How do brands build a DTC strategy that co-exists with Amazon?

Jan 24, 2020 | Marketing Strategy

Now is not an easy time to be a marketer for an established consumer brand. Retailers are experiencing immense business pressure, and Amazon presents a uniquely new set of challenges for brands to consider. As historically strong distribution channels shrink, should we sell our products on growing areas like Amazon? If so, which ones? Should the pricing differ from that on our website? What issues does Amazon create regarding attribution?

We work with retailers and direct-to-consumer brands that deal with these challenges frequently, and we wanted to share our perspective on the different options brands may consider when assessing the Amazon risk/opportunity.

Brands typically have 5 Amazon strategy options to choose from, we tend to heavily favor one above the rest:

  1. Don’t sell any products on Amazon
  2. Everything we sell, we also sell on Amazon
  3. We only sell on Amazon
  4. Sell some things on Amazon!
  5. Use Amazon as a strategic tool

By no means will one or all of these options “solve” your issues, but hopefully at least one should present a starting point for your marketing team to build a successful Amazon strategy.
Here is our take:

Option #1: Don’t sell any products on Amazon
We don’t like this option, because it misses a huge opportunity. There are so many consumers on Amazon searching in your product category, and many of them explicitly searching for your brand! Why miss out on that revenue? Some consumers (myself included) place an incredibly high premium on free shipping that a prime membership affords. Others have only a few minutes to make a purchase and don’t want to mess with filling out credit card info and shipping addresses. We think this option is simply too conservative for a brand trying to grow it’s revenue.

Option #2: Everything we sell, we also sell on Amazon
This option represents the opposite end of the spectrum compared to option #1, and we also do not recommend it. Yes, you get to capitalize on those consumers on the Amazon platform, but what about all the negatives that come with it? You give up on a huge amount of customer data by allowing a significant portion of revenue to come from the Amazon platform. Giving up on consumer data will also make it more difficult to reach your customers with marketing and measure how well those initiatives are working. As an agency that uses data to help clients drive marketing decisions, the data limitations alone are enough to kill this option. But there’s more! On Amazon you can’t control the customer experience, from shopping to shipping, or the 15% FBA fee. Other brands can poach your product traffic with their own ads. Amazon can use your sales data to influence products they make, and might eventually use that data to cannibalize your business. We could go on and on, but you get the point.

Option #3: We only sell on Amazon
All the negatives from Option #2 apply, for sure, but if you are a passionate product manufacturer that wants to quickly tap into a massively scaled marketplace without having to build out an eCommerce platform, or develop a customer service and fulfillment strategy, then this may be an option to consider. Granted, you need to meet the Amazon brand registry requirements, and will have to spend on advertising and on acquiring reviews to gain traction, but the barriers to entry are a lot lower than getting your product on the shelves of a big box retailer or grocery store. If you start down this path, future growth will come in the form of wholesale distribution through those channels and would not meet the definition of a true “direct to consumer” brand. For that reason, we do not recommend this path for anyone interested in building lifelong one to one relationships with your customers.

Option #4: Sell some things on Amazon
We like this option broadly speaking, because it avoids the risks of being too far to one side of the spectrum (outlined above). But what you sell is a huge decision. And how to sell it (e.g. pricing, messaging, promotions, packaging, etc.) are immediate next decisions. If only there was a way to help navigate that seemingly endless list of questions…(keep reading!)

Option #5: Use Amazon as a strategic tool
This option is basically #4 on steroids. If we know we want to sell some products on Amazon but are having trouble identifying which products and how, we should use overall business goals and strategy to be our jungle guide. Here are some examples:

Current business challenge: low sell-through on certain product lines
How to use Amazon strategically: only offer those challenged product lines on Amazon.
Outcome: Gain benefits of incremental demand without any significant downside – your next best alternative was simply not selling those products

Current business goal: Aggressive year-on-year revenue growth for next 3 years
How to use Amazon: Only offer products on Amazon that you know to be “beachhead” products, i.e. products that customers purchase as the first step in engaging with your brand. Leave premium or core products for sale only on your site. Include promotional materials in your packaging that push consumers to connect with the brand directly and give options for how to repurchase directly.
Outcome: Get the benefit of incremental new customers gained from Amazon’s huge demand base, but you don’t need to pay the (full) price in terms of margins and lost customer data.

Current business strategy: steal market share from competitors
How to use Amazon: Have your best products on Amazon, in every key category. Encourage customers to post reviews. Compete on whatever key attributes you’ve decided position you most effectively, e.g. price, quality, selection, etc. If your brand promise is speed, ensure you are working with Amazon closely to offer same-day and 1-day shipping to as many areas as possible. If you are the high-quality option in your market, use Amazon as the place where you showcase your reviews – low price isn’t the only way to win on Amazon! Once you’ve taken your target market share, you can slowly push your customers to other channels by offering certain benefits if they purchase direct.
Outcome: Amazon becomes just one of the ways customers experience your brand, and supports your key brand promises.

In all the above instances #5, Amazon becomes less of a “scary threatening nebulous beast” and more of a “strategic marketplace tool full of current and potential customers.”

Again – I’m not saying this solves all your problems. But hopefully it’s a start in the right direction for your internal discussions. Let us know what you think in the comments.

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