In anticipation of Prime Day on October 13-14, we wanted to discuss ways that brands can do business with Amazon. As the premier online retailer they can’t be ignored and ESP has the relationships and intellectual capital to assist your brand in developing an Amazon strategy.
Can your brand be successful today without an Amazon Strategy?
It would be an understatement to say that Amazon is the World’s dominant retailer. The Seattle based e-commerce giant holds 37% of the market share in retail. In 2018, Amazon eclipsed Google for online product search. Nearly 90% of Amazon’s product views come from the company’s own product search and not from advertising, merchandising, or product aggregators. Below are some more key findings from a Raymond James Consumer survey that was published on October 2nd, 2020:
- Consumers Expect to Shift 11% of Spending Online (Pre vs. Post COVID-19). Current online spending by respondents was indicated at 48% (up 16% from pre-COVID-19 levels of 32%). Post- COVID-19, respondents expect to purchase 43% online (down from current levels but still up 11% from pre- COVID-19).
- 70% of consumers start their shopping journey on Amazon
- Among respondents who consider buying home furnishings online, 69% (vs. 75% in January) would buy from Amazon, followed by Wayfair (47% vs. 37%), Walmart (43% vs. 54%), Target (40% vs. 62%), Overstock (30%), specialty home furnishings stores (29% vs. 33%), and department stores (28% vs. 35%).
At eCommerce Sales Partners, we have had the opportunity to work with Amazon in many different ways. If your brand doesn’t have an Amazon strategy, we will break down the three primary ways to consider doing business with the largest retailer in North America.
Two main ways you can business with Amazon today
Amazon Vendor Central
is a wholesale relationship between the brand and Amazon. This can be on a drop ship basis or larger volume if the demand is there for your product. If your brand has distribution concerns and requires IMAP (Internet Minimum Advertised Price) to be intact Vendor Central is not for you. Amazon’s stance on IMAP is that they will always have the lowest price when the goods are shipped and sold by Amazon. On Vendor Central, Amazon handles the shipping and the relationship with the customer. Vendor Central is a good solution for your brand if your brand does not have IMAP concerns due to distribution.
Amazon Seller Central
is a Third Party or 3P relationship where your brand is the seller of record on Amazon’s marketplace. Amazon is essentially marketing your product for you on their site, but you are the seller. You are responsible for shipping to the customers home, the monthly fee of $39.99 as well as handling all returns and customer service. Amazon collects a referral fee from each sale based on your product category which is usually around 15%. By selling on the Amazon Seller Central marketplace, you do maintain control of the retail price of your products. There are many other features that are available, such as utilizing Amazon’s Distribution Network through Fulfilled by Amazon that unlocks the prime badge for your products and promised 2 day shipping, Amazon’s Pay Per Click Program, called Amazon Marketing Services, is key tool that allows you to pay to get your products on the top of Amazon’s search based on keywords and categories. Lastly, with Amazon Brand Registry, if you have an active trademark, you can register your brand with Amazon that will allow you to protect the products you sell from rogue/counterfeit sellers and build a brand store.
Amazon Seller Central is an attractive solution if you need to control the retail price, can handle delivery to the customers home, and have a way to deal with returns internally through an outlet or a third party. The pros here are your products are shopable on the highest trafficked retail site in the world and you get the retail margin less shipping and the 15% marketplace fee paid to Amazon for the listing. The cons are handling returns and dealing with customer service issues as they arise.
Shop Local – A New Way to do Business with Amazon
This new program targeted at brands with big and bulky products requiring specialized delivery, enables brands to work with both Amazon and their Brick & Mortar retailers to sell and fulfill products more efficiently. The brand creates and maintains its catalog on Amazon Seller Central. It then introduces Amazon to its dealers In different geographic markets to sell their products to consumers in their geographic market. Opening up your key dealers directly to Amazon is something that is worthy of taking into consideration if pursuing this strategy.
This is how the process works. The brand creates the SKUs or ASINs on Amazon and registers their brand on the Amazon Brand Registry. Amazon then asks brands to help them identify authorized retailers in different trading areas to set up Seller Central accounts with Amazon and sell your brand’s authorized ASINs within their trading area (a customer located in a certain zip code, identified their IP address while on the Amazon site) will only see your products sold by the retailer who is the authorized seller in that zip code). Once the retailer is set up as an Amazon Seller Central partner authorized to sell the brand’s products in their trading area, when a sale is made to the consumer, they will be responsible for ordering the product from the brand, shipping it to the customers home and dealing with any returns. This is an interesting hybrid approach that will be attractive to the furniture industry for three reasons:
- The deep relationships furniture brands have with their retailers
- The prohibitive cost of setting up a website to compete with Amazon in a retailer’s trading area
- The local retailer is best positioned to efficiently deal with last mile delivery and service issues
It will be interesting to see how this program grows and how distribution concerns are managed between the brands and the retailers. One thing we do know is that Amazon with its technological superiority and relationship with the consumer positions them in a position to demand brands and Brick and Mortar Retailers to work with them and by working with them you will get your product in front of more customers. Even if consumers do not want to buy online, the vast majority of them begin their shopping process on line and the majority of these consumers begin on Amazon. This will drive not only your online sales, but also your in store sales.
We recognize that Amazon is not right for every brand but if you’d like to learn more about how to do business with Amazon we at eCommerce Sales Partners are here to help.