Let’s start with the obvious: owning and managing a brand is a harder proposition than ever before. Gone are the days of controlling a brand’s image and reputation through owned properties like traditional advertising, packaging and websites. Instead, in today’s world, customers (and non-customers) control your brand’s image and reputation. That’s because 21st-century shoppers look to their peers, and third-parties, for a more “trusted” endorsement, rather than a brand’s owned properties. To get there, they turn most often to online marketplaces, and Amazon is their marketplace of choice.
We’ve all seen the overall Amazon growth numbers, but consider that in 2016, Amazon delivered over $10 billion in e-commerce sales for CPGs, with a 42% annual growth, thanks in part to a significant sales increase in everyday essentials such as toiletries, bottled water and laundry detergent. (Source, A Mendes and J Millot, 2016)
As with any good thing, there’s always an outsider looking to ride the wave while it’s on the rise. For Amazon, enter third-party sellers, who through the Fulfilled by Amazon (FBA) program have become a dominant part of the equation. Amazon currently boasts over two million third parties selling through its marketplace. This past holiday, Amazon saw a 50% increase in items shipped through FBA vs. the same time last year, and 2016 overall saw the total items shipped increase by 50% as well. This is where the challenges for marketers begin. Whether you’re a household name, challenger, or “just launched” brand, if you have an online presence on Amazon, it’s essential to put time and resources toward assessing and managing the impact third-party sellers can have on your brand.
Despite education and activations around the brand side of e-commerce on Amazon for controlled product SKU’s (“ASINs”) being well documented, education is greatly needed for marketers to tackle the issue of third-party sellers, including price strikes, brand dilution, and QC issues. More specifically, we as marketers have to be on the hunt for fraud related to both our products and those who are selling them. Outdated items, counterfeits, deep discounts, and those unfit for retail sale are plaguing our brands.
While Amazon will police the marketplace as needed — and in recent months there has been a well-documented extra effort to do so by Amazon — it is up to the brand (or customer) to identify the issue before it will be fully addressed. Meanwhile, we’re witnessing third-party sellers continuing to encompass more of the proverbial Amazon pie. At the moment, third-party sellers are not always considered to be a major CPG issue, but that is changing fast, and the growth potential is enormous as Millennials, who carry $200 billion in annual buying power, say they would buy everything online if they could. This is a group comprised of the savviest and most well-researched shoppers we’ve ever seen, yet they’re not concerned with who’s selling the product, but rather what information they can find, what their peers are saying about it and what kind of deal they can get.
So what’s a brand to do? We’ve witnessed three paths: The first has been to ignore it and hope for the best outcome. The head-in-the-sand approach certainly causes less internal friction and work, but often results in a damaged brand and the loss of sales long-term.
More often, brands are choosing to deal with the problem head on with their partners at Amazon. They are dedicating teams to help the organization better embrace the nuance of a third-party sales cycle, tasked with getting ahead of the problem, minimizing fraudulent products, and combating fraudulent sellers while embracing those third-party sellers who are good for a brand’s reputation and bottom line. They are rolling up their sleeves and ready to engage. This entails extensive auditing and cataloging of the issues plaguing your brand and presenting your findings to Amazon with the expectation that it will rectify the situation. This is typically done most effectively on a regular basis, and though a problem can often be resolved, it has a tendency to resurface if not monitored.
The more drastic response we’ve seen many take is to kiss Amazon goodbye altogether, removing all owned items on the site and broadcasting to their consumer base that Amazon’s unacceptable business practices are damaging their brand, and their products are no longer available in this particular marketplace. Birkenstock was the latest and most high-profile of brands to take this approach to much fanfare. While we’ve rarely seen this approach work in the long term, it’s certainly a bold strike and sends a message that has received a response from Amazon it the past (see Johnson & Johnson.)
Regardless of your roadmap, it’s important to understand the value and media capability of Amazon, and the threat posed by third-party sellers in this equation, and invest your brand-planning dollars accordingly. By evaluating what brand building opportunities exist in the realm of Amazon and auditing the marketplace to identify and address any potential liabilities, you will be well positioned as the Amazon wave continues to gather momentum.