Assessing Your Marketplace Opportunity with Amazon
For retail brands, it’s no secret that Amazon is a force to be reckoned with. But whether your e-commerce company views the Amazon marketplace as a threat or an opportunity for your brand can mean the difference between struggling to keep up, and soaring ahead with a strong multi-channel sales strategy. Of course, retail brands understand the immense market share Amazon represents. They accounted for 4% of all US retail sales in 2017, according to data from One Click Retail. However, a lot of e-commerce companies see Amazon as a competitor. They worry the marketplace could cannibalize sales, present a slew of new business challenges, and potentially ruin their brand’s reputation and value, should they engage.
Retail Brands Give a Lukewarm Welcome to Amazon Australia
The late-2017 launch of Amazon Australia offers a prime example of retail brands getting defensive when it comes to the major marketplace. Across the globe, traditional retail companies aren’t exactly welcoming Amazon with open arms.
Despite retailers’ wariness, experts speaking in Australia about the Amazon debut encourage brands to embrace the change.
“If I were a business owner, I’d be trying to think about how to work with Amazon as opposed to trying to fight them.” – Steven Levitt, Author of Freakonomics, speaking about the introduction of Amazon Australia
Think of Selling Products on Amazon as an Opportunity Instead of a Threat
As a marketing consultancy specializing in marketplace-first strategy, Directional Cue often works with brands on the cusp of expanding their distribution channels to include Amazon. These companies are generally debating the pros and cons of entering into the marketplace. For many of them, selling products on Amazon feels like a double-edged sword. And it certainly can be. So, we’re here to help you understand how to wield it for good. We’ve broken down three of the most common concerns we hear from retail brands considering Amazon in their multi-channel strategy. We’ll discuss these. Then, we’ll explain how you can turn them on their head to improve your e-commerce company. Finally, we’ll outline the risks associated with declining to sell in the marketplace.
Valid Concerns About Selling on Amazon and Solutions to Work Through Them
1. I’m afraid selling products on Amazon will cannibalize my sales from other channels, like e-commerce and brick-and-mortar.
In considering expansion into the Amazon marketplace, plenty of retail companies worry that adding this channel will cut into their sales, rather than build upon them. But the truth is that with close to 50% of US e-commerce sales under its belt, Amazon is offering your brand the chance to attract new customers and sales it otherwise would not. It is definitely possible that adding Amazon to your channel strategy could shift some of your profits around. Yet, much of your marketplace sales will actually be incremental. The key is to work toward overall growth and building your brand. Then, your company can be future-proof, as Amazon continues to dominate.
“Amazon is taking its share of dollar from other channels, but what is happening now is that brands are looking at the overall marketing and advertising picture and increasingly treating this as incremental.” – Todd Szahun, Head of Digital, Geometry North America and eCommerce Lead, WPP’s Data Alliance
Reluctance to broaden your brand’s scope to include marketplace is reminiscent of the early days of e-commerce. When retail brands were just starting to enter The World Wide Web, their hesitation to adapt from brick-and-mortar was similar. The cycle continues, as we advance into the world of omni-channel commerce.
“The risk of cannibalization was heard in the early days of e-commerce until online selling took off. Cannibalization chatter appears to be making a comeback as online gains accelerate, in-store traffic declines and store closings become epidemic.” – Tom Ryan via RetailWire
Now that e-commerce has a stronghold on the future of consumerism, retailers have had to step up to keep up. And the next step forward is understanding the large role that online marketplaces play in e-commerce. Then it’s about learning how to use that to your advantage.
Overall, the idea is to get a handle on your brand strategy holistically. You can gain new customers and new sales through selling products on Amazon. And, the risk of Amazon taking away any sales from your site or your store is less than the risk of being left behind as retail moves forward – with or without you.
2. I have enough on my plate already. I don’t want to manage a second e-commerce site for my products.
Setting up and maintaining your own e-commerce site is a ton of work. From deciding on the perfect creative, to making sure your logistics are set up correctly for getting your products to customers, to attracting visitors to your page, there is no shortage of resources required to build your online presence. Luckily, Amazon offers more of a plug-and-play platform with their FBA program. So, it’s a lot less work to set up and get moving than your own retail website. Amazon can store and ship your products, handle your returns, and even label your items (for a fee). Most enticing is that they’ve built in access to their huge customer base. The majority of these shoppers are those whom you would never have reached before, without the help of Amazon’s unique cross-selling and upselling features.
“Selling through Amazon is extremely tempting for a simple, logical reason: you don’t have to pay for digital marketing to drive traffic to Amazon. The volume is bigger than any marketer can dream.” – Helen Schmid, Harvard Business Review
To begin selling on Amazon FBA is essentially a 4-step process.
- Set up a Selling on Amazon account with FBA.
- Make product listings either one-by-one or by linking your e-commerce inventory with Amazon.
- Prep your products and ship them to Amazon, who stores them for you.
- Then, when Amazon customers buy your products, Amazon picks, packs and ships them, handling tracking info and logistical customer service issues like refunds, returns, or inquiries 24 hours a day.
In sum, the barrier to entry to set up your Amazon store is low in comparison to the effort it takes to create your own website. With Amazon’s plug-and-play platform, your brand is just moments away from creating a marketplace web store. This comes with a plethora of new customers that would be much harder – and more expensive – to drive to your site.
3. I don’t want to give up control over my brand that I worked hard to build.
For some e-commerce companies, the idea of selling products on a platform you don’t own seems akin to “selling out.” Yet, this doesn’t have to be the case. First of all, you get to strategically choose what products you will sell in the marketplace. It absolutely doesn’t need to be all or nothing. So, you can get the benefit of a presence on Amazon by testing out new products or moving your bestsellers. And you can achieve all this while maintaining some exclusivity among your other channels.
