Interview: Transforming Amazon into a Profitable Channel
As media budgets grow and fulfillment models face heightened scrutiny, yesterday’s Amazon strategy must evolve at the dynamic pace of this evolving...
4 min read
This original Op-Ed was written by Podean Global CEO Travis Johnson for The Drum and can be found here.
It’s important to level-set past perception of Amazon and current reality.
Amazon’s power as an e-commerce platform is unquestioned, however it’s past dealings with brands have not always been so positive. Given how fast Amazon moves and the changes that have occurred, it’s important to level-set past perception and current reality. Marketplace consult Travis Johnson shares eight ways Amazon has changed.
“I will NEVER sell on Amazon,” is a mantra for some brands.
It’s true. Amazon doesn’t have a great reputation with many brands for a number of reasons. Some are valid to a point. Some are wildly misunderstood. But given its huge success, brands recognize that they now need to be a part of it.
Given how fast Amazon moves and the changes that have occurred, it’s important to level-set past perception and current reality. Here are eight perceived problems and an explanation of how to address them:
Perception: Data. “Amazon shares zero data. Even on MY customers.”
Reality: This is correct. Amazon won’t send you a list of customer details (Walmart or Target won’t either), but you can derive insight that impacts all facets of your marketing. Not just demographics, but also what products consumers compare yours to, what your most loyal customers buy and what competitor products they buy. This knowledge can inform bundling, new product development and messaging. For more sophisticated brands, Amazon’s Marketing Cloud is a “clean room” environment where brands can add their own data to Amazon’s log-level data in a private and secure environment to understand media channel incrementality, consumer journeys, audience segmentation and cross-retailer purchase impact.
Perception: Environment. “I’m not selling on that flea market!”
Reality: Prestige brands have steered clear of a shopping environment they deem unworthy. This is ironic considering thousands of their products that are actually sold on Amazon – not by them – but by third-party sellers. For example, Estee Lauder’s Double Wear Stay-In-Place makeup is sold by 21 companies with combined monthly sales of $55,000 and Estee doesn’t receive a dime, nor has any control over customer experience in terms of imagery/video or customer service.
Perhaps it’s time such brands focused on being where their customers are. That doesn’t mean adding every product on Amazon, but carefully selecting the most appropriate ones. It also means thinking about Amazon not just as the retail website, but considering voice innovation through Alexa, audio ads, OTT ads in premium shows, and brand integration through Amazon’s Studios (like Revlon did with Mrs Maisel).
Perception: Cannibalization. “Amazon will just take my customers and sell to them at lower margins.”
Reality: Amazon is the place Americans do their product research. Being on Amazon means you’re providing information to interested consumers that may even make their purchase outside of Amazon. To maintain your D2C sales while adding Amazon revenue, the right audience strategy may involve excluding your D2C customers from seeing Amazon ads and/or re-marketing to lapsed D2C customers who may prefer the convenience of adding your item to their Amazon cart.
Perception: Counterfeits. “Amazon will happily sell fake products, so long as they get their cut.”
Reality: Amazon sells billions of products and can’t physically check every item is authentic. Fake products might simply be poor quality, but at worst they could be dangerous – imagine fake skincare products that burn the skin, or a baby’s high-chair that collapses. Amazon has admittedly been lax in actively policing counterfeit products and this has been off-putting for brands. In June, Amazon announced a Counterfeit Crimes Unit which will proactively go after bad actors on the platform. Coupled with Amazon’s reported 5,000 employees already focused on fighting fraudulent products. This signals a more concerted focus by Amazon and a safer and “cleaner” retail environment.
Perception: Private label brands. “So, let me understand this… I sell my products on Amazon, and then you copy them and run me out of business?”
Reality: If someone can create similar products with lower quality, no advertising and beat you, then is that their fault…or yours? Amazon didn’t kill name-brand battery sales, a lack of differentiation did. “Innovation” and “differentiation” are critical qualities of any successful brand to win against competitors. Some progressive brands are actually embracing Amazon’s private label approach by engaging with their Launchpad, Grants and Accelerator programs to bolster sales.
Perception: Profit. “You can’t profit from Amazon. At best you can drive revenue and get some new customers.”
Reality: Many brands see their Amazon margins decrease or even disappear. Typically, those brands default to treating Amazon just like other retailers – they wholesale to Amazon as a vendor and Amazon then sells to consumers. Being a vendor incurs marketing co-op fees, merchandising allowance, damage allowance, freight allowance, early payment charges, penalties and chargebacks. That’s a LOT of charges that eat away at margins.
What most brands don’t embrace is the opportunity to be a Seller on the platform’s marketplace. It’s far more complex, nuanced and labor-intensive method of selling, but revenues can climb 30% or more overnight, and profits can double.
Perception: Servicing. “Amazon, you’re asking me to pay you… for you to service me… and solve problems you created?”
Reality: Amazon just de-listed your product. Reason provided makes zero sense. You’re losing thousands of sales a day. What do you do? Amazon is philosophically a self-service company that is very lean and siloed, so while dozens of people may touch your account, nobody has overall responsibility and troubleshooting is done via support tickets which can take months to resolve. Brands are understandably frustrated, especially when asked to pay extra for a Strategic Account Services person to solve issues.
To manage ongoing retail operations, and utilize the best tools, brands should work with Amazon-focused internal experts and respected agencies. Amazon skillsets are highly specialized and rest-assured that “that person who knows Google ads or how Target operates” is not the right person to drive Amazon success.
Perception: Platforms. “Amazon’s platforms resemble Google Adwords a decade ago.”
Reality: Amazon’s own tools are notoriously clunky and hard to use – whether it’s the vendor/seller central interfaces, search console, DSP or others. They lack critical features, everything you need now “is on the roadmap,” and visualization is ugly.
To succeed, brands need to vet and embrace third-party platforms that link into Amazon’s systems via APIs – they assist retail operations, reputation and advertising and are much more efficient, insightful and user-friendly. They’ll pay for themselves in weeks.
Despite all evidence and success stories, some brands may never sell using Amazon, and that’s their loss and your advantage. Amazon is by no means the only path to sales growth, but it is can be a major contributor if you have the expertise and know the tips and tricks to drive profit and long-term success on the platform.
This original Op-Ed was written by Podean Global CEO Travis Johnson for The Drum and can be found here.
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