Over the past couple of years I have been consulting with vendors who are selling direct to Amazon and as Kate Harrison states so effectively in her 5 Things Article, both myself and my clients have learned “Amazon is not your partner”; but man can they generate some volume. I cover just a couple of Kate’s points in this post so read the entire article – well worth the read.
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.
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 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.”