How to Survive in an Amazon World: Should You Be Selling on Amazon?
A recent report from brand intelligence firm Survata revealed 2017 data showing that 49 percent of product-related searches start on Amazon.com compared to 36 percent on search engines and 15 percent on retailer sites. Despite Amazon’s decrease from its 2016 value of 55 percent, it still owns the majority of product-related searches and should be a serious factor in resellers’ and manufacturers’ future growth strategies.
Many retailers sell on Amazon successfully, either as a complement to their main business or as their single source of revenue. Alternatively, other companies have stayed away and consider Amazon a direct competitor. Regardless of previous strategies, retailers need to continue evaluating Amazon’s impact on their overall business as it continues to grow and increase its loyal customer base.
As companies evaluate the opportunity of selling on Amazon, there are several factors to consider. These include the logistics to manage orders and provide customer service support, importance of owning customer data, brand experience, and revenue opportunity.
- Logistics are an important key to success. Amazon expects sellers to provide outstanding customer service, including accurate product information, on-time orders, and quick replies to customer inquiries. Failing to perform at Amazon’s standards can result in having a seller’s privileges suspended. Sellers need to have the capabilities to provide exceptional service in those areas before expanding to Amazon.
- Importance of owning customer data varies by seller. Amazon’s policy is that it owns the customer data and sellers can only communicate directly with a customer through Seller Central. Plus, sellers cannot provide additional marketing materials that encourage customers to buy outside of Amazon. As people-based marketing becomes critical for companies’ marketing strategies, they must decide if the opportunity on Amazon is valuable enough to give up the ability to collect customer data for targeting and building brand loyalty.
- Brand experience is most important for manufacturers. Amazon allows brands to sell almost any products, provided they remain good sellers and their products adhere to Amazon’s policies. As companies like Nike have experienced, brand and price integrity aren't always upheld by sellers on Amazon that aren't authorized sellers with Nike. To counter this situation, manufacturers have two choices: One, they can register their brand through the Brand Registry process, allowing them to control the product information displayed and ensure that all sellers are authorized. Or two, they can become a vendor that wholesales products to Amazon and then Amazon controls all aspects of the order fulfillment process.
- Revenue opportunity is imperative because sellers don’t want to sell in a channel where they lose money. As a third-party seller, Amazon collects a commission on the total price of the sale which is 15 percent for most categories. Sellers can also show their products to interested customers through paid ads, such as Sponsored Products, Headline Search Ads, and Product Display (only available for vendors). These CPC-based ads help sellers increase visibility and sales in their program.
While selling on Amazon can be a successful venture for many businesses, there are still retailers that consider the channel a direct competitor and aren't interested in being a seller. Luckily, there are ways for these companies to counter the Amazon behemoth. These companies own their customer data and should use that information to effectively target past and current customers, as well as similar prospects, with ads across channels like Google, Bing, and other channels. They should also offer competitive discounts on major retail “holidays” like Black Friday, Cyber Monday and, yes, Amazon Prime Day. Finally, these companies should explore other marketplace opportunities like Google Express that allow them to sell on a marketplace and own the customer data.
As retailers build their strategies for 2018 and beyond, Amazon’s impact on their businesses will continue to be a major factor in their planning. Retailers should keep a close eye on Amazon to make sure they're either taking full advantage of selling on the marketplace or being very creative to compete against the growing influence of Amazon.
Todd Bowman is the senior director, SEM and feeds, at Merkle, a technology-enabled, data-driven performance marketing agency.