Surival kit for brands in the age of Amazon
It is not a secret anymore that Amazon is dominating e-commerce today. Checking Amazon first is a very normal behavior of a regular online shopper.
The stats show that 44% of all product searches, start on Amazon. Also, Amazon covers 43% of all U.S. online retail sales.
If you are a brand, now more than ever, you can’t escape seeing your products listed on Amazon. The challenge becomes how to sustain your business without sacrificing your margins and brand value while your control over this sales channel is somewhat limited. Presence on Amazon is an opportunity to capture additional market demand, improve brand awareness and create a new area to sell your products. However, it is also a risk because there are some harmful actions that may be taken by Amazon sellers, such as:
- lowering prices and eroding margins that lead to price wars,
- availability of fake products,
- unauthorized sellers (also of refurbished, used products sold as new) .
Big brands such as Nike started selling directly on Amazon in order to gain control over their products, preventing unauthorized sellers and disabling fake products. But is this the only way?
In this article, we aimed to give tactics that may guide you on how to compete with Amazon sellers and survive in the competitive era by focusing on your own online store or distributing your products on Amazon.
How to survive in the age of Amazon?
You can compete with Amazon sellers directly from your online store or dive into Amazon yourself to sell your products. In both cases, you can find some ways to gain a piece in this massive marketplace for yourself.
1 – Choose your distribution
If you decide to sell on Amazon as a brand, the first thing that you need to look at are the Amazon distribution options because they will affect your strategy. Amazon has 2 dedicated distribution options for brands who decide to sell on the marketplace:
Vendor Central 1P:
In this option Amazon serves as a retailer of your products, launches the orders through the Vendor Central platform, keeps your inventory and handles every single operation from pricing, shipping to customer services.
Amazon’s tagline for Vendor Central says a lot: “We buy and store the inventory, and take care of everything from shipping and pricing to customer service and returns.”
1P offers a great variety of benefits such as Amazon promotion, fulfillment, access to premium Marketing tools, even a selling strategy. However, you’ll lose control of your products on some basic issues like pricing. The brand will lose control over MAP enforcement (Minimum Advertised Price, applicable in the United States), leading to price erosion.
When forming 1P partnership with vendors, Amazon will respect your MAP and will not sell products below it. However, if any reseller – authorized or not – has decided to sell the products below MAP, Amazon can lower its prices to match. This can manipulate demand and harm your margins.
Seller Central 3P:
With the 3P option, brands hold the power of selling products directly to Amazon shoppers. Products are priced with a retail price and brands just pay Amazon for the usage of the marketplace. As an independent seller on Amazon, you’ll have more control.
With that option, the brand will gain 100% control over retail & MAP pricing which means controlling the profit margins. Also, the brand will be able to quickly adjust pricing by introducing discounts and promotions.
This is why, before diving into selling through Amazon, you need to decide which option fits your strategy best. Do you want to leave the control to Amazon and always be competitive in the market?
Or, do you want to keep the power and manage your own brand?
If you have problems deciding, you may also try a hybrid approach. In this model, you combine the 1P and 3P strategies and use both simultaneously. You manage the assortment that Amazon buys through Vendor Central and you manage the assortment you sell direct-to-consumer on your Seller Central account.
2 – Don’t Try to Beat Amazon on Pricing – Don’t Sacrifice Your Margins
If you are competing with Amazon resellers from your online store, the last thing you should do is competing with them in the pricing arena. As a brand, you simply can’t win that race. As we have mentioned in this post, Amazon already has the advantage with the complex algorithms of dynamic pricing and repricing.
There is also an issue of eating into your profit margins and damaging financial health. Keeping your prices below the competitors, at all times, will most likely end up in unprofitable sales. Instead of competing with price, you should look at the internal ways to make sales with fattened margins. In order not to have huge price differences with Amazon, brands should have reasonable prices in their store to satisfy the customers.
To do this, optimizing costs and then adjusting prices according to the cost optimization strategy would be a wise move, especially in three areas; product, shipping, and operating costs.
Research shows 55% of shoppers prefer to shop directly with manufacturers over third party sellers. Especially millennials drive this shift. They are more inclined to buy directly from brands because if they view the product review or contents from the brands itself, it appeals to be more reliable and appealing.
To put it simply, by building loyalty and having reasonable prices, brands can both have competitive prices and better margins.
You need to control your brand image, your products, your resale channels, and much more. Lack of control at any point can damage your brand’s reputation, your sales, and your profits.
That’s why unauthorized sellers are a problem for brands, especially on Amazon. These sellers aren’t part of any formal reseller agreement, which means they’re selling your products without your permission.
