For brands, it begs the question: Do we meet consumers where they are and where they want to shop—on Amazon? Many brands have, seeing that much of Amazon’s recent growth has come from third-party sellers. Per Statista, Amazon’s net sales generated through third-party sellers hit US$27.4 billion as of the first quarter of 2022, a 13 percent year-over-year increase, and third-party sellers made up 57 percent of Amazon’s paid unit sales. Of course, Amazon takes commissions, fulfillment, and shipping costs from these sales.
Additionally, Amazon has built a massive advertising business, with many sponsored ad products to help sellers generate traffic to their Amazon storefronts: text and visual ads within shopping results triggered by consumer search queries, contextual (not keyword-based) sponsored display ads, and Amazon’s programmatic demand-side platform (DSP) enabling brands to drive traffic from inside or outside Amazon with display, video, and audio ads.
Benefits and Costs
Brands must strive to attain the proper balance between leveraging Amazon’s audience and protecting the brand. Some benefits to selling on Amazon include massive audience reach, consumer loyalty, repeat sales (for example, “subscribe and save”), consumer reviews, and online-to-offline (showrooming) behavior.
On the other hand, selling on Amazon can become expensive with commission and advertising costs and pressure on price/margins—since consumers see Amazon as the place to get the best deals. Brands have faced reputational concerns around counterfeiting on marketplaces like Amazon. And some brands are wary that Amazon acts as a retailer in its own marketplace for private-label products like Amazon Basics; Amazon could be your direct competitor, and you may not want Amazon to have access to your merchant data around sales, price, margin, or popular products.
But perhaps the biggest cost to selling on Amazon is the loss of the direct customer relationship you have when selling through your native site. This means loss of valuable consumer data that brands can later use for email/SMS outreach, personalization, or advertising retargeting. As we move closer to a cookieless future, zero- and first-party data assets are becoming more valuable than ever, and brands cannot lose these assets to Amazon.
Achieving Balance
Most brands, after weighing the pros and cons, will decide that they shouldn’t give up the exposure and reach Amazon provides (some brands even have unique product lines specifically for Amazon and other marketplaces). If not just out of habit, consumers will continue to flock to Amazon for free shipping, price, ease of use, and one-stop shopping for multiple brands in one cart.
But even if selling on Amazon, brands must focus on driving the sale through their native sites whenever possible. Consumers will stray from Amazon for free shipping and better prices. Most importantly, they’ll stray from Amazon for better shopping experiences, including data-enabled personalized experiences tailored to their unique needs within moments. The key is to create a better shopping experience than Amazon.
Winning against Amazon, and in turn building that direct customer relationship anchored in data, depends on doing the things on your native site Amazon can’t (or at least isn’t great at) around shopping experiences: unique products, loyalty programs, content marketing, customer service/chat, and payment installments. By leveraging performance marketing, brands can drive customer value and build first-party data assets to extend that value far into the future.
Winning the Marketing Battles
Furthermore, brands can focus on winning the early stage marketing battles against Amazon to shift some of Amazon’s scale to their native sites. For instance, Amazon excels at repeat purchases; brands can compete here by promoting their own native apps as app users are more likely to be repeat customers. Winning the native app marketing battles can include running app install ad campaigns in search, social, and display as well as optimizing your app for organic visibility in the app stores.
In search and display, brands can leverage learnings from their Amazon marketplaces (search data, competitive data, what your customers looked at, related/complementary products) to inform native site paid search and programmatic campaigns. In organic search, Amazon tends to rank well for product queries, but your native site is more relevant for your products, and it’s in your control to rank above Amazon on the Google search results page. In affiliate marketing, rewards or discounts for customer loyalty can influence consumers to forgo the Amazon habit.
Deciding whether to sell through Amazon and/or a native site is an exercise specific to each individual brand. You must weigh the various benefits and costs. Balance is possible, and brands should consider how they can leverage Amazon’s massive reach while building valuable direct customer relationships outside of Amazon.
Whether you need help evaluating your approach to marketplaces, including Amazon and off-Amazon performance media and content strategies, or building your own marketplace to directly compete with the retail behemoth, our digital commerce experts are ready to connect. Reach out today.