Andy Ballard, CEO, Wiser
In 2017, Amazon’s CEO Jeff Bezos announced that third-party sellers made up more than half of all units sold. That same year, over 300,000 small-to medium-sized businesses (SMBs) were selling on Amazon, marking a historic move. Fast forward to Prime Day 2018. Amazon shipped more than 100 million products equal to $4.2 billion in sales, of which $1 billion was sold by SMBs.
It’s no surprise that Amazon is a top priority for all brands regardless of size. But, as exciting as these numbers may be, take a moment to consider the challenges of selling on the globe’s largest e-commerce site and develop a clear, concise plan.
Create a competitive pricing plan
A common issue many brands face when joining Amazon is how to maintain their products’ price integrity. If you set the price too low on Amazon, direct website sales will ultimately suffer. It’s worth noting Amazon instated its own Price Parity rule in the U.S., requiring all sellers to match their Amazon price to their lowest price across all channels.
Unauthorized resellers are those promoting and selling your products without your permission. You’re not benefiting from these resellers simply because you’re not profiting from those sales. They’re effectively stealing your brand’s reputation to make a profit. Additionally, competing with them may result in a price war, which could ultimately devalue your brand and reduce profit margins.
Worse than resellers are counterfeit sellers who offer cheap, knock-off versions of your product, under your brand name and at such a low price no one can compete. Consumers naturally gravitate toward the lowest price and it can damage brand integrity if they purchase a cheap knock-off. The problem of counterfeits got so bad, Birkenstock pulled all its products from Amazon.
The solution? Protect your brand and resist the urge to price match the lowest price. Run price tests to see how changes affect demand—you might even be surprised to find opportunities where a price increase makes sense. You can adjust your pricing strategy for different products or categories. According to one study by Wiser, Amazon is a loss leader in some categories but not all. The retailer is competitive in categories where they garner a lot of traffic, like electronics, but less so in categories, like automotive, giving them the ability to make back lost margins.
Apple gets away with charging far more for their products compared to other tech companies, because consumers have a strong view of the brand value based on quality, innovation and overall product offerings. But, are Apple products really worth the money to consumers? The answer may lie in psychological pricing.
Consumers may view products priced on the lower end of the scale as “cheap” and the alternative as “high quality.” While you definitely don’t want your products to be viewed as cheap, you also don’t want to set prices so high that they scare away consumers. Many shoppers will choose the middle-of-the-road price, seeing it as a good deal for decent quality. Additionally, usie promotional intelligence and transparent price slashing to appeal to shoppers. If you list a product that used to be $99.99 and now it’s $49.99, buyers will walk away feeling like they got a great deal and not a cheap product.
Create a strict MAP policy
Ensuring minimum advertised price (MAP) compliance is crucial to maintaining brand integrity. It’s the minimum price you can set across all distribution channels and it prevents distributors from going rogue on pricing. MAP is great for competitive intelligence, preventing price wars, protecting profit margins and ensuring brand compliance.
Once you set a MAP compliance policy, be prepared to enforce it. After confirming your MAP, outline the violations you want monitored and the penalties they carry. From there, consistently track all sellers and channels (including the grey market ones), notify all parties involved in the event of a violation, and keep a historical record of violations as well as a record of compliant and non-compliant sellers. Amazon doesn’t typically monitor for MAP compliance; it will be your job to notify them of these issues unless you have a third-party vendor who monitors MAP violations for you.
While it may be easy to spot unauthorized sellers, getting them to stop is another challenge. These sellers often hide their identity, either using fake information to register or changing their names frequently to remain anonymous. But you have options including sending the seller a cease and desist letter, if you have their real name and contact information. And if you don’t, leverage an investigative partner who can search for a seller’s identity and contact information on your behalf.
Register for Amazon’s Brand Registry
Once you have a MAP policy in place and you are monitoring for violations, it’s a lot easier to then monitor for counterfeit and stolen products marketed under your brand’s name.
As we know, resellers not affiliated with your brand will inevitably spark a price war. It’s an easy win for them too. They don’t need to worry about profit margins as they continue to sell unauthorized products. Additionally, they’re piggybacking off of your brand’s reputation.
This is not to say that unauthorized resellers don’t worry about profit margins, they certainly do. However, because they may be purchasing wholesale goods and materials at a much lower price than your average SMB owner, resellers have a larger margin to work with.
Register with Amazon’s Brand Registry, which will give you access to tools that enable you to more accurately represent your brand, find and report MAP violations, and share intelligence that Amazon can use to help decrease the problem. The brand registry allows you more control over product pages using your brand’s name and maintains brand integrity and representation. After taking this crucial step, customers are more likely to see correct product descriptions and pricing information associated with your products.
Amazon shows no signs of slowing down. As your business continues to grow and build its presence on the marketplace, include pricing intelligence, MAP compliance, and a plan for punishing violators in your business strategy. If you don’t take advantage of your brand’s reputation, someone else will.
Wiser collects and analyzes online and offline data for brands, retailers and other organizations.
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