For many retailers, the thought of going up against Amazon is daunting. One strategy is to embrace the “If you can’t beat ‘em, join ‘em” mentality — and build a brand as an Amazon seller.
But using Amazon as a commerce platform is not as straightforward as one might think, according to James Thomson. Thomson is a Partner at Buy Box Experts and co-author of The Amazon Marketplace Dilemma. He believes that a company looking to win on Amazon must understand 5 specific concepts if they want to succeed:
- Amazon is not your partner – start behaving accordingly.
“Too many brands appear to believe that when Amazon Retail reaches out to buy product, somehow a partnership is being formed between your brand and Amazon. It is critical to realize that in fact, Amazon’s incentives rarely align with the incentives of your brand.”
Amazon is committed to building a marketplace with the largest selection at the lowest prices. “While a brand may be attracted to the customer base of that marketplace, most brands need to protect their pricing. Hence, the Amazon channel can be a source of frustration once the brand’s products start selling on Amazon or through third-party sellers, well below MAP prices,” Thomson explains.
Why? “Amazon Retail has all sorts of scraping software that goes out like a good bird dog, sniffing to find the prices of brands. If Amazon finds a lower price somewhere, Amazon Retail will usually match that lower price so as to ensure a positive experience for Amazon customers. Because Amazon Retail rarely shares any useful information with brands about where it found those lower prices, it becomes difficult for the brand to manage pricing across all channels.”
- Amazon is an open marketplace – it’s difficult to stop someone from selling your product on Amazon.
The Amazon marketplace is designed to encourage as many sellers as possible to offer products to Amazon’s customers. “As long as sellers are selling non-counterfeit product that is appropriately described on the Amazon product listings, almost all product categories and brands can be sold by anyone on Amazon. Thomson notes, “As a result, if a brand does not have tight control of its distribution, it can be quite hard to control the price.”
As some shady sellers are not likely to abide by a brand’s pricing policies, the products are often sold below MAP, creating channel conflict with other better-managed channels. “Product supply on the Amazon marketplace may be a natural culmination of a brand’s global distribution sins: if the brand isn’t in control of its global distribution, product will mysteriously show up on Amazon, usually to be sold by unknown sellers at lower prices,” Thomson concludes.
So what can you do? Tight control means “eliminating product diversion, gray market selling, re-importation of products, etc.” — avoiding anything that makes it easier for sellers to show up on Amazon offering your product at a discount.
- Control your brand content vigilantly.
Amazon’s websites get a lot more traffic than any single brand’s website. “Therefore, if a brand has product listings on Amazon, it’s entirely possible that the content will end up higher indexed on Google than the brand’s content from its own site,” Thomson explains. “So, whether for the purpose of ensuring high-quality content is indexed on the web, or to make sure Amazon customers are seeing complete, accurate information about your brand, we strongly encourage consumer brands to load their content onto Amazon. Given how hard it is for most brands to control their distribution completely, someone is likely going to sell the brand’s product on Amazon at some point. That’s why we encourage brands to make sure correct information is already on the site, ensuring brand equity on Amazon that is consistent with the content off Amazon.”
No one has more incentive than you to control your brand equity on Amazon. It’s up to you to ensure the Amazon product messaging for your products is consistent with other channels — “otherwise 200 million Amazon customers will get misaligned or disconnected messaging,” Thomson says.
- Distribution on the Amazon Channel can be Controlled.
For brand executives looking to influence what companies sell their products on Amazon, there are three avenues Thomson and his co-author suggest taking. First, an investment should be made in developing and communicating an online reseller policy that contains anti-diversion language. “The executives can document how the brand wants to have its products sold online. While resellers may choose to ignore the terms of the policy, it becomes much easier for the brand leadership to pull product from distributors or retailers who don’t abide by the written policy,” Thomson notes.
Next, the brand executives should investigate how production technologies like RF Tags, Serial Numbers or even simply invisible ink can be used to track test buys of product sold by unauthorized sellers back to specific distributors or retailers. “Until the executives can identify the source of a product leak, it is not possible to close that gap efficiently.”
Finally, the brand executives should work with their legal team to ensure that no trademarks are being violated by the unauthorized sellers on Amazon. “There are literally dozens of ways that a brand’s trademark could be violated. It is imperative for a brand to have its trademark properly enforced on Amazon or any online channel,” Thomson says.
He concludes, “A brand can determine who sells its products on Amazon, but it takes continuous channel management, better incentive alignment with distributors and retailers, and a well-defined, well-enforced trademark to prevent outright poaching.”
- Amazon isn’t just a selling platform, it’s an advertising platform.
While many brands view Amazon negatively because of what might happen with their products being sold, it is important to acknowledge just how powerful Amazon is as an advertising platform. “Amazon offers brands all sorts of advertising opportunities, both on Amazon.com (Amazon Marketing Services, Sponsored Products) and outside Amazon.com (Amazon Marketing Group, Amazon Advertising Platform). These platforms all compete with a brand’s advertising budgets on Google and Facebook. They are getting more attention these days because of the relatively strong ROI experienced by several brands using Amazon to promote their products. We have seen brands shifting a large portion of their advertising dollars to Amazon over the past two years, as managers realize they can advertise directly to consumers who are much closer to making the purchase decision,” Thomson notes.
At the end of the day, remember that consumers on Amazon are there to shop. “If a brand can intercept the consumer during the shopping experience, it is much more likely to get its message heard. And Amazon customers tend to buy again and again, so a solid foot in the door can be very lucrative.”
- Kate Harrison
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