“The smart brands and retailers are selectively participating in Amazon… In addition, they are also strategically collaborating with other partners where they can differentiate their value, services, experience and engage customers directly.” – Chris Petersen, PhD. via RetailWire
Being discerning in your Amazon involvement is key to creating a successful, omnichannel brand strategy. Focus on developing a brand with which people truly want to engage and a product that solves a problem. By doing so, you’ll generate a following of customers who seek you out through various channels. Then, Amazon will be just one of these many touchpoints.
Although you can’t control your customers’ entire experience on Amazon, you can ensure your own product pages are on brand. FBA Sellers taking part in the Brand Registry can further stand out with Enhanced Brand Content. This feature allows you to include extra images and text on your product page to give your customers a deeper understanding of your product and company, which helps increase conversion.
To conclude, you decide what to sell on Amazon and how to make your brand matter outside the marketplace. You can’t control everything, but you can control your product listings. Plus, with all the customization options for Amazon Sellers that continue to expand, you can surely tie the marketplace into your company’s strategy without letting go of the ropes on your brand.
The Risks of Not Selling on Amazon
If you choose not to sell your products on Amazon, there are several drawbacks for your brand. The first is that without your brand in the marketplace to establish itself, competitors can bid on your keywords and rank when your customers search for your products. Here is an example.
According to The Economist, “Ralph Lauren has not sold clothes directly to Amazon so far, despite the platform’s explosive growth.”
But, when you search for “Ralph Lauren” on Amazon, competitor clothing brands have created sponsored ads that show up on the first page of results. Here, you can see three sponsored ads from 8 Vertigo, Goodthreads, and Horze competing for Ralph Lauren’s keywords in Amazon. In this way, your brand awareness can be used to sell other companies’ products in the marketplace in lieu of your own.
And, Ralph Lauren’s resistance to stay ahead of the curve as consumer habits shift may be a contributing factor in their declining revenue.
As they continue to stay dependent on deteriorating department stores, with polo tees crumpled on the floors of Macy’s clearance sections, Ralph Lauren is missing out on a potentially lucrative e-commerce opportunity with Amazon.
“[R]etail has evolved and the company has not responded to that as fast as its peers. That’s the issue.” – Simeon Siegel, an analyst at Instinet LLC, via Business of Fashion
Beyond the missed chance to partake in the massive Amazon pie is the real threat of authorized – or even unauthorized – distributors selling your products on Amazon and tarnishing your brand. For well-known brands like Ralph Lauren, unauthorized distributors are also more likely to sell knockoffs, adding another layer of issues for some brands.
This 1-star review from a customer who purchased a “Polo Ralph Lauren Men’s Long-sleeved T-shirt” on Amazon outlines some serious problems.
First, this is written by a brand advocate who has “been buying Ralph Lauren…for over 3 years.” He states that, “Ralph Laurens [sic] my favorite brand.” Second, he was looking on Amazon “because the price was cheaper.” And lastly, his poor review indicates clear dissatisfaction with his experience.
While he knows the cheap imitation didn’t come from the actual brand he loves, the review negatively impacts the look of Ralph Lauren on Amazon and may be detrimental to the customer’s brand loyalty. Many times, customers are looking on Amazon for brands they already know and trust, and they are simply shopping the marketplace for better prices and the convenience of Prime.
Although Amazon has an anti-counterfeiting policy, brands selling on the marketplace can sign up with the Brand Registry to protect themselves more aggressively from these issues. Otherwise, they are relying on customers like the one above to report fraudulent activity and knock the knockoffs out of the marketplace.
The Brand Registry was first announced at the 2017 Shoptalk Conference in Las Vegas, where Amazon execs touted the benefit to brands who participate:
“Any brand in the world can identify where they own the intellectual property through copyright etc. and put Amazon in the position where we can protect your products across the Amazon Marketplace, across the world.” – Peter Faricy, Vice President of the Amazon Marketplace via Keyword Podcast
Regarding authorized resellers, allowing your wholesale accounts to manage your brand on such a huge platform is not generally in your best interest. If you do allow other companies to sell your brand’s products, they are responsible for answering public questions or replying to reviews on your product pages and for submitting content for product descriptions. This is an unnecessary forfeit of control over your own brand, where you could be earning the profit and directing the brand experience yourself.
Despite the fact that your distributors care about your product selling, they do not have the same ownership over your brand image as you do. They may have 100s of brands to manage and not enough time to go the extra mile for customer service on your Amazon product listings, especially if they are also focusing on brick-and-mortar retail.
Take a look at these reviews from the “Amazon’s Choice” recommended listing for Zignature Trout and Salmon Dog Food, sold by a pet store chain that carries this brand. The first review reports an allergic reaction and is an example of a negative review that might merit a response from the brand. This would be a time to offer empathy and support, including suggested remedies and recourse.
The second review is actually completely misplaced, and the reviewer comments that they left this 1-star review on the wrong product entirely. In this case, your brand would have the choice to report the review to Seller Support in order to have it removed from your page, rather than leaving it there to bring down your overall product rating.
As you can see, the risks of staying out of Amazon are not to be taken lightly. Without staking a claim on the marketplace, you leave your competitors free to bid on your keywords, allow your distributors to affect your brand image, and miss the opportunity to create the curated omni-channel experience your customers expect – and deserve.
A Final Note About Selling Products on Amazon
In the end, is selling products on Amazon the right move for your brand? Much of Amazon sales are incremental, it’s substantially simpler to manage than an e-commerce store, and you can maintain your brand’s integrity while growing your company with your product pages. That, coupled with mitigating the risks of avoiding the marketplace make the big dive into Amazon positively worthwhile for many retail companies. Will yours be next?