First: Know Thy Sellers
A brand really needs less, but better, Amazon sellers
In a perfect world, you would design your Amazon strategy and then put it into action. In that perfect world, you would consider all the available options. You would analyze who should sell your products and how. You would choose your path and follow it. But the world is far from perfect and it’s very likely that you found your products on Amazon without deciding it.
This article is for all the brands already sold on Amazon, and that discovered this all of a sudden. They got ambushed in the jungle!
Make no mistake, it can also be useful to those thinking they do have a strategy...
So, let’s put first things first. Know thy sellers.
Many people shopping on Amazon still believe that they are always buying from Amazon. That was true up to 30 September 1999. On that day, Amazon allowed third-party sellers to sell used merchandise. It happened in what Amazon called zShops, now known as the Marketplace, and was a success. The transactions on Amazon.com rocketed. A quarter of a million customers bought something using the service in the first four months.
Today third-party sellers sell more than half of the units sold on the Amazon platform.
It is for third-party sellers that a brand can find its products on Amazon by surprise.
There are many kinds of third-party sellers. They are large or small. Some of them sell only on Amazon, others sell on many platforms, or they have their own webshop. There are pure online sellers and bricks and mortar stores willing to open new channels.
They differ for the way they provide products to the end customer. Fulfilled by Merchant (FBM), sellers deliver through their distribution channel. Fulfilled by Amazon (FBA) sellers use Amazon Logistics.
Each of these classifications is useful, but here we will use a different perspective. We will look at the type of relationship that sellers establish with their suppliers. This is an often overlooked but fundamental point.
From this angle, we see three kinds of third-party sellers:
Since 2017 most of the sales on Amazon are by third-party sellers
Third-party sellers' share of Amazon platform 2007-2019
Percentage of paid units sold by third-party sellers on Amazon platform as of 1st quarter 2019
Anonymous sellers, rogue sellers and the like
How can an “anonymous seller” exist? Obviously, each seller has a name, but thanks to the use of “doing business as” (DBA), it can remain unknown on Amazon.
As with most online platforms, Amazon does not disclose contact data of sellers and buyers. The main reason is to make the users safe, but this also allows transactions to be kept on the marketplace.
This is not true everywhere. On Amazon Europe, for instance, sellers have to provide a great deal of information:
Trade Register Number;
You can still also sell goods in Europe as an individual, and you do not have all those requirements. Anyway, things change as soon as you get some serious sales volumes, and if you want to use FBA. In that case, a seller will need to provide that data and, more importantly, that information will go public.
Third-party sellers cannot be anonymous on Amazon Europe
Storefront headers in USA and Europe
While third-party sellers in USA can provide almost no information, in Europe they have to provide all their data.
It is a strange irony of fate. Europe, with tight privacy rules, does not permit anonymity to sellers. The USA, with more relaxed data protection, enable sellers to hide.
Indeed, suppose a brand discovers third-party sellers distributing its products on Amazon. As the brand price policy is not respected by those sellers, the brand decides to reach out to them.
So, the assistant sale manager goes on Amazon, looks at the seller’s storefronts and ends up with a list of names. For some of them, she gets also a city and a state, and a foundation year, but that’s all.
Now she looks on the company database, hoping to match some of those names. Nothing.
She goes on Google; she has to deliver a result for her task! Nothing there also. Pages and pages of search results but nothing to do with the products of the brand.
Here we have it. Not all anonymous sellers are rogue, but all rogue sellers are anonymous.
The definition of rogue sellers is not ours. It comes from the VP of sales of one of the brands we talked with. As she stated in her first email:
There are some rogue sellers on Amazon right now who are hurting our business and since we don’t know who they are, we cannot stop them.
Of course, there are many legitimate reasons for a seller to be anonymous. Still, that can be a big issue for a brand owner.
It has never been easy for a manufacturer to control all its distribution channels. The digital transformation makes it more delicate and vital.
Behind the use of DBAs, you can find a universe of fantastic beasts.
Sellers doing retail arbitrage (RA) or online arbitrage (OA). They find products at physical or online store sales, they buy and resell at a margin. Not a long-term business, yet a business that exploits any channel opportunity.
Beloved and known bricks and mortar stores can realize that a parallel market can be useful. It can happen also with distributors. All the people who you sell your goods to can resell them through their normal channel and on Amazon. On their usual, trackable channels they respect your policies. On Amazon they do not, using a DBA.
Finally, there are sellers who engineered their path with care, using many passages. It is all but easy to track the way your products passed from hand to hand.
The digital disruption means also this. Poor control of distribution becomes evident.
Enforcing pricing policies on Amazon can be a time-intensive activity. As told by a sales and marketing VP:
It is another full-time job to be the Chief of the Amazon police!
Pricing is a very sensitive matter. One that rogue sellers can seriously hurt brands with. We will dedicate more than one of our next articles to this issue. Many respond trying to limit the damages. Not a very good approach to excelling in a digital time.
A typical reaction to these issues is to ask for a bricks and mortar store to approve wholesale accounts. It is understandable. In a world where anonymity is available, a physical address seems a safe harbor. The problem is that the skills needed are completely different. It is very unlikely that people who grew up in traditional channels can cope with Amazon.