They set ridiculously low prices, provide bad or no service and damage brand reputation.
There are several strategies to prevent them from selling your products.
Register to Brand Registry
Amazon has options that can benefit brands in these instances. One is the Brand Registry, which enables you to register your brand as the sole owner of your products and services. When confronted with an unauthorized seller, you can report them to Amazon and, as a registered brand, can clearly prove that the other party is not authorized to sell on the marketplace.
One common strategy that you can do as a brand is detecting them through MAP monitoring tool. If you monitor Amazon for MAP violators, any unauthorized resellers will be seen in the list of sellers and can be detected due to the MAP violation and an unknown company name.
As tracking all channels manually requires a huge amount of work and may cause errors, implementing automated monitoring to analyze your products on Amazon will help you deal with unauthorized sellers quickly.
4 – Monitor and Optimize Keyword Positioning in Amazon
If you are distributing your products in Amazon, you want them to be found and bought by Amazon shoppers just as you would want your products to show up on the first search engine results page for your product keywords.
As you invest in SEO in Google or Bing, you should invest to be found on Amazon as well. The marketplace has its own keyword algorithm and serves as a platform too. Failure in Amazon SEO means less traffic to your products’ pages and less sales!
Firstly, let’s look at the Amazon algorithm briefly. It is referred to as A9 and works differently from Google, focusing on two main indicators; Relevance & Transactional Performance.
A9 encourages and honors the listings that have better conversion rates not just the listings stuffed with keywords. Of course, the algorithm has various components that affect the position of the keyword and the listing. It definitely counts the quality and the quantity of the reviews, price, fulfillment method, product images, description and bullet points, seller name, keywords.
But, conversion comes at first place and everything follows it. The more a listing converts for a specific keyword, the higher A9 will rank it in the first place!
Of course, your work does not end there. This is a continuous process which needs constant tracking, analysis and optimization.
Like every business process, you first need to gather and display the data in order to make optimizations. You can automatically monitor your brand positioning and keyword performance with Dealavo Brand E-Health. Closely monitor the positions at which your products are visible in the search results of specific phrases on Amazon.
How do your products rank on Amazon search against most popular keywords?
How do you compare against competition and what is your share of virtual shelf?
The product title is the most valuable field that you can place your keywords in. Your main goal should be providing a great user experience, not keyword stuffing. Also, your strategy should be aligned with Amazon policy and best practices.
You should keep the length between 50 – 100 characters including the brand name, product name, and product information like size, color, flavor, etc.
We can formulate the most optimized title like the example below;
Brand – Feature – Material – Key Component – Type – Code – Size – Color
Amazon Search Terms Optimization
The required characters are 250 to be indexed in the Search Terms field. You should include search terms that can be related and tangential to your product. Also, do not include the keywords that you use for the product title. Keep avoiding using repeated keywords, but use punctuation to make your content clean and easily spottable.
Amazon Product Feature Optimization
Adding top 3-5 search terms would help your listing to be shown at the highest positions. Again, do not make the keyword stuffing but add the most prominent product features related to the search terms. By doing that, you make Amazon shoppers able to find what they are searching for and potentially increase the conversion rates.
Amazon Product Description Optimization
Adding your search terms and related keywords into the product description would help Amazon shoppers to find your listings as well.
5 – Increase the visibility of your products by investing in “sponsored products”
What are “sponsored products”?
Sponsored products help brands to advertise their products with the targeted keywords in search results and detail pages on Amazon. Brands can choose their most-hyped products and advertise them with manual bidding or allow Amazon to set automatic targeting.
By using sponsored products, brands increase the chance of being more visible and boost sales via ads when Amazon shoppers are looking for products similar to your brand’s. “Sponsored products” are image-based ads showing just by the searched products. Most often chosen ere are new offers, specific selections, promotional and seasonal products.
Amazon’s dominance in the current e-commerce world is incomparable, and it won’t change soon.
Instead of ignoring the power of Amazon, try to get advantage from it and maximize your effort and performance there.
Of course, you should also be looking for other marketplaces or going directly to customers. But with the strategies mentioned above, you can start to be more effective and generate results for your brand.
So, to recap:
- Choose the Amazon distribution strategy that’s best for you.
- Don’t fight with Amazon in the pricing arena.
- Detect harmful unauthorized resellers.
- Improve your search terms and be more visible in Amazon.
- Use sponsored products.
And what are your thoughts? Do you have other strategies to survive and thrive on Amazon? Please do not hesitate to write in the comment section below.