Not a week goes by that I don’t get a call from a brand executive asking how to get Amazon executives to pay more attention to his/her brand. The brand may be a huge multi-national brand, or a 200-year-old, family owned brand known to all households. The brand may have an existing sourcing relationship with Amazon, or may be looking to initially engage in a sourcing relationship with Amazon. Usually these brand executives assume that there’s a silver bullet solution – a visit to Amazon HQ and a meeting with the right team to unlock all the goodies. Well, as the former Head of Amazon Services, I can assure you that strategy, while it may work with many big box retailers, does not solve your Amazon problems.
So how does one work the system so that Amazon will give their brand preferential treatment? Better yet, how does Amazon partner with brands?
There, I said it. Amazon, to put it mildly, sells widgets, and your brand is nothing but a collection of widgets Amazon wants to add to its catalog. Yes, your brand’s products might be in higher demand among Amazon customers than other brands’ products, but ultimately, your brand is nothing but a collection of widgets to be offered in conjunction with 400 million other products that Amazon has compiled in its catalog.
And, every brand has to play by the same rules. Billion dollar brands and start-ups alike are not exempt from paying the same third-party selling fees, and they both pay co-op fees where a direct wholesale relationship has been established. While large brands have budget to pay for SAMs (Strategic Account Managers) or AMG (Amazon Media Group) campaigns, those brands do not enjoy greater visibility on the site through a personal relationship. They spend money, lots of money, to place their products in front of customers.
Amazon vendor managers – those people within Amazon responsible for sourcing specific products for wholesale acquisition – are each tasked with finding a way to get specific brands into the Amazon catalog. Based on Amazon’s incredibly large database of Amazon customer search and purchase behavior, Amazon knows which brands are critical to Amazon customers – which brands matter most to customers, which brands are most often out of stock, which brands are shopped but under purchased relative to other brands, and an assortment of other data points to guide the development of a shopping list of brands. And through the compiling of this data, the vendor manager is provided with that list of brands to be acquired.
The vendor manager will likely start by contacting the brand to see if a direct sourcing relationship is possible. If not, the vendor manager then finds distributors – authorized or not, who are willing to supply product to Amazon. And if all of those sources don’t work or only supply a portion of the brand’s catalog, the vendor manager will keep looking for other places where the brand’s product might be available. Such sources might include gray market product diverters, international markets, and so on.
And once the vendor manager does source the brand, Amazon will aggressively re-price (Amazonian for price-match) to other sellers on the Amazon marketplace as well as any of the thousands of other online and offline shopping channels where Amazon checks pricing regularly. Brand teams will likely be encouraged to pay large six or seven figure amounts each year to the apparent incremental support of Amazon teams, in order to promote those brands. While some of these investments are worthwhile, I have seen far too many situations first-hand where the brands basically wrote checks essentially for the privilege of selling on Amazon.
When I speak with brand executives, I encourage them to evaluate the range of distribution options available for brands to capitalize on the Amazon marketplace channel, while controlling key issues like pricing, distribution, brand equity content, catalog selection and inventory levels. Given the wide range of considerations that most brand executives don’t realize need to be considered, it’s not surprising to hear from so many executives frustrated with Amazon.
Remember, no one at Amazon will manage the day-to-day for a brand’s Amazon business let alone create a strategy for a brand. It is up to the brand to find the right expertise to improve Amazon channel brand equity, product catalog, and advertising. Amazon doesn’t partner with brands – each brand needs to build and manage its own Amazon strategy.
To learn more about ways of doing business with Amazon, and the tradeoffs to be considered, read the new book I co-authored with Joseph Hansen, titled “The Amazon Marketplace Dilemma: A Brand Executive’s Challenge Growing Sales and Maintaining Control.”