Amazon Marketplace requires a deep knowledge of digital marketing tools and challenges. It is very hard for people focused on a physical store to become adept at them. Like a brand owner, they do not make their living on Amazon. They have to cope with store costs, face customers and make them buy. Why should anyone expect more from them?
“No more Amazon sellers” is another well-diffused approach. The brand has experienced issues on Amazon and decides to close the gates. This is like shutting the stable door after the horse has bolted. Actually, this is like shutting the sheepfold to the shepherd dogs after the wolves already got in.
Maybe the current sellers of the brand are not that bad, sure. They respect pricing policies, they have a clear address and stay in stock all times. They are honest and serious. But honesty and seriousness are only a prerequisite.
The analysis of product pages on Amazon is an easy way to reveal the kind of sellers a brand has. Look at the quality of a product listing and check the following:
Are there few images and no lifestyle one?
Bullets are short and focused on product characteristics instead of functionality for the customer?
Product description is short, of poor quality and without enhanced content?
Listing has few and not relevant keywords?
Negative reviews sit there without any comment from sellers?
If that is the case, it means that, if the wolves are not in, the sellers are only ordinary ones, for sure.
Asking for physical stores, or closing the gates to new sellers are ways to limit issues. But, even if reducing hassles is a good enough goal, good enough is not enough.
A brand needs a proactive presence on Amazon Marketplace. Sellers are able to increase visibility and sales of its products. Sellers willing to protect the brand, to reply to negative reviews, to manage advertisements.
A brand needs value-added sellers on Amazon.
At bilubah we define ourselves as a "value-added online retailer". We are not the only one, of course, but the definition comes from us.
If you try to google "value-added seller" or "value-added retailer", the search engine will correct you. While I am writing, I get suggestions to replace "seller" or "retailer" with "reseller". Which means this term is fairly new.
A Value-Added Reseller (VAR) is a well known animal. As for Wikipedia definition:
A VAR is a company that adds features or services to an existing product, then resells it (usually to end-users) as an integrated product or complete "turn-key" solution.
This is not what we and the others value-added retailers or sellers do. Then, what is a value-added online seller or retailer?
Here is our definition:
A value-added online retailer or seller is a company that provides services to its suppliers while reselling online the suppliers' products.
The provided services should be at least the following:
Improving online visibility;
Increasing online sales volume;
Managing online customer relationships;
Monitoring marketplace compliance to company policies.
Note “at least”, which means that there are many other activities a value-added seller can develop. For instance, supporting international expansion. This is the set we establish as a benchmark for ourselves and for any other seller claiming to be a “value-added” one.
So, a value-added online seller does not add features or services to the product, but to its online marketing and sales.
You can observe that these are services offered by many agencies. The difference is that an agency gets a fee, the value-added seller gets paid through margin on sales.
You know the riddle: “In a bacon and egg breakfast, what’s the difference between the chicken and the pig?”
Well, agencies are like the chicken – “involved”. A value-added seller is definitively like the pig – “committed”. No sale, no gain!
Fewer but better sellers
When you come to Amazon sellers, quality is more important than quantity. When somebody says: "We do not need more Amazon sellers", we could not agree more. Few valid value added sellers are enough to help a brand get control of its presence on Amazon. That will also have a positive fall out on the traditional sales channels. As outlined in our article The Amazon 5/50 Trap, Amazon is today the main product search engine. So, Amazon product pages have a strong marketing impact.
But how to recognize value-added sellers and test them?
You can read our article The Magnificent Seven to have a benchmark for value-added sellers, but here are a few points to start with:
They are not anonymous. They ask approval for a wholesale account with your company. They provide all the required information.
They welcome and sign MAP policies.
They are generally FBA so to provide prime service to the end customer. Using Amazon logistic enables them to concentrate on value-added activities.
They know about Amazon challenges and can provide solutions to brand specific issues.
Finally, it is easy to test them, as a five weeks' time frame is more than enough to see their actions in place.
The alternative for a brand is in becoming its own only Amazon authorized seller. This is a viable solution for start-ups focused on the online channel. But the effort is often out of reach for small to medium-size brands with traditional distribution.
Value-added sellers are likes guides in the jungle. You have not founded your business to become an Amazon expert, they did.
Today third-party sellers sell more than half of the units sold on the Amazon platform.
The relationship that third-party sellers establish with their suppliers is a fundamental point; often overlooked.
From this angle, we see three kinds of third-party sellers: rogue, ordinary, and value-added.
Rogue sellers hide behind the possibility of anonymity. They do not respect supplier policies. They can hurt the reputation of brand and products. A brand should avoid them, but it is not easy without extensive distribution control.
Ordinary sellers, though honest and serious, lack the skills required by the Amazon Marketplace. They do not harm their suppliers, but they can neither permit them to excel.
Value-added sellers provide the services needed on Amazon. They can help brands to get control of their presence on Amazon. They are recognizable and establish clear relationships. They are a valid opportunity to cope with the Amazon challenges and get rid of rogue sellers.