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Here’s what every entrepreneur should know about Amazon’s marketplace and third-party selling

If you want to sell via third-party platforms — you can, but you just have to kiss the ring.

With so many customers switching to online shopping, it is a must for brands to have an online presence. How do you get to sell online? With so many options nowadays, in just a few clicks, you can add a Facebook page store, start selling on Instagram, put your products on Amazon — there are so many platforms to choose from. It’s relatively cheap and easy to start on any of them vs selling on your own website. What’s better though?

Joel Bines, global co-head of retail at consulting firm AlixPartners

Amazon, eBay, Etsy, Facebook, Instagram? Whose brand are you really building when you lean on third-party platforms as your main place for people to find you?

A silent giant: AmazonBasics

AmazonBasics is Amazon’s private label brand which offers products ranging from electronics accessories to kitchen products and more. So, it’s Amazon’s house brand. It is an elephant in the room. It is a silent giant and he is growing… right before the eyes of their competitors. The company is able to leverage internal data (as they know what their customers are looking for) and if Amazon has your category and product insight, they won’t think twice to create their own version and sell it to the public. Probably for the lower price you’re offering. On the other hand, if you start selling your products on Amazon, the silent giant collects 27 cents of each dollar customers spend buying your product, a 42 percent jump from five years ago, according to Instinet, a financial research firm. I don’t even have to mention that it does not include what you have to pay to place ads on their platform. Say hello to the giant, what else can you do, right? Do the math. How much does it cost you — per week, month, year? Is it cheaper than building your own brand? Does it cost you less to invest in a good domain, a functioning website, your own online empire?

Big brands are breaking up with Amazon.

Just a month ago, Nike agreed to sell a limited product assortment to Amazon, in exchange for stricter policing of counterfeits and restrictions on unsanctioned sales of its products. The company decided to shift its focus on sales straight to consumers through its website, stores, and various apps. Wondering why?

Less brand growth, increased competition, dependency, commissions, no split loyalty, the fact that Amazon may ban you for factors beyond your control? What about false negative feedback on your products, copycats, your data? I won’t ask because I know that’s certainly not what you want for your brand.

Bernie Thompson, a top seller who Amazon has highlighted in its marketing to other merchants

The official Nike products had fewer reviews (and therefore received worse positioning on the site) thanks to Amazon’s algorithm.

The sportswear giant has more than 8,990 domain names in its ownership including all the possible ways you can think of misspelling the name. Nikeshit.com, Nike.sucks? Again, in order to keep its reputation under control, the company has made sure no one has those domains. What about Nike’s iconic “Just Do It” slogan? You guessed it, JustDoIt.com belongs to Nike. Swoosh.com? Belongs to Nike. Nike Fit, which app uses AR and AI to scan feet for the perfect fit? Of course, the company has acquired the domain nameNikeFit(.com) to protect its brand and convert app users to website buyers.

Does such a strong brand, that has taken all possible measures to provide direct traffic, happy customers, a strong brand presence and a reputation in check, need a third-party seller offering counterfeit products on the marketplace? Should such a brand think about what will happen with the next algorithm change? By making sure that it sells through its own distribution channels (such as its e-commerce site and its brick-and-mortar stores), Nike doesn’t need that. So… they just did it. Because they can do it. Because they should do it.

Randal Konik, Equity Research Analyst, Specialty Retail

You just have to kiss the ring

Nike is not the only brand that has decided to break up with Amazon. Founded more than 240 years ago in Germany, Birkenstock also walked away from this e-commerce platform when Chinese merchants started flooding the site. Redirecting them to their official site, the company told its