Is Amazon a necessary evil?
As someone who manages Amazon for several brands, and makes a good chunk of my living off of the Amazon performance of my clients, you’d think I would be one of the biggest advocates for brands selling on Amazon, right?
Well, that isn’t quite the case. Let me explain why.
Amazon is the most powerful website online for driving sales. They recently reported that “net sales increased 44% to $108.5 billion in the first quarter [of 2021], compared with $75.5 billion in the first quarter of 2020.”
While $108.5 billion dollars in sales in Q1 alone is wild, you can likely guess that these numbers are only getting bigger. This begs the question, “Why shouldn’t EVERY brand sell on Amazon?”
Amazon, as I like to call it, is a “Necessary Evil”. There are 3 primary “Evils” of Amazon that are critical for any brand to understand before committing to the marketplace:
1. Amazon Fees
Amazon has what’s called a “Referral Fee”, where they take a percentage of every sale. Depending on the category you sell in, this can range from as low as 8% to as high as 20%.
The vast majority of sellers fall into the 15% referral fee category, meaning most sellers immediately lose 15% margin any time they sell on Amazon. However, if you’re a brand that is selling wholesale, this 15% fee might not be too bad!
2. Control Customer Journey
Unlike a website, brands don’t have control over their customer journey on Amazon. Amazon views shoppers as their shoppers, not your shoppers. While there are tools and strategies you can implement to target customers through their purchase cycle, you don’t have the opportunities or mechanism to move customers through a conversion funnel like you would on your website.
3. Access to Customer Data
As stated above, Amazon views shoppers as their shoppers, not your shoppers. Amazon controls and owns your customers’ data. They do provide demographic data, but it cannot be extrapolated to support your business decisions.
Additionally, Amazon does not share this data or communicate with outside tools like Google Analytics. Important pieces of information including buyer names, IP Addresses and purchase history are owned by Amazon, and not available to brands.
In addition to the limitations above, you must also consider what it takes to successfully manage and grow an Amazon account.
I’m sure you’ve heard of “Amazon Horror Stories” — where brands get kicked off of the marketplace, top products become blocked and items can’t be fulfilled (amongst other not-so-great narratives). It is important to understand that these issues arise for various reasons and often demand an Amazon expert to resolve.
All of what I’ve shared so far leads to one claim: Amazon can be an excellent channel for driving sales, but it may not be best for your brand’s profitable growth long-term.
Therefore, I believe Amazon should not be the only source of traffic for your brand. Amazon has their own agenda and priorities. To ensure your brand’s priorities are being met, it’s necessary to be diversified in your channels and marketing strategies. We’ve worked with many brands that grew sales rapidly and profitably on Amazon while also building up their own direct to consumer business. A heterogenous strategy will work to keep your brand on par in the case that things go south on Amazon.
Now, with that said, there are ways we see brands effectively use Amazon:
- Drive awareness on new products
- Generate top line revenue
- Control brand messaging against other sellers
- Protect against resellers and control MAP pricing
- Retain market share
The “Necessary” Component of Amazon.
By providing a massive opportunity for brands (big and small) to reach new audiences, test products, and see how they match up against top competitors, Amazon can be a driver of growth for your brand in many areas.
The beauty of this marketplace is that it is product-focused, not brand-focused.
Sure, it helps to have an established brand name that people are searching for, but it is not a requirement. As I am sure you have seen in your own Amazon shopping experiences, any brand can make its way to the top of the page, generate thousands of reviews, and be a top seller – even brands you have never heard of before.
What it Takes to Become a Top Seller
It’s important to recognize that an agency like eAccountable is critical in helping build the right strategies to get you to become a top seller. If you’re a well-known brand, it’s essential to protect your brand name while also targeting other market leaders. If you’re a brand-new seller with a new-to-market product, your strategies will greatly differ, and you’ll need to focus on driving awareness.
Working with an agency like eAccountable takes the “guessing” out of the equation. Our team has tried and tested hundreds of strategies, so you can get the head-start you need to succeed.
In conclusion, though I consult with brands every day about Amazon, I often find myself explaining to brands that Amazon is not the only solution. It is imperative that you are aware of both the “Evils” and the “Necessary” components of Amazon. Create strategies that are best for YOUR brand and don’t become reliant on one channel while neglecting others.