If your company’s products are being sold in Amazon’s marketplace by unauthorized sellers, how is that affecting your brand? Here are five key questions you need to be able to answer.
With the introduction of online marketplaces like Amazon, today’s brands are faced with new challenges that they have never faced before. Unfortunately, many of the largest brands have not adequately evolved their channel management efforts, subsequently creating an “Amazon problem” where brands have unauthorized sellers offering the brand’s products at prices lower on Amazon than most any other channel. This trickles down to create complaints from existing brick and mortar retailers, as well as challenges for the brand looking to add new distributors or retailers.
There are common structural issues that cause brands to be inadequately balancing the tradeoff of the sales opportunity from the Amazon channel versus the uphill battle of creating consistent branding and retail pricing across all channels.
To be able to construct best practices around operating procedures, branding procedures and pricing procedures, ask yourself these questions to understand how well you have prepared your brand for the Amazon channel:
- How are your offline sales team & ecommerce teams incented to work together to account properly for diverted product, and to stabilize pricing across all channels?
- Where is the biggest distribution leak in your business? How are you reducing its impact on your overall business?
- Do you have an online reseller policy in place? How do you police your distribution channels? When was the last time you fired a distributor or retailer for diverting?
- Does the person in your organization overseeing online channels (including marketplaces) have a senior seat at the table?
- What programs are in place to ensure consistent branding offline and online (your website & marketplaces)?
The culmination of these questions raise a number of issues for brands that are used to treating all retail channels the same. With the introduction of the Amazon marketplace, product from previously loosely controlled retail channels can now flow efficiently and with few barriers to entry onto the Amazon marketplace, leaving brands guessing at identifying the sellers offering their products on Amazon.
The typical sales team is focused on selling more units – not worrying about the long-term implications on brand equity of selling to a distributor or retailer that may not be diverting some inventory to resellers that aren’t authorized by the brand to sell in online marketplaces, usually at lower than desired retail prices. Ecommerce teams that are charged with building the ecommerce portion of the brand’s business find themselves at odds, usually in-fighting, with the (brick and mortar) sales team. If there isn’t proper alignment across internal brand teams, the sales team may know who is ultimately diverting product, but it is not in the best (sales incentive) interest of the sales team to police such behavior.
While many brands have implemented minimum advertised price (MAP) policies, those policies apply only to authorized, known sellers, and do little to provide the brands with a legal basis to regulate unauthorized seller activity. Hence, there is need for a more sophisticated online reseller policy, which can provide additional mechanisms for the brand to protect its brand’s desired distribution efforts. Yet any policy is only as good as the level to which it is policed, and best practice brands now make the effectiveness of the policing a shared goal across executive teams inside the brand. For only with senior buy-in will brands make the necessary tradeoff of cutting off short-term sales to likely product diverters in order to shore up control of distribution (and likely reduce cross-channel pricing discrepancies).
Finally, while controlling distribution remains critical to a brand’s ability to manage its inventory and sales across channels, the brand must also ensure that its brand message is consistently managed across all channels, including Amazon – even if the brand itself isn’t selling its product on Amazon. It is unlikely that a reseller will apply the same level of effort to consistent, correct branding as what the brand can do for itself if it chooses to be active in this responsibility.
For brands that are serious about growing their Amazon channel business, these initial steps around brand control are paramount to building a firm foundation to support longer-term growth. Some brands are used to doing business a certain way for decades before Amazon became relevant. Yet the unique pressures of the Amazon channel are forcing brands to rethink how they do business both offline and online. Only with an evolved, disciplined approach will brands be able to remain in the driver seat when it comes to determining where, when and how they are sold.
James Thomson is a partner at Buy Box Experts, a managed services agency supporting brands selling online. Earlier, he served as the business head of Amazon Services, the division of Amazon responsible for recruiting tens of thousands of sellers annually to the Amazon Marketplace. In 2020, he will release a co-authored book “Brand Control in the Age of Amazon,” designed for brand executives struggling to make sense of what it takes to make the Amazon channel a positive component of their brands’ overall growth flywheel.