The Amazon Dilemma
There’s a tug of war in the minds of many brands when it comes to selling their products on Amazon. While some brands may view it as a risk-reward wager, there’s no denying the power that the Amazon sales pipeline can offer. When brands approach the Amazon question, there’s a secondary hurdle they immediately stumble upon; is it better to sell directly to Amazon themselves or to sell your products through Amazon? Is the boost in sales worth giving up ownership of the sales funnel? The issue that comes to the minds of brands is whether or not they will have their products put on display like commodities. Direct-to-consumer (DTC) brands spend a lot of time and energy to carve out their presence within their niche. The last thing any of these companies would want is to have their products displayed like revolving sushi.
Amazon is an e-commerce powerhouse, to say the least. The company’s continued innovation and strategic partnerships can literally predict what consumers are buying and have put complex algorithms in place to create a B2C process that seems virtually flawless. But many DTC brands have backed away from Amazon’s offers to get them to sell their products on their platform. Partnering with Amazon has tremendous opportunities, but some executives may feel a loss of control when they open up negotiations. Brands may have unique ways they package, ship, or set up their products. There are numerous strategies that you can implement to market products on the platform.
Product-focused VS Brand-focused
Furthermore, one of the largest reasons many brands refuse to move forward with Amazon is because the platform will not share analytics nor consumer data. Amazon keeps this information private in order to protect their buyers. For retailers, consumer insight acts like fuel to their ability to develop sales strategies and understand their markets. Brands that can better understand their consumers can better target them and develop their business’ marketing strategies. So, it may almost seem counterintuitive to companies that place their products in front of a seemingly infinite number of buyers, but then learn nothing about who these buyers are, what they are like, and how they interact with their brand. Consumer insights are incredibly valuable to niche brands that spend immense budgets on customer acquisition, retention, and brand expansion.
Amazon is heavily product focused because they have the buyer in mind. The difference between the Amazon selling mindset of survival-of-the-fittest and DTC brands is that Amazon benefits nothing from developing your relationship with brands. To Amazon, a sale is a sale is a sale. Brands, on the other hand, spend so much of their focus on developing their brand identity and nurturing their relationships with their communities. These two mentalities could not be more different and trickle down into the very essence of the shopping experiences consumers go through.
Selling on Amazon to boost brand sales goals
However, not every brand or retailer can afford to contemplate the Amazon dilemma. For many brands, selling on Amazon allows for great visibility and opens doors to customers that may have never even seen their products otherwise. Larger brands, perhaps those with heavy VC-backing (venture capital), can afford the options of how they want to manage their sale strategies while other brands need to meet their bottom lines by focusing on getting their products sold by any means possible. VC-backed or not, many brands need to prove that they are profitable in order to keep the business going. Smaller companies may struggle with logistical problems like order fulfillment and inventory management, something that Amazon can virtually fix within the next sales quarter. Larger brands with VC-backing may risk being absorbed by larger entities if they are not able to keep their heads above water. Amazon in response provides greater opportunity for sales.
Many DTC brands see Amazon as a product platform, plain and simple. DTC brands are hesitant to join a platform that doesn’t allow brands to distinguish themselves. After all, branding is a company’s story and soul put on display. Consumers are able to relate to brands, establish brand recognition, and display their own personal connection with brands. On the flipside, brand-focused companies often focus on their lifestyle marketing strategies that help them develop unique relationships with their consumers – you’ve probably seen this on display through your own Instagram feed.
Amazon doesn’t care about the brand. It cares about the product and systems in place that connects the product to the hands of the consumer. However, this may be old news for the powerhouse platform. Amazon is shifting in a new direction; they want more brands. When Amazon holds more brands in its search results, they open up the floor for competition and selection for the consumer. All of this helps develop the end user in mind – the buyer. Amazon’s main focus is to create more opportunities for their buyers, and that means adding more brands for their customers to select from.
However you view a relationship with Amazon, it is important to note that Amazon is turning a new chapter. Amazon’s future with brands looks more inclusive; the company wants to help DTC brands. Perhaps Amazon sees this strategy like a painter with only three colors on their palate – more brands add a new vibrancy to its marketplace. Of course, Amazon is interested in its own bottom-line above all else, the customer. Amazon has recently been extending generous meetings and offering to DTC brands in order to convince them to sell on their platform. The luxuries and generosity presented clearly indicate Amazon’s desire to get DTC brands on board. Some of the deals Amazon has offered have included $1M of free native advertising, managing brands’ inventory to complete order fulfillment, and some very tasty investment opportunities.
For some of those smaller, non-VC-backed brands, these deals are almost too good to pass up on. Amazon is always keeping its own interests at the top of the priority list, but it’s clear that the platform is willing to meet the needs of developing brands to get them to join the marketplace. Additionally, free native advertising, inventory management, and generous investment capital certainly don’t come cheap for Amazon – especially when copy-cat or generic sellers of products can be found by the dozens. Instead, Amazon is clearly focusing on the value that brands can bring to consumers and the perception of quality that consumers can develop with the relationships they have with the brands they purchase from. Perhaps this means that Amazon benefits from having a seller with a higher-price point competing on the first page of their results because they know their customers will be more satisfied, compared to buying from an unknown seller.
Many brand heavy DTC companies have experienced the same hardships and Amazon could certainly fill the gap. One of the most challenging aspects for many companies is the high cost of customer acquisition. For many of these customer-focused companies, Amazon product placement may feel like primetime advertising in Times Square. It eliminates the high barrier to customer acquisition, which in some part also helps smaller brands develop their reputability and overall growth.
What Amazon is willing to offer brands and DTC’s
We ourselves have a brand that we partner with that was invited to Amazon headquarters to sit a roundtable of other DTC brands. Although our partner ultimately decided not to go forward with Amazon, they would have been offered ample support through their first year of selling on the platform. One of the highlights Amazon touched on included allowing brands to maintain control over how their brand shows up on listings. The brand sets the price, manages photos, creative, the bullet points, and product copy – they can even manage the brand images on the marketplace. In addition to DTC’s being able to protect their brands, Amazon allows these brands to sell directly through their platform and utilize Amazon’s fulfillment services. This option contrasts from selling directly to Amazon instead. Selling your products directly to Amazon takes away the freedom that many of these brand-centers companies want to have leverage over – it’s a much more cold, sterile process.
The reality is that anyone can start selling on Amazon. But to have access to Amazon’s extra support is something that takes a lot of the heavy lifting in the selling process. Many brands have entire positions dedicated to growth through Amazon, while other companies look for individuals solely responsible for managing their Amazon sales strategies. Amazon should be looked at as an entirely new e-commerce ecosystem channel in the way that Facebook Ads Manager has evolved into a new marketing vertical.
At the end of the day, brand executives are really looking at their sales and marketing funnels and seeing what they are willing to give over to Amazon. Although Amazon has made leaps and strides to be more accommodating to brands by allowing greater brand control, it’s clear that Amazon’s primary focuses aren’t going to change. Amazon will still have the buyer in mind, and if that means creating a carousel of products that are put on display, then no marketing strategy or native ad-spend budget will help DTC brands. DTC brands that want to own every part of the funnel will most likely steer away from the idea of offering their products through Amazon.
This way, they know exactly how they acquire their customers and how their products are positioned. Although some brands are looking at strategic placements on Amazon – like including only some products with the primary motive of leading customers to their brand’s website – the decision to sell on Amazon truly depends on the strategic needs of each company.