This year’s CES show in Las Vegas featured a wide range of new products and innovations across various industries making it evident that technology continues to advance at a rapid pace. In addition, it was clear that manufacturers believe that CES is the place to be investing big budgets to showcase their new and enhanced products to the trade at this multi-day event.
With CES now behind us, many new and improved products being launched, and the New Year in full throttle, it’s the perfect time for brands to formalize or enhance their Amazon strategy. Whether a brand is already selling on Amazon or a new brand is looking to break into the marketplace, developing or refining an enhanced Amazon strategy is a must.
Selling on Amazon
Amazon has become one of the most important retail platforms in the world, and it’s critical for brands to have a strategy in place for how they will sell their products on this site. Amazon’s marketplace is a massive $600+ Billion channel that can’t be ignored. With the right strategy, it can add substantial incremental sales and positive exposure for brands. However, without a solid strategy, manufacturers can see their profits shrink, channel conflict abound, and brand equity deteriorate.
There are a few key reasons to sell on Amazon:
- Reach: Amazon has a vast customer base, and it’s an excellent way for brands to reach a large number of potential customers.
- Convenience: Amazon is incredibly convenient for customers, as they can easily search for products, compare prices, and make purchases all in one place. This makes it an attractive platform for brands to sell on.
- Data: Amazon provides brands with a wealth of data about their customers, including purchase history, demographics, and browsing behavior. This information can be used to inform marketing and product development strategies.
- eCommerce dominance: With the rise of eCommerce, more and more customers are shopping online. Being on Amazon can be a way to capture these customers so you don’t miss out on potential sales.
- Competition: Many of your competitors are probably already selling on Amazon. You don’t want to fall behind.
The decision regarding whether the brand will be sold on Amazon is not always solely within the brand’s control. Therefore, it’s better to start with the assumption that any popular brand’s products will eventually show up for sale on Amazon, whether the brand wants those products there or not.
The Right Amazon Strategy Approach
The big question is, what is the right Amazon strategy approach for a brand?
The main approaches to selling on Amazon include:
- The Do Nothing Approach – Resellers sell without the brand’s guidance or participation
- Selling to Amazon Retail (1P) – The brand wholesales to Amazon
- Selling through multiple authorized third-party resellers (Authorized 3P)
- Selling through an exclusive third-party seller (Exclusive 3P)
- Selling as the exclusive third-party seller of record (B2C model)
- Blended 1P/3P approach
Let’s look a little deeper into the Do Nothing Approach and the Selling to Amazon Retail (1P) approach:
Do Nothing Approach or Lack of a Clear Amazon Strategy:
This approach is dangerous for the brand. It can cost them dearly as random sellers that are not motivated to do a good job will most likely not manage and protect the brand and sell for the lowest price they can get for the product creating channel conflict.
At a minimum, manufacturers need to keep control of their brands on Amazon by ensuring they have a brand registry established with Amazon. This is whereby they can create and control their content that represents the products correctly and tells the brand story. Also, it’s important for brands to have a strong MAP policy in place to protect their pricing from deteriorating and devaluing the products and creating channel conflict.
Selling to Amazon Retail (1P) Approach:
This approach is challenging for most brands due to the following constraints:
- Limited control over pricing: When selling to Amazon 1P, brands have less control over pricing and may have to accept the prices set by Amazon. This can make it harder for them to compete with other sellers on the platform and may reduce the profitability of the products they sell.
- Reduced brand awareness: When selling through the 1P program, brands may have less visibility and control over how their products are marketed and presented on the Amazon platform. This can make it more difficult to build brand awareness and customer loyalty.
- Dependence on Amazon: Brands that rely heavily on Amazon as a sales channel may be more vulnerable to changes in Amazon’s policies and fees or disruptions in Amazon’s business. This can make it harder for them to plan for the future and diversify their revenue streams.
- Limited data availability: When selling through the 1P program, brands may have limited access to data and analytics about their sales and customers, making it harder for them to make informed decisions about their business.
- Potentially reduced profit margins: By going through the 1P program, brands may not be able to sell at the same margin level as 3P sellers.
Overall, brands need to have a strategy in place for how they will sell on Amazon. Keeping as much control over your brand as possible is a major consideration. This might include pricing strategy, product optimization, marketing, advertising campaigns, and customer engagement. By developing a thoughtful strategy, brands can maximize their sales and growth on Amazon.