Week 8: Should You Sell on Amazon? (Probably, Yes) 🦎
Your DTC Cheat Sheet for all things Amazon
In all areas of life, it’s good to keep an open mind. If you had told us a few years ago we would be buying brands and selling our products on Amazon, I wouldn’t have believed you.
But if you stay closed-minded, you might miss out on the opportunities that are right in front of you. In our line of work, opportunities move fast, so you have to think fast.
That is what we did, and Pattern now has a fast growing presence on Amazon.
Meet Your Customers Where They Are
Over the past few years, one thing we’ve learned at Pattern is to take Amazon seriously — very seriously. Amazon Prime has almost 150 million members and is by far the largest shopping club in the U.S.
Many Americans almost exclusively shop on Amazon through Prime for the convenience, rewards, value, and familiarity. If you are trying to significantly grow your business and don’t sell on Amazon, you have to be prepared for the uphill battle of acquiring customers outside of America’s largest marketplace. There is a reason a top item will have thousands and thousands of reviews — that’s where the customers are.
While Amazon can command a hefty fee of a total sale, 30% to sell, and larger if they do fulfillment, there are many categories and product types that are crucial to explore selling on Amazon.
“If you’re a brand, you need to remove barriers from customers discovering and purchasing your products. An important way of doing this is diversification of channels. Make sure your products are in the places that your customers are shopping for those categories.”
Own Your Customer Experience
We had the good fortune of sitting down with Chad Hetherington, CEO of The Stable, which is widely considered one of the most important consulting and branding firms for consumer goods brands looking to bolster their retail and Amazon relationships.
Chad had this to say about the importance of Amazon,
“Today, Amazon is the largest eCommerce retailer, and by 2025 is projected to pass Walmart in total US retail sales.
As DTC brands explore whether or not to sell on Amazon, our recommendation is that it can’t be ignored for long. Ninety percent of product searches that start on Amazon convert on Amazon, and with their third party marketplace expanding rapidly, we would rather the brand own the customer experience versus someone else.”
Earlier this year, Stable found that one of their clients that they represent at Target had one of the top selling products on Amazon (in their category), yet did not have any relationship with Amazon. It was all third party — meaning content was off-brand, product information was not updated and customer Q&A was not managed.
Not only was this a missed sales opportunity for the brand, but also a huge marketing and customer experience challenge. Stable always tells clients that Amazon is your digital billboard for the world. If customers see your product in the marketplace, they will generally go to Amazon to learn more.
Quick Tips For Success on Amazon
Consider the following when considering Amazon:
Pricing and Value:
Value-driven everyday items, extremely high-end items, or products that need a lot of careful narration and storytelling are not necessarily best suited for Amazon. That is the world where ‘Shopify’ and direct to consumer websites thrive. You want to have the jurisdiction and space to tell your own story, show the products beautifully and control the experience.
You have to have a solid product that is going to get a top review out of 5. If your product can’t achieve this for whatever reason, it’s best to avoid selling that particular product on Amazon. Not only do you need very strong reviews, but also utilize some Amazon-based SEO to ensure you are ranking highly. Amazon is almost an internet unto itself for eComm.
Like wholesale in general, you need to have solid margins to support Amazon’s cut. If your product is not over 50% gross margins, it can really be hard to sustain a business through Amazon-based selling because of the cuts they take.
Does it negatively affect brand equity or value? The most likely answer is no. Many small to large eComm businesses sell solely on Amazon and do very well. Thousands of successful, brand-conscious CPG, DTC, and luxury brands now sell on Amazon.
However, if you are seeking to tightly control access to whom and where your items can be sold, then, yes, you might want to hold off.
From Supreme to Glossier, these brands control their distribution and access points, so it makes sense to limit where their product is sold.
If you do want to maintain some exclusivity while still selling on Amazon, consider offering a limited color selection, or select models.
Remember Your Customer
It’s important to remember your customer. Who are they, where are they, and what do they want? Your goal is to get the best product you can make to the customers who want it.
We have to remember we are increasingly in a more fluid channel commerce world. It is also OK to experiment. You don’t have to stick with any one channel or decision.
Explore if Amazon is right for you. You need the right conditions, but, if managed properly, it can be a powerful channel.
Pattern’s prior installments:
Introduction: The Definitive 10 Part Guide to DTC
Week 1: Why Great Brands Make Great Businesses
Week 2: The Power of Community & Why Great Brands Have It
Week 3: Mastering Foundational & Performance Marketing for eCommerce
Week 4: How to Build a Great Product
Week 5: Culture & Values
Week 6: Supply Chain
Week 7: What is DTC, Anyway?
If you are a business owner interested in learning about joining Pattern,
we’d love to hear from you! 👋