How Does Amazon Marketplace Fit Into Your DTC Strategy?
Amazon’s market share and its offerings to eCommerce companies mean it can be either a tool or threat to brands. Direct-to-consumer brands, especially, must pay special attention to Amazon Marketplace’s ability to reach consumers easily.
As a sales channel, Amazon does offer some ways to build direct customer relationships. And as Cie Digital Labs CEO Anderee Berengian writes, “Not having a direct relationship with the consumer puts brands at the mercy of anyone who does.”
However, many brands will bristle at how much control Amazon exerts over its sales channel. Brands end up trading some aspect of the customer relationship for the access Amazon provides. The question is whether that balance fits into your brand’s DTC strategy.
What Amazon Marketplace Offers a DTC Brand
Amazon Marketplace lets vendors, both large and small, sell products alongside Amazon’s own offerings. In short, Amazon Marketplace offers access to customers through an established platform — though, it should be noted, brands don’t get the customer data nor do they fully own that customer relationship. Marketplace also offers the option for fulfillment, which Marketplace Pulse founder Juozas Kaziukenas says at least 60 percent of brands opt into.
Further, Amazon is so big that brands must decide to either join forces or compete with it. After all, Amazon is where the customers are. “As an Amazon seller, you become part of the Amazon experience that attracts a huge audience of loyal shoppers,” Krista Fabregas writes at FitSmallBusiness. “Shoppers come in droves, drawn by Amazon’s vast selection, competitive prices, excellent shipping, and sound reputation.” Of course, Amazon does charge a commission for this opportunity — about 15 percent of every sale, on average.
And, as the saying goes, with great power comes great responsibility. Fabregas points out that brands on Amazon Marketplace are expected to maintain certain standards along the way — high-level customer service and tailored product pages, for instance. These efforts will help your brand, but do require investment.
The Hidden Costs of Partnering With Amazon
It’s important to remember that Amazon “owns” the customer relationships on the Marketplace, says market researcher Pamela N. Danziger.
Further, the branded experiences you create on your own sales channels don’t translate to Amazon. “Taking advantage of Amazon’s massive traffic is one way to get going quickly, but you might have to deal with limited brand recognition and compete in a cramped space where there are lots of similar products,” Rob Starr writes at Small Business Trends.
Despite the limitations, the opportunity for growth is still there. Matthew Ferguson, director of strategy for the consultancy Rich Insight, writes that Amazon Marketplace could simply be another channel to your DTC strategy. The control is still there. “Being an Amazon seller allows you to control pricing and, therefore, margin,” writes Ferguson.
“This can be very important for brands. You also have full control over stock range and depth. You are in control of the experience, the listings and the marketing.” In this vein, you can treat Amazon Marketplace as another storefront for your brand.
Things get a little trickier, however, for brands that resell through other retail outlets. For one thing, price competition within this channel is intense. Your brand might end up competing with itself over price if you rely on other resell outlets. What’s more, if you aren’t the only seller of your products, it can be difficult to control your minimum advertised price. And in general, Amazon doesn’t like for brands to act as both first-party sellers and third-party sellers.
Thinking Beyond Sales Channels
Another option is to use Amazon Marketplace as a marketing tool to gain exposure. Scalefast founder Olivier Schott points out that Amazon is now more popular than Google as a product search engine.
“This growing omnipresence means many brands selling direct-to-consumer may want to consider Amazon as a marketing tool for their brand, by leveraging the giant’s massive reach to drive awareness about their products,” Schott writes. “By looking at Amazon as a tool to promote their storefront, rather than just another sales channel, retailers can place their products in front of millions of shoppers on Amazon, while still prioritizing their DTC channel.”
Schott recommends using Amazon Marketplace for lead generation by listing only a few select products. Alternatively, you could use it as an inbound engine by taking advantage of search ads or the eCommerce giant’s SEO superpowers.
Another way to leverage Amazon’s marketing powers is to use the platform as a means of collecting and publicizing customer reviews. After all, Amazon provides a great channel for customers to leave feedback, says Duncan Jones of growth agency Webprofits. In turn, brands can use positive feedback on their own product pages (and negative feedback to improve processes and products).
The Bottom Line: Sometimes Useful, Sometimes Not
Working with Amazon Marketplace can help push your DTC strategy forward.
It may not be the right fit for every brand, so it is important to address the pros and cons, particularly in the context of your future plans for growth.
“When determining your Amazon strategy, you want to consider how your products, margins, skillset and future growth will contribute to the Amazon selling route you choose,” writes Jay Goldberg at Seller’s Choice. For instance, Goldberg points out that Amazon Marketplace requires significantly more work than the retail route. You should be sure you have the skills (or a team with the skills) to handle merchandising, marketing, selling and customer service.
The risk is you could put a lot of effort into a program that may not pay off — particularly with the shift away from personal vendor managers toward the new automated Vendor Success Program. James Thomson, partner at Buy Box Experts, says that program features automated interactions and computer-based contract negotiation. This shift that may prove frustrating to vendors, Thomson writes, particularly when you want to focus on your customers and DTC strategy.
One deal-breaker may be if your brand is in direct competition with one of Amazon’s private-label brands. The NYT’s Julie Creswell points out that it may simply not be worth jostling for space against Amazon brands, which can be placed front-and-center for the customer. “Now, with its expansion into private label, Amazon has shifted away from being an impartial, may-the-best-product-win distribution partner to being a direct competitor to those other vendors,” Creswell writes.
That said, Marketplace can still offer a fantastic channel for a host of eCommerce brands. As Mark Abadi points out at Business Insider points out, the program accounts for over half of all units sold on Amazon. In other words, the eCommerce giant is creating a universe big enough to accommodate its customers and its vendors.