Interested in selling your products on Amazon? While this vast marketplace provides an exciting opportunity to grow your brand, it can also be daunting. Your e-commerce goals and team logistics both factor into the best way for you to sell on Amazon. These days, this ever-growing channel will have an impact on your brand no matter what.
Read on to learn the various methods for selling on Amazon — and what to consider in your overall brand management and protection.
Your products WILL appear on Amazon
Many brands don’t think Amazon is a meaningful channel for them or their products. That may be so, but these days, every product shows up on this powerful and highly visible marketplace.
Have you ever ordered a product only to realize it was a knock-off of a popular brand? Or seen a product listed for far cheaper than you know the price should be? These issues can affect your brand as well. Unauthorized resellers, authorized but poorly managed resellers and fraudulent duplicates all negatively impact your brand reputation.
It’s no longer an option to ignore Amazon. If left unmanaged, resellers can post your products with a price, description, and imagery that they choose. This potentially affects the way consumers will see your brand, which could harm your profitability in other important channels. Every reseller should be held to your Minimum Advertised Price and you should be in control of your product messaging strategy.
Because Amazon has such massive reach and visibility, you must protect your brand image and pricing to ensure that unmanaged Amazon listings don’t negatively affect them in your most important channels.
So, what if you do wish to sell on Amazon? You have several options for selling on Amazon, each with its own advantages and disadvantages.
Sell Directly to Amazon (1P)
If you have a first-party (1P) relationship with Amazon, you sell through Vendor Central directly to Amazon. They send you a purchase order, you complete it, and Amazon fulfills and ships orders. Many brands believe that this will give them more control of their presence on the Marketplace.
However, working directly with Amazon (1P) is challenging for most brands. Only the largest brands get actual live support. Otherwise, you manage the relationship through the Vendor Central portal. As Amazon’s terms and conditions are constantly evolving, this can be a steep learning curve for your brand’s employees and a “black box” for management. In short — don’t expect Amazon to handle everything for you.
In 1P relationships, Amazon ultimately controls the pricing for your products. It can react to other sellers selling below your MSRP or MAP by lowering their own selling price (even below the cost they paid for your inventory!) In other words, this is a wholesale relationship, so your profit margins tend to be lower even if you’re saving on some of the selling fees.
Sell through your own branded 3P store
Another option is to open your own Seller Central store. You will gain a presence in the marketplace as a reputable destination to purchase your brand’s products. Plus, you’ll maintain fairly extensive control of the product content and pricing (through your store).
However, your brand is responsible for managing almost all aspects of the channel, including logistics, customer service, and accounting. As you won’t have the enticing “sold by Amazon.com” message, you’ll have to invest in brand credibility and strong advertising. While Amazon does assist with fulfillment through its FBA option, most brands will need to hire knowledgeable people to help manage all of these moving parts.
Sell through a Hybrid 1P and 3P relationship
Some brands choose to have a hybrid relationship with Amazon: they send some of their best-selling products directly to Amazon (1P – Vendor Central), and they manage the long-tail of their products through 3P (Seller Central). While this approach does provide a wider array of benefits, it usually means you’ll need separate processes and people for each of these relationships.
This can quickly become an expensive route to pursue.
Getting started is easy — growing on Amazon is complicated
Amazon’s bar to entry is low; it’s relatively simple to start selling. The challenge comes when profitability for this channel begins to erode. Without active management and a well-refined e-commerce strategy, unauthorized or unmanaged resellers can degrade pricing to the point where it is no longer profitable to fulfill orders. In some cases, this may negatively affect your brand’s performance on important sales channels.
Many brands start to see increasing fees and chargebacks as they struggle to keep up with Amazon’s ever-changing terms of service.
And of course, there are often growing pains as brands find themselves needing to hire additional skilled resources to handle higher demand for both products and price management. Amazon’s 1P adjusts prices based on their algorithms — sometimes at the expense of your profitability.
Phelps UNITED checks all the boxes in eCommerce! Contact us at Phelps UNITED to learn how we can make Amazon and other marketplaces work for you.