The Role Of Amazon In A World Of Direct-To-Consumer Brands

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How three companies navigate the pros – and cons – of partnering with the world’s largest ecommerce website

That elephant in the room has become impossible to ignore: Amazon, the world’s biggest ecommerce site, now accounts for 43% of all online sales, and over 52% of consumers go directly Amazon when they shop online. In the past, brands often squared off with this mega-behemoth, hoping to parlay customers into their own on-site sales, bypassing a partnership via Amazon Merchant Services. But, with Amazon’s ever-increasing presence, some larger brands find themselves facing an even bigger problem: third-party sellers and wholesalers selling their products either steeply discounted, or even worse, as knock-offs.

Our CommerceNext panel, moderated by Ruthie Ackerman, Deputy Editor, Women@Forbes, shared differing opinions on whether to have an Amazon partnership and how to approach it. One panelist is adamantly avoiding an Amazon partnership while the rest advocated for collaboration, and ironically all in the name of maintaining brand integrity. Whose side will you land on? Read on about the panel and let us know.

PANEL QUESTION: What are the positives of selling on such a huge platform?

“Think about just the media spend on Amazon: it’s shifting dramatically from Google to Amazon and partly because 55% of all searches in retail are starting on Amazon. When you have such a stellar statistic… it comes down to need-based retail, [and] Amazon’s the definite leader in that.” – Sid Jatia, VP of Global eCommerce at Under Armour

George Nahra, SVP of Business Development at Chico’s, FAS, Inc., shares Jatia’s sentiments. When it comes to customer acquisition, Chico’s chose to partner with Amazon due to its logistics and ability to acquire customers outside of Chico’s original reach.

The same is not true for Cheryl Kaplan, President at M. Gemi, who has avoided pursuing a wholesaler agreement with Amazon. “For us, we are direct-to-consumer. We’re online, but we also have pop-up shops we just recently opened: a store-in-store within Bloomingdale’s,” she explains. Even though M. Gemi operates within Bloomingdales, it’s still her team and look and feel. She’s able to manage the customer relationship and service a full end-to-end experience. This, she emphasizes, is something she is unable to do on Amazon, and for her, business has always been about interacting with her customers in a very personal way.

PANEL QUESTION: Chico’s recently decided to start selling on Amazon, and this is surprising for some because the company is a vertically integrated brand and doesn’t wholesale through others. What went into that decision?

Nahara denotes three main reasons to sell on Amazon: the scalability of customer acquisition, innovation and an ability to protect Chico’s IP.

That third reason is common among major brands, says Nahara. Take Nike for example: in 2017, the company announced that they would begin selling on Amazon and Instagram in an effort to combat unauthorized sales. Many brands are choosing the same route—combating unauthorized sales by selling their products directly on Amazon, with the retail giant agreeing to work with them to limit sales of specific products.

Even with agreements between Amazon and a brand in place, companies still aren’t completely satisfied with the way their brand is represented on the site.

As traditional stores close and shopping moves online, Amazon’s dominance in retailing has grown, leaving even the most powerful brands unable to ignore it. Some companies disdain Amazon’s site design, which doesn’t conform to the tailored image they want to project, according to lawyers and consultants who work with them. They consider it a site that sells items, not one that builds brands.” –  The Wall Street Journal

This is where companies like SupplyKick come into play. Josh Owens, CEO at SupplyKick, works with companies to devise a strategy on how to effectively sell using the Amazon Marketplace. With new changes, he says, companies can retain a lot of control over how their brand is represented. “We’re working with a lot of brands who want to be able to have control. It’s not going to be perfect, it’s not exactly what you look like on a direct-to-consumer website, but you do end up with a lot of control in that piece, and that’s been really attractive [to brands].”

It’s worth noting that Amazon will not proactively help target unauthorized sellers, but they’ll give companies the tools to be reactive, and when those sellers are identified, Amazon works with brands to remove those listings.

Watch the panel discuss: “The Role of Amazon in a World of Direct-to-Consumer Brands”:

PANEL QUESTION: Looking into your crystal ball and predicting the next five years, will there be more or less brands selling on Amazon?

While Kaplan recognizes the appeal for brands to jump onto the Amazon ship, as well as Amazon’s desire to innovate, she’s not convinced that all brands like M. Gemi or even Bombas will make the switch because those companies strive for a customer-centric approach. Still, she doesn’t rule out the possibility that the continued innovation might persuade her to change her opinion in the future.

On the flip side, Nahara, Jatia and Owens all agreed that in five years, it would be unlikely that any brand wouldn’t be selling on Amazon. “I think within the next five years everyone’s going to be on [Amazon] in some form, but I would say that’s also true of Walmart, and that’s also going to be true of Alibaba,” says Owens.

Consider this: as of November 27th, 2018, over 1,146,083 joined the Amazon Marketplace, according to Marketplace Pulse. While most sellers are inactive, over 20,000 sellers make over $1M per year.

With one-third of all apparel sold on Amazon, Jatia notes that it’s hard to not be tempted by the lure of reaching that ever-increasing market (over 100M Prime members), and is interested to see how the team at Amazon changes the UI and content strategy on the platform, if at all.

PANEL QUESTION: For brands currently opting-out of Amazon, do you think there’s another platform that’s going to evolve that’s going to cross-sell products?

“We’re trying to pass along as much of the benefit to the customer as we can so it’s yet another reason why we would be held back,” says Kaplan, though she’s certain that Amazon will find a way to appeal to the direct-to-consumer experience that companies like hers strive for, and doesn’t rule out the possibility of joining the marketplace in a few years.

Brands: Where are you in this discussion? Does your company currently sell on Amazon, and if not, do you have other reasons for avoiding the platform aside from the sentiments Cheryl shared?

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