Amazon Briefing: Despite its ubiquity, brands are rethinking and scaling back their Amazon strategies
This is the latest installment of the Amazon Briefing, a weekly Modern Retail+ column about the ever-changing Amazon ecosystem. More from the series →
Every year brings new complexities to brands’ Amazon strategies.
This week, brands and retailers came together to talk about industry trends and woes at the Modern Retail Marketing Summit. Speakers included AG1, Sweetgreen, Béis and QVC — ranging from topics like customer acquisition, omnichannel expansion and channel diversification.
But one topic that plagued attendees from companies both big and small was Amazon.
The overall sentiment was that Amazon is continually trying to make its platform more convenient for customers, to the detriment of brands. The company continues to to offer same-day deliveries for all items — especially demanding that low-margin products be available individually rather than in larger quantities that make for better margins. “They’re a lot more willing to kind of test things out in order to preserve that consumer experience of having that assortment, but it’s not a long-term solution,” said one attendee. “Profitability-wise, it can’t be sustaining”
Here are some of the major pain points and observations from attendees, who aren’t being named to allow for more candor.
The key to a successful Amazon channel: direct connections
A longtime issue brands have felt about Amazon is that they cannot get a direct line to Amazon when things go awry. But some brands have said that forging personal connections has helped alleviate this issue.
“People think of Amazon as like a machine,” said one brand executive of a home goods startup. But he found that seeking out individual members of different teams has helped his company stand out from the rest of the pack. “We built really good relationships with Amazon — one-to-one relationships — and that’s unlocked a ton of value for us,” he said.
In this case, by having a direct connection with a member of a strategic team inside Amazon, the brand was able to get placements on marketing materials like Amazon’s Lookbook.
These relationships are especially helpful when problems arise. “These people are the crucial point for your Amazon business… If your discounts don’t roll out to the PDP, you’re just going to be struggling with cases and cases and cases [which won’t go] anywhere,” this attendee said.
Having a backbone
For brands on the 1P side, a major issue was Amazon’s constant demands, which hurt brand margins. These included not agreeing to price increases and demanding smaller package sizes.
For many brands, the feeling is if Amazon says it wants something, then that’s ultimately how it will go. However, two different brands found that pushing back ultimately yielded good results.
One startup needed to raise its prices, to which Amazon wouldn’t agree. “Our CEO put his foot down,” the executive said. It turned into a month-long standoff that certainly hurt sales in the short-term. “We stuck to our guns and finally they accepted the price.”
Similarly, another 1P large apparel brand stopped shipping Amazon products in the run-up to the holidays because the two wouldn’t agree to terms. This got Amazon’s attention, and helped the two come to a solution.
Know when to in-house
A long-running debate among brands is whether or not they should use an agency to help grow their Amazon business.
One large multinational brand decided to bring more of its Amazon strategy in-house. The idea, said the person behind this initiative, was “to basically have the agility, have just like operational excellence in-house, and the ability to pivot quickly.” The thesis, she said, was to “have that ability to be very agile in our activations and have experts in-house who can produce them.”
Other smaller brands also saw the benefits of using internal teams — but getting some external help. “There’s a bunch of Amazon sort of expert influencers… and a lot of them give the top tips,” said one executive. This person, for example, saw a popular post on the social platform about how to optimize a main image. It doubled the click-through rate while having the conversion rate stay the same — “just off following these top tips.”
An executive at another large consumer brand put the company’s in-housing strategy thus: “When bringing on an agency or any kind of consultant, you got to think about: What do you want your business’s core competencies to be? What is your strategy? Where do you need to win? And if Amazon is somewhere that you absolutely need to win then I wouldn’t outsource all that to an agency — you want to be learning and you want to be building that muscle.”
Dupe culture has changed the Amazon calculus
A major question asked during the event was whether it’s worth it to join Amazon at all if you’re a premium brand.
This has been a debate for years, and many larger brands have started joining the platform. But some are still holding out. “We just continue to not sell on there, because I feel like it’s a little bit harder to have your brand integrity on there,” said an executive of a consumer-facing premium brand. “I think our brand integrity is held really high. We just didn’t feel like we could emulate that on Amazon.”
One higher-end apparel brand has been on Amazon as a defensive strategy. “We wanted to own the brand on Amazon,” that executive said.
But now this person is rethinking that strategy. “When there are so many dupes and the price point is crazy, the quality is so different, but they look so similar to your product — and now the influencers and the marketing is really getting involved and pushing those products as well.”
For the time being, this brand is staying on Amazon because of its vast audience and it helps it stay competitive. That being said, “it really is a scary marketplace.”
Amazon news to know
- Amazon’s delivery drone program is coming under fire with residents in Texas saying the vehicles are too loud.
- India’s commerce minister called out Amazon for predatory pricing practices.
- At its most recent earnings, Amazon said it would begin spending heavily to beef up its AI program. Wall Street isn’t thrilled.