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How Brands Can Win on Amazon With a 3P Marketplace Strategy [Webinar Recap]
Stay on top of the latest e-commerce and marketplace trends.
E-commerce has become a highly sophisticated and complex landscape, with modern marketplaces at the core. Consumers are increasingly shifting their shopping behavior to marketplaces over brand and retailer websites, using these digital destinations for every phase of their purchase journey, from discovery to price comparison to conversion.
The top 100 online marketplaces worldwide sold $1.66 trillion worth of goods in 2018, generating a staggering 50% of global e-commerce sales for that year. Furthermore, Amazon’s U.S. marketplace alone sold over $275 billion worth of goods globally, representing 58% of total Amazon sales worldwide. To put that into perspective, Amazon sellers sold just $100 million worth of goods 20 years ago.
Indeed, Amazon’s marketplace is at the center of e-commerce disruption, and the platform is increasingly the first stop in a shopper’s path to purchase — 66% of consumers say they begin their search for new products on Amazon.
In addition, Amazon is not only a destination where consumers search for new products but also where they discover new brands. As such, Amazon has become a pivotal entry point that more often sets the tone for the brand and customer experience, and it is increasingly crucial for brands to identify ways they can leverage the platform to better engage with consumers.
However, implementing an Amazon strategy poses a unique set of challenges, from unauthorized sellers to counterfeits to the lack of control over brand representation, among others. Brands on Amazon experienced a particularly tumultuous year in 2019, which began with foreboding rumors about the company’s supposed push of 1P brands to its 3P marketplace.
While the rumors did not quite materialize as drastically as expected, the possibility of this occurring still exists — and many brands are rethinking their Amazon strategies, as a result. Is an Amazon 3P marketplace strategy right for your brand? What are the benefits and opportunities you can leverage to acquire new customers, increase sales volume, and preserve your brand value?
In this webinar, “Why Brands Need a 3P Marketplace Strategy on Amazon,” Feedvisor VP of Sales Brian Liebman outlines Amazon’s importance to brands’ e-commerce strategies and reveals key tactics for brands to maximize their marketplace impact.
Brands Struggle to Navigate Challenges on Amazon
Over half (55%) of U.S. brands currently sell on Amazon and, of those that are not, 48% are inclined to do so this year, up from 26% last year.
It is impossible to ignore Amazon’s definitive dominance in the e-commerce space, and brands, now more than ever, are recognizing the profit-generating, brand-building opportunities that the platform presents — with more than 100 million Prime members in the U.S. alone, Amazon opens the door for brands to captivate these high-value consumers, increase market share, and enhance their digital shelf presence.
Yet, numerous name brands in recent months have chosen to end their business with Amazon — Nike, Ikea, Birkenstock, to name a few — citing the various challenges associated with selling on the marketplace. Certainly, brands have a number of reasons as to why they are not selling on Amazon:
- “I’m concerned about counterfeits.”
- “Our products need to be customizable.”
- “My brand is too niche for Amazon.”
- “Selling on Amazon would hurt the customer experience.”
Interestingly, 37% of brands say they do not think selling on Amazon is necessary for their business. Yet, eMarketer estimates Amazon’s market share of U.S. e-commerce will reach 38.7% this year, up from 37.3% in 2019.
Plus, of those that have left the platform, their products continue to be sold on Amazon, often by unauthorized sellers. Canada Goose, for instance, does not sell its products on Amazon, yet their products are still available for purchase on the platform via unauthorized resellers who are using poor product detail pages and images, and are selling the products at much lower price points compared to the brand’s own website.
Amazon 1P vs. 3P
Here, Brian outlined the differences between a 1P and 3P selling strategy on Amazon.
- The brand operates as the wholesaler and Amazon operates as the retailer, controlling merchandising, inventory levels, and so on.
- Amazon controls most of the brand and customer experience, such as pricing.
- Brands have access to Amazon marketing features, like specialty badges.
- Amazon handles the supply chain and fulfillment, and ultimately owns the product.
- The brand sells directly to consumers and acts as the retailer, controlling merchandising assortment, levels of inventory, and more.
- The brand controls all aspects of both the brand and customer experience, including pricing, marketing, and brand messaging.
- The brand manages inventory levels at Amazon FBA or its own warehouse, and owns the product.
The Benefits of an Amazon 3P Strategy
- Increased control over pricing and inventory strategies
- More hands-on capabilities for listings via Brand Registry
- Greater promotional capabilities
- More direct influence over brand value proposition and representation
- Content listing optimization for discovery
- Strategic advertising to outpace the competition
- Access to tools and expertise to maximize 3P impact
- Access to data and analytics
Overall, brands are increasingly recognizing Amazon’s value to their business, but new challenges on the marketplace arise regularly. With a 3P strategy and access to data and expertise, brands can identify unauthorized sellers and MAP violators, increase market share and gain stronger brand control, maintain influence and protection over IP and product listings, police their unique seller footprint, and create a more seamless brand and customer experience across all channels.