Should You Sell on Amazon? Part Two
Written by David Schmidt
Published on July 27th, 2022
You’ve just launched your new brand after months, if not years, of prep, sweat and sleepless nights. You’ve opened your own online store and several retailers. You’ve got a little traction. A buddy makes a killing selling electronic components on Amazon and is trying to convince you that you could be making a killing selling on Amazon too. What do you do?
Building a brand is not easy. Basically, you need to get the planets to align to succeed. You’ve heard the stat – 90% of all businesses fail within five years – and you’re on a mission to not add to that statistic. So why would you bet the business on a channel that you have limited control of, where managing the fundamentals of brand building is close to impossible? Amazon is not the place to build a brand. There might be a place for Amazon in your distribution plan later - if your brand survives - but your initial focus needs to be on the channels you have the most control of.
Building community - Building a brand means building a community of loyal fans and there is no better customer than those early adopters. Connect with them with newsletters, blog posts, informational videos, etc. Send them insider info and special offers on new products. Make them feel like they are part of the mission.
On Amazon, as with selling to all retailers, you do not get the customer info – they do. Selling on Amazon, especially if you do it yourself, can be an all-consuming endeavor, that time would be better spent focused on the customer, not on Amazon. Your specialty shops can be another great advocate for your brand as a great retail environment encourages actual human interaction. Although you might not get the customer info, they are doing your work of building loyal fans.
Avoid being knocked off – For the last several years Amazon has been criticized and accused of knocking off popular products sold by others. They’ve created over 40 house brands and allegedly used the sales data they acquire selling other products to determining what products they should make and sell. It’s even the cause for anti-trust investigation in Europe. Knockoffs happen, but Amazon took it to another level with all the sales data they acquired. They have very recently started to reduce the number of private label products claiming poor sales. I’m sure that brands leaving the platform and complaints of Amazon going after customers with private label brands has just as much to do with it – not to mention getting EU regulators off the antitrust case.
Maintain brand value – Keeping specialty retailers happy and supportive requires they remain profitable selling your product. On Amazon, pricing is often controlled with computer algorithms and whether it’s Amazon selling a product or a third party, all it takes is for one party to lower a price to drive others to do the same for control of the ‘buy box’. Trying to stop this is like playing ‘whack-a-mole’ – as soon as you deal with one, another pops up. Brand value is also about perception, and those same specialty shops do not want to see the brand they just bought into selling on Amazon as it tips the competitive landscape against them.
Exclusivity is important - One of the essential elements of building a strong brand is exclusivity. Early adopters love finding new products that few others have discovered and bringing them to their peers and followers. Wholesale buyers are also on the hunt for the next cool brand, one that you can’t find in big box retailers and on Amazon. Keeping your distribution limited to the better specialty accounts, both brick-n-mortar and online, helps build a brand’s cache with the core community. If you need any proof of this, just look to premier brands like Patagonia, Vuori, Birkenstock, and Kuhl which are not to be found on Amazon. It gets even tighter when you look at the luxury brands whose distribution controls are extreme. Rolex on Amazon? I don’t think so!
Before you open any retailer, you need to know where they sell. Do they have their own online store? Do they sell on Amazon? Even if you’re too new or too small to institute dealer agreements with your accounts, spell out your sales policies in a thorough ‘terms and conditions of sale.’ Getting accounts to acknowledge your T&C with a signature is a great practice. Once your brand has some clout, get a proper dealer agreement, complete with your terms and conditions, put into place with every account. Your dealer agreement needs to spell out where they are authorized to sell your products and if you don’t want your products on Amazon, you need to make that is clear in the dealer agreement. Of course, your dealer agreement is only useful if you’re ready to back it up with action. Clarify the steps that will be taken should a retailer violate the agreement then make sure to act should that occur.
Time is your most valuable resource in the early stages of a brand, use that time wisely by focusing your efforts on building the strongest pillars you can to support your brand. Only then can you consider your next move.
Next week – When does Amazon fit into a distribution plan?
This article was originally published on 45north.us.