen and what effect it could have for their company’s image.
That leads us to the second question, which is a little bit more complex but can be summed to the following two options:
Should they sell on Amazon or to Amazon?
Product Reach:
Amazon is a Marketplace but acts as a search engine.
You type search terms that best describe your wish and Amazon produces a number of results that deems more relevant to your keyword. Therefore, not only does a keyword determines which product listing shows up, but its placement also determines the ranking of a product. If a retailer creates all the listings and doesn’t possess the in-depth knowledge of what works and what not based on Amazon’s search algorithm, then that product will not reach the number of customers that are searching for it. It will simply never realize its potential on the platform.
Small sellers know that. They have identify some of Amazon’s algorithm nuances and are able to surpass top companies and get the first spots in their respective category, hence the sudden boom with thousands of private label companies targeting exclusively Amazon.
By maintaining control of your product listings directly you ensure that all products maximize their reach and convert better than ever.
Pricing:
Pricing is extremely valuable in E-Commerce especially when the products are offered through multiple channels. By selling on Amazon the brand retains the ability to determine how its products are priced and ensure that retailers follow to the point the MSRP strategy that best serves the company.
On the other hand, by selling to Amazon, you have zero control over pricing.
Product line and selection:
A crucial question is how and when new products are introduced to their customer base. By controlling all its product listings on Amazon directly, either through a designated seller or some other sort of collaboration, all new products can become available simultaneously on all channels, covering all possible traffic sources. All product info changes can happen exactly when the brand wishes to, and this is big, especially when certain SKU’s are discontinued but there is remaining inventory on Amazon.
Marketing:
What content describes best each product and is it being used efficiently? A marketplace offers significant advantages but one of the main characteristics is that from a customer’s perspective, it provides clarity. It is a way to compare directly all products and this is where the decision making process begins and ends. By seizing control of the content that is displayed on Amazon and analyzing the data constantly, brands have the ability to improve their sales, enhance their credibility and demonstrate their value.
Amazon has its own timeline and will not favor a product over another (to our knowledge). Execs should think of it as a Google website. Do you want your website doing exactly what every other website does or do you want to utilize experience gathered through trial and error and rank to the top?
Distribution:
Selling on Amazon means that brands have a chance to control which re-sellers represent their brand. It is a common practice to find the same item listed multiple times with different UPC codes, with varying quality that only harms the brand’s image. Moreover, the open nature of the platform may result in a negative customer experience as the quality of each product cannot be guaranteed. Yes, re-sellers with bad metrics (a score system that determines customer satisfaction) will eventually get banned but that may take months. That way, brands may incorrectly be associated with inferior quality products.
In conclusion, brands should invest the time and effort required, in order to manage directly their presence on Amazon. They will be able to attract more customers, build and expand their reach exponentially, harmonize and coordinate all their distribution channels and outwork their competition. There is a saying after all: ‘’Don’t fight the wave. Ride it’’.
Amazon almost has 2.64 million views per month which means that it is an ideal place for businesses to list their products and boost sales. Also, Amazon’s brand reputation plays an important role.
Completely agree there.
However, a large number of brands do not want to become involved and refuse to pursue this channel. It would be interesting to learn is if this is based on a strategic decision or some major misconception.
Garyfallos, it is often based upon a strategic decision. I know a good number of companies that built their own marketplaces, many others are there because ‘one needs to be there’.
Brands can very well control their fate without Amazon. By selling to ‘their’ price it doesn’t matter to them whether some retailer or other charges a little less of a premium (other than possible damage to the high end high value brand that some want to be).
Retail organizations with own infrastructure need to carefully consider whether they can keep the margin they need via Amazon. If they can’t, they need to be careful. It still is a good way to sell excess stock …
it is my impression that many companies do not consider the implications of answering question 1 with a yes well enough..
Interesting perspective Thomas.
I think that, even though Amazon can cut their profit margins, a good question is how selling on Amazon would impact their long term growth. If selling on Amazon opens up a brand new market for them and offers access to customers that they would not reach otherwise, it is well worth the cost. That way, even though their profit margins might be lower for that specific customer base, it would be margins they didn’t have before.
For example, European companies can access immediately the US market and vice versa. I believe it is an excellent strategy to utilize Amazon’s authority and tap into a brand new demographic, establish brand authority and simultaneously develop your own marketplace and infrastructure in that region.
Appreciate your input.
thanks for your reply, Garyfallos. The risk that brands run is that they do not utilize Amazons authority but damage their own while increasing Amazon’s, as nearly everything is Amazon-branded in between. Simple thing like ‘Alexa’. It is not, hey Gucci, it is hey Alexa, or hey Google for that matter.
That is one of the main reasons for brands to look into building up a marketplace of their own.
Simply tapping into Amazon’s infrastructure for selling is also not enough as they also need to build their own delivery infrastructure, which is a much more daunting task than setting up shop in Amazon.
just my 2 ct
I understand your point Thomas.
But I frankly disagree. I can point out to a number of brands that have been created from the ground up because they capitalized of Amazon’s traffic and authority. It is up to each brand to find ways to promote their image sufficiently on this ”monster” of a marketplace and I know that it is not hard to get there ( I talk from experience here). You can create a brand from scratch and get traffic from Amazon to your marketplace through a number of ways.
There never was a bigger opportunity. Yet brands with established product lines adopt a passive approach and allow several new players in their niche. If they were to jump on Amazon they would have millions more revenue and if a brand with zero authority can take traffic from Amazon and create a loyal fan-base, I cannot find a reason that a big player should find it hard.
Plus, the issue here is that no matter if a company wants to sell on Amazon or not, its products are already up there. Rolex wanted no part of Amazon but its products ended up there. There are numerous examples like that. I believe it is better to be proactive than reactive.
Thanks!
right, the products may already be there. But then they have been sold at the desired margin before, so no major harm done as long as the resellers want to make a living, too.
Let’s agree to disagree. Amazon is trying to monopolise the transaction for their own benefit, not for the rest of the platform. That is one of the main reasons why so many other platforms emerge and why so many vendors try hard to move traffic away from Amazon (or FB, for that matter) to their own premises. It is not only the sale that matters, but also the data that gets generated.
True, one cannot anymore fully neglect Amazon, but one should be aware and wary of it.
Cheers