Amazon has quickly become the number one distribution channel in the world. As a result, many brands feel it is necessary to list their products on Amazon. This creates a unique problem for brands: Amazon is a critical place to sell products, but they’ve also commoditized product distribution and made it harder to reach customers on a personal level.
Although initially helpful for selling products, Amazon is a very risky platform. Listing a lot of products on Amazon may cause brick and mortar and online specialty stores to not carry your brand’s products or even relegate them to lower positioning. These stores may not want to compete with Amazon.
Unlike these specialty stores, Amazon does not have brand loyalty.
For example, if your brand sells a mattress through Amazon and Amazon sees its success, they will create a knock-off of your product and will direct sales towards their product instead of yours. If you move too many eggs to Amazon, you may lose the support of other channels that have greater loyalty and add more value to your brand.
So what should your strategy be for long-term success?
- Launch your new products through your brick and mortar and online specialty stores. These stores will be able to provide you with strong product marketing and brand support.
- If you must put your product on Amazon for distribution reasons, make sure they hold minimum advertised price (MAP). Amazon is notorious for breaking MAP on products when their crawlers see a lower price elsewhere, even if it's not from a legitimate seller. Often “fake” stores, that do not even have a product to sell, will list your same product below MAP. Your brick and mortar and other channels will hold MAP when this occurs, but Amazon will drop prices and it will hurt your channel partners and brand reputation. If you are going to work with Amazon, it is important to ensure they uphold your product’s MAP.
- Don’t underestimate the negative economic and brand impact of Amazon returns. Amazon makes it very easy for consumers to order many items. However, with this ability comes mispurchasing and over purchasing. Consumers can easily order 3 pairs of headphones, try them all on, and ship two pairs back. The problem with this is that it creates massive B stock product in the market that has reduced value for everyone, puts bad product in the market, and undermines the sale of your A stock. Negotiate to try to minimize these returns.
- Don’t spend all of your profit on Amazon advertisements. Amazon now has a massive advertising engine, but with so many products and ads, the ads on Amazon deliver a low return on investment for brands. Now, if a consumer searches for a product they have to scroll through layers of advertisements and sponsored products before getting to the product they want to buy. With so many ads, customers are now completely ignoring the sponsored products and scrolling straight to the product they want. Avoid being baited into spending all of your profit on advertisements.
- Lastly, work closely with your channel partners to create authentic marketing and social media messages. While Amazon used to be viewed as a cool new place to buy products, it’s now seen as a large corporate machine. Gen Zers and Millennials want to support companies with great core values and have a relationship with the brands and stores they buy from. When you partner with Amazon you can’t personalize your brand. Localizing your messaging with stores, on the other hand, allows you to connect with your target audience and customers on a more personal level. As a brand, you should develop close relationships with your non-Amazon partners by building out creative localized ads that display local addresses, phone numbers, and website URLs.