The Amazon Marketplace Dilemma

By guest | Amazon

Jul 10
amazon_marketplace_dilemma

Amazon_marketplace_dilemma_bookIn our newly published book “The Amazon Marketplace Dilemma”, Joseph Hansen and I from Buy Box Experts have dissected the critical business issues affecting each brand when it tries to answer the question of how best to represent itself on the Amazon channel. Gone are the days where most brands can stop their products from being sold on Amazon by some seller that has acquired the brand’s product through any number of brand-approved or brand-unapproved channels.

Amazon: The Open Marketplace

Image a teenager who lists an unwanted gift from his grandmother on Amazon in hopes of quick cash. As an “open” marketplace, that teenager’s product listing now creates a situation where the brand’s products are now on Amazon, regardless of the brand’s intentions. Add to that the thousands of sophisticated gray market sellers, distributors, companies selling under “doing business as” names to conceal their identities, and the brand finds itself with product being listed and sold on Amazon by dozens of companies potentially unknown to the brand.

So what is the brand going to do to create and manage an active strategy on the Amazon channel?

In our book, we develop a framework around the “Five Pillars” that a brand needs to consider when pondering its position on the Amazon channel: These pillars are:

  1. Branding
  2. Distribution
  3. Pricing
  4. Product Availability
  5. Catalog Selection

At a minimum, a brand should be ensuring that its products are properly represented on Amazon, even if the brand doesn’t want its products to be there. Someone will get the brand’s products on Amazon, and the brand should be looking to ensure that Amazon customers get at least minimum consistencies in the brand’s representation on Amazon relative to the brand’s messaging efforts on every other channel where it is sold.

Product Distribution on Amazon

Next, the brand needs to figure out how it wants its products distributed on Amazon. There are at least four options available for brands here:

  1. The DO NOTHING approach all too common for brands pretending they can ignore the Amazon channel.
  2. The Amazon Vendor Central/First-Party approach of wholesaling product to Amazon Retail where it is the seller of record.
  3. The exclusive/authorized third-party seller where the brand designates one or more authorized sellers to represent and sell the brand on Amazon.
  4. The direct to consumer model where the brand is the seller of record through its own third-party seller account.

In our book, we examine more than two dozen tactical issues that brand needs to evaluate to come to terms with which distribution approach makes the most sense for the brand, given all of its other distribution choices in other channels. We also examine physical tracking mechanisms that brands have effectively used to figure out who is supplying which Amazon sellers with its product.

While the brand’s desired pricing is often impacted by the brand’s lack of control of its distribution, it is important for each brand to determine whether it wants to have specific price levels for its products on Amazon. Does the brand have and enforce a minimum advertised price policy? Does the brand have an online reseller policy that states pricing preferences by the brand? Although the brand may have such policies in place, the brand also needs to evaluate how it plans to police such pricing policies on Amazon, as this channel can create on-going challenges for brands faced with the ever-present, and ever-changing resellers. Nonetheless, there are specific legal and enforcement mechanisms that are available to brands, if they are willing to do the legwork of managing pricing online.

Product Availability on Amazon

Product availability is an issue often overlooked by brands, yet repeated out-of-stock situations on Amazon for a brand will hurt its search relevance to customers seeking comparable items. While a brand may be sold through a mixture of authorized and unauthorized sellers on Amazon, the brand should be asking how it ensures that its items are always in stock, for a stock-out result in an opportunity for competitor brands to get the sale. While a brand may find it very difficult to do any kind of cross-seller planning on how much inventory is available during peak times of the year, those brands that have a better handle on this issue can ensure more customers see its brand ahead of other brands.

Product Handling and Safety

Catalog selection considerations include questions about who is making sure listings for new products are high-quality and timely and enforcement of which products may not be sold online due to regulatory, product handling, or safety issues. While many online resellers may not pay attention to regularly or safety issues, the brand is still the one who can be harmed should there be customer complaints or bad PR due to the action of other sellers of the brand’s items.

Upon a detailed review of more than two dozen tactical issues to be considered by brands when formalizing a desired distribution strategy for the Amazon channel, we look at how the brand can effectively transition from its current distribution approach to a desired approach – these distribution shifts are often the cause of uncertainty, as brands don’t understand how to make the change or what to anticipate during that shift from resellers, distributors and Amazon.

At the end of our book as an added bonus, we discuss specific approaches brands can use to limit product diversion challenges that typically cause the brands to view the Amazon channel with frustration or disdain.

Brands Need to Be Prepared for When Their Products Are Sold on Amazon

While there are several issues that brands may forget to evaluate, our philosophy is quite clear: we believe brands need to prepare for their items to be sold on Amazon, whether or not that is their desire. Once a brand recognizes the high likelihood that its products will surface on Amazon, the brand needs to develop and manage actively its Amazon channel strategy, ensuring that it has the opportunity to align what happens on Amazon with the brand’s other efforts elsewhere, all the while creating products and better controlling its own destiny on Amazon.

For more details, check out James and Joe’s perspectives at buyboxexperts.com/marketplacedilemma

About James Thomson

Amazon sales consultant James ThomsonJames Thomson was formerly head of Amazon Services, the division of Amazon responsible for recruiting tens of thousands of sellers annually to the Amazon marketplace. He also served as the first Fulfillment by Amazon (FBA) account manager. Prior to Amazon, James was a management consultant and banker. He holds a Bachelor of Science from University of Alberta, an MBA from Vanderbilt University (Owen School), and a Ph.D. in Marketing (B2B Pricing and Distribution) from Northwestern University (Kellogg School). James has published or contributed to more than 20 articles and podcasts on e-commerce issues, and guest lectured at more than a dozen top business schools around the world.

About the Author

  • Christopher A Blaine

    Unfortunately, this type of behavior is usually created by the brand itself. I am constantly harassed by brands that utilize third party distribution without doing their due diligence in regards to the contract they are entering with distributors. All of my distributors give me unrestricted licensing to utilize product information, images, and content available on their site. I respect the intellectual property of a manufacturer, but many want to play in every sandbox while still being able to dictate selling price and venue. You give that up when you use third parties to distribute your products.