By Kerry Lee | Director of Consulting

Reading the literature that Amazon publishes about sales, consumer brands would be forgiven for thinking that selling on the marketplace couldn’t be easier. Conversations with Amazon vendor managers will reinforce this as they sell you all the benefits. These may include access to the biggest online marketplace in Western Europe with huge sales volumes for your category (that your competitors are already benefitting from), and a risk-free wholesale deal with win-win pricing.

All round, it sounds like a great deal for everyone involved. But, is this a reflection of what trading on Amazon is really like?

For many of our clients, particularly those in Western Europe and other emerging Amazon markets, the benefits are not quite as apparent. Some brands have managed to negotiate a mutually beneficial deal with Amazon that delivers strong margin (often better than the grocers) and the marketplace represents one of the few growth channels in a gloomy retail landscape; contributing positively to the market/business P&L.

Yet, there are still downsides, as logistics is notoriously difficult and time consuming to manage and Amazon’s chargebacks can be hard to unravel.

Premium brands

For brands that sell a more premium range of products, there are cases where products are halved in price due to Amazon’s algorithm matching an unofficial seller’s price. This can create problems with other retail partners and tarnish the heavily invested in brand image.

Despite this, there are ways that brands can mitigate the damage caused by unauthorised sellers, which are explored in our report on Selective Distribution in Europe. And, with strong margins and positive growth, these downsides can be manageable.

The Amazon Vendor programme in the US

But, in the US, reports of brands being unhappy in their dealings with Amazon are increasing. Amazon’s dominance of ecommerce sales in the market - making up 49% of online spend in the US - has seemingly emboldened it to become more obstinate in its demands.

Smaller brands that had previously been seduced by excellent sales performance are being thrown off the Amazon vendor programme with little or no warning, as purchase orders are paused or permanently terminated.

In order to continue selling on Amazon, these brands are being told they need to move to a 3P model, where they are the Amazon seller; whether this is suitable for the business or not.

This transition also takes time and cannot simply be switched across overnight.

Europe and emerging markets

So, despite the Vendor programme working well for many brands trading on the marketplace in Europe, there is a risk that Amazon will roll out something similar to its US policies across the rest of the world.

While the legislative environment is different between the two continents, the overarching goals of Amazon are not. Brands must be mindful of Amazon founder Jeff Bezos' mantra that "your margin is my opportunity." While once this quote could be thought to apply to traditional retailers, it could now be said to apply directly to brands just as much. 

Brands currently on the Vendor programme must be wary of such changes; and should prepare to protect their sales through Amazon.

If you would like to find out more about protecting your brand from unauthorised sellers in Europe, or need help developing a future-proof Amazon strategy for your business, please contact us.

Or, apply for our free Amazon Health Check to get a view of how your business is trading on the marketplace.

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