At Buy Box Experts, we have worked with several high-quality brand companies that invested millions of dollars into building their brand equity. They worked hard to earn distribution in a number of retail outlets, with some even setting up their own stores or websites. But then along came the Amazon marketplace, and those brands weren’t prepared for what was going to happen to them—specifically, channel control challenges, pricing parity challenges, and branding control challenges. If you care about your brand, you have to manage its presence on Amazon.
Brand Executives: Does This Sound Familiar to You?
Do you have product listings created by unknown third-party sellers? Price erosion caused by unauthorized sellers not being bound to a pricing policy you have in place for all authorized sellers? Are different colors and sizes of your products sold at different (seemingly illogical) prices because different sellers are responsible for selling different variations of your products? Are your products on Amazon receiving poor reviews from customers complaining about receiving scuffed packages or damaged/non-new products? Are your products not consistently in stock? Are Amazon customers buying older versions of your products, not understanding what versions are old models vs. new models?
These are some of the issues that can arise when your products are being sold on Amazon without your control.
On the other hand, if you’re a brand today selling through an outlet mall, you automatically have certain control over your brand. For example, you decide which items and what quality of that selection to sell in this channel. You decide at what prices these items will be sold. You decide when the items will be made available, and when they will no longer be available. You also get to determine the in-store merchandising and marketing efforts that will support this channel. Compare that to what happens when your brand doesn’t actively control what happens on the Amazon channel: the specific selection, quality of selection, timing of selection, and pricing of selection sold on Amazon are all outside your control. How your brand is merchandised is also left to someone else.
Amazon’s Advantage Over the Outlet Mall: Better for Customers
These issues are commonly seen on the Amazon marketplace, especially when brands don’t actively manage the channel and control their distribution and branding. But unlike an outlet mall, Amazon helps to protect the Amazon customer from bad customer experiences (such as receiving low-quality products), while at the same time recruiting new sellers onto the site, generating price competition and even lower prices for its customers.
As outlined in the Amazon Flywheel, growth on the Amazon marketplace is driven by creating more price competition through additional sellers competing for the same sale. Should an Amazon customer buy a faulty product, or something that is not as described on the Amazon website, Amazon protects the customer, thereby encouraging the customer to become loyal to Amazon. On the other hand, in an outlet mall, purchases are often final, and not backed by any or much of a warranty.
So in essence, an unmanaged brand on Amazon provides customers with a high-quality shopping experience (low prices, lots of selection, and strong shopping protection from Amazon), without the customer having to accept the reduced expectations that usually come from outlet shopping. For brands that are interested in controlling the brand experience at the point of sale, why would they choose to ignore what is happening to their brand on Amazon?
If You Care About Your Brand, Manage It
Here’s the bottom line: If you care about your brand, you must actively manage the Amazon channel. In all likelihood, unless you already have iron-fist distribution control, your products will end up being offered for sale on Amazon, whether you want them to or not. Amazon customers will naturally gravitate to buying your products there, and all the while you aren’t controlling messaging, pricing, or selection.
In response to the Amazon Flywheel, Buy Box Experts has developed the Marketplace Flywheel®, which outlines how brands need to control so they can grow effectively on the Amazon marketplace. When a brand controls its distribution tightly enough that it manages who is selling its product in each channel, it’s a lot easier to ensure consistency of brand message across all channels, while reducing the likelihood that your first-run products will be priced unexpectedly lower in some channels.
As luxury brand LVMH’s CEO Bernard Arnault says, “If you control your distribution, you control your image.”