You may be wondering if you should adapt your business strategy to sell direct-to-consumer on Amazon. Though there’s no easy answer to that question, we can help ease the anxiety you’ve cultivated from reading too many Amazon horror stories.
You may think of turning to an e-commerce site like Amazon as “feeding the enemy” with the exact tools it needs to destroy your company. It’s an extremely valid worry for brands, as Amazon has a history of leveraging the data they capture to cannibalize market share from competing brands’ products with their own private label.
Scary-sounding? Yes. Worth it? Usually. Why? Because even with that in mind, Amazon’s share of the total US eCommerce market is projected to hit 52.4% this year, so they’re not going anywhere.
The reality is that unless you have the global commercial pull of brands like Nike, Glossier, or Louis Vuitton, chances are you can’t afford to ignore the influence that Amazon has with its network of customers all over the world.
It’s likely that if your brand isn’t large enough to be included in Amazon’s list of restricted brands like Apple, your products will probably be sold on the platform anyway.
If you’re at this point in your business development, congratulations on your success! This competitive “growing pain” is inevitable, and one that all retail businesses have to encounter in the golden age of the internet.
If your brand is in this predicament, and you’ve determined that you’re ready to take control of your Amazon presence, rest assured that you retain the power to choose how you are represented.
In this blog, we’ll go over a quick case study and 7 more reasons why wholesale and direct-to-consumer businesses need to adapt and sell on Amazon. Read on to find out how your brand can use Amazon to its benefit, even if it’s natively a direct-to-consumer brand.
When to Sell Direct to Consumer On Amazon: A Case Study
If an item from your brand is the first product to appear in Amazon SERPs, and you’re not the one in control of it, your e-commerce reputation is at stake. We’re not exaggerating here.
At Lab 916, we often have prospective clients come to us with the same problem:
“We don’t know how to regain control over our Amazon presence.”
“How can we stop these third-party sellers from jumping on our listing?”
“The items that are being resold are unauthorized. The product information is either old or totally incorrect!”
More often than not, these inquiries come from some of the most popular brands with a massive cult following. Although they’re doing just swell with their direct selling strategy, they’re losing control of their methods of distribution as well as their brand identity with it.
In this case study, we’ll take a closer look at a fictional soy sauce brand, Ohana Blend.
Upon initial analysis, Ohana’s Original Blend Soy Sauce is so popular that it ranks 1st for a broad keyword phrase like “shoyu soy sauce.”
Great! That shows us that there’s tremendous demand for this brand and its products.
However, upon further investigation of the product listing page, we find sinister signs the company doesn’t have their Amazon presence under control:
- The company is losing out on direct sales
- They can’t regulate or manage their brand presence on the world’s most popular e-tailer platform
- Their good name is at stake
If left to its own devices, it may spiral beyond our help as optimization experts. Here are a few signs to look for to know if your brand needs to start managing its presence on Amazon before it’s too late.
Red Flag #1: Multiple Sellers
The most prominent doom sign for direct seller or wholesale brands is seeing its products being sold and shipped by random distributors on Amazon. Especially when no particular seller has the buy box. And there are no timely shipping options.
To be frank, this situation is what we’d colloquially call a hot mess.
Having multiple sellers offering this item is a red flag for multiple reasons, however, the most important thing at stake for Ohana Blend is its reputation and relationship with its customers.
Logistics-wise, none of the sellers that list this product on Amazon qualify for Prime. This means that users who purchase this soy sauce product are not guaranteed to receive their product in a timely manner. Likewise, the customer service they offer could be sub-par.
From fraudulent products to inconsistencies that cause your products to appear cheap to poorly written copy, there are a host of problems that could appear, over which the brand would not have control over because they refuse to list products themselves.
These factors combined could easily lead to bad reviews, which could tank the ratings, which could affect the brand’s relationship with new customers before even starting one. You catch the domino effect here?
Further, because the product is sold by numerous third-party sellers, this indicates that there’s high enough consumer demand on Amazon for their products that isn’t being met.
Be it convenience, price, trustworthiness, or otherwise, these customers are not purchasing from your primary sales channels and have turned to Amazon.
Red Flag #2: Inconsistent Pricing
It’s not uncommon for sellers to bundle products that are less than $10. This is because the profit margin for an item under $10 is really low after factoring in Amazon’s cut.
On the current Ohana Blend listing page on Amazon, there are 2, 4, 6, and 8 pack bundles offered. That’s good. Not uncommon.
But, when you take a closer look at the pricing, it differs greatly from what’s offered on the Ohana website. By comparing the 6 pack on Amazon (starts at $41.99) versus the 6 pack on the website ($19.83), we find that there’s an increased markup of 111.75%! Very bad. Very uncommon.
This instantly negatively impacts the relationship between brand evangelists because not only does the product become inaccessible, but it also gives the optics that the brand is intentionally taking advantage of its scarcity.
From there, a former brand evangelist can pass on the product and choose to purchase a new, cheaper product recommended by Amazon. Ohana Blend may never see them again, all because of a misunderstanding.
That’s a story sadder than Romeo and Juliet, am I right?
Red Flag #3: Copy
A listing with bare, unoptimized listing copy hurts so much for us to see! Particularly because it has SO MUCH POTENTIAL.
Ohana Blend has a healthy social media following, a well-developed brand identity, and solid reputation. But these characteristics aren’t translated to their Amazon listing. Why is that?
Unfortunately, because of the nature of Amazon, third-party distributors (who generate more than 50% of sales on the platform) are able to sell products without distribution approval from the brand.
That means that any product details or images are at the mercy of whoever has the time to upload them… unless your brand is protected by Brand Registry.
For now, at least, there are enough positive customer reviews that speak to the quality of the product. Hiring a professional copywriter trained in Amazon SEO can supercharge the impact of organic reach and conversions.
Red Flag #4: Images
Having basic product images on a listing are not bad, but it’s not the savviest move either. We all know that optimizing images to draw in new buyers can increase your conversion rate and your bottom line.
If your brand makes the deliberate effort to develop brand guidelines that include tone of voice and graphics like Ohana does, it should be extended to every aspect of your online presence.
Furthermore, relying on a consumer brand’s popularity is a luxury that doesn’t last long on Amazon, as there are always competitors vying for the top spot with better images and more engaging copy.
The Wake-Up Call
So what can we learn from this quick analysis of Ohana Blend?
Making a daily, conscious choice to ignore Amazon from your distribution and sales strategy is one that strictly DTC brands can’t afford to make.
The best way to avoid this nightmare is to jump on the Amazon bandwagon for as long as it’s beneficial to the longevity of your business. Besides the revenue that you’d earn to boost your bottom line, you’d be employing a strong defensive brand strategy.
If your brand is in the same predicament as Ohana, this birds-eye view analysis may have you feeling a bit overwhelmed. But don’t worry! As a brand-owner, you still have the capability to reign in your presence on Amazon.
You are in command of your e-commerce narrative. Take control of your brand today and consider adapting to sell direct-to-consumer on Amazon.
Benefits to Selling Direct to Consumer Products on Amazon
If you’re still not totally convinced that adapting your strategy to selling direct-to-consumer on Amazon, here are a few other reasons that may help off-set the cost.
1) Boost Sales Off-Amazon
According to Wunderman Thompson’s Future Shopper Report 2020, more than 6 in 10 (63%) consumers in key e-commerce markets start their online shopping searches on Amazon.
That’s more than the percentage of people who start their purchase journeys on search engines, retail sites, and social media!
Even if those buyers choose to purchase directly from your brand’s retail site, chances are they still reference your product’s Amazon listing before buying anywhere else. Having professional product images, optimized listing copy, and positive or verified reviews can boost sales in-store or on your website.
If your brand has historically been DTC, the revenue you receive from distributing your products on Amazon can significantly impact your bottom line. After all, Instant Pot couldn’t have become the household appliance it is today without selling on Amazon.
2) Lower Cost of Advertising & Acquisition
Website traffic for DTC brands is usually acquired through paid traffic. Shoppers are directed to the platform because they’ve viewed PPC ads on sites Google, Facebook, Instagram.
Brands on Amazon, however, experience an increase in organic traffic (especially if it’s a top-ranking product) so you spend less money interactions, and thus, have healthier profit margins.
Compared to brands’ websites, the cost to acquire a customer is also lower on Amazon. That’s because Amazon users are almost always searching through results with purchasing intent. Customers are more likely to purchase a brand’s product on sight.
3) Control over Minimum Advertised Pricing
When you start selling on Amazon, you have more control over MAP compliance. You define what the lowest possible price your items can be legally sold for by retailers.
This can prevent your brand from appearing low-quality, cheap, or fraudulent when it’s sold on a distribution channel like Amazon. It can also help keep your prices competitive by preventing price erosion by other retailer sites, like Walmart.
4) Positively Impact SEO
Conduct this 5 second experiment for us. Go to Google. Type in the name of any one of your favorite brands. What’s on the first page of results?
Amazon listings appear alongside top results in SERPs. Even on competing search engines, the popularity of Amazon’s domain can’t be denied.
Your brand owes it to itself to optimize its listings on Amazon because, whether you like it or not, it is a part of your brand experience and therefore, your customer’s shopping experience.
5) Protect Brand Value & Equity
If your popular brand isn’t managing your Amazon presence in-house or with an agency like Lab 916, someone else will do it. And do it poorly.
Having an optimized listing helps your brand maintain its image. Having high-quality images, text, reviews, videos, pricing/shipping logistics, and so on, instantly raises your brand equity in the eyes of consumers.
Being available on Amazon increases your brand visibility, and therefore, increases your chances of cultivating brand loyalty with new customers.
6) Become More Accessible
Like we mentioned earlier, if users are buying your items from unknown sellers on Amazon, their need for your product isn’t being met elsewhere. Selling through a platform like Amazon makes your brand seem trustworthy, lowering the barrier for purchasing.
Using this guide to calculating the appropriate fees and costs can help you stay on top of the transactional value of selling your products on Amazon.
Considering the operational costs, opportunity costs, and marketing costs can often be offset by creating bundled products. From here, you can also decide to sell what’s profitable for you. After all, Amazon is just another tool to brandish in the battle for your brand.
7) More Distribution Potential
A product that does well on Amazon can be an indicator of how well brands will do on shelves in other big-box stores.
At Lab 916, we’ve helped brands secure in-store distribution at retailers nationwide, like Costco, by showcasing the sales data they’ve received on Amazon.
Leveraging the data that Amazon provides on demographics, sales history, and so on can lead your brand to valuable opportunities that cultivate a stronger direct consumer relationship in the long term.
Making the choice to work with Amazon is not an easy one. But if you’re at the point that your brand doesn’t have the luxury to avoid staking its claim on Amazon, we’ve provided a strong case for your next move.
In order to stay one step ahead of unapproved third-party sellers, it’s time to integrate Amazon FBA or FBM into your sales strategy. And, if you need extra guidance, the experts at Lab 916 are here to help.
Don’t continue to sit by while your brand is sold on Amazon without your consent. Take control of your brand image, voice, and story because the longevity of your business depends on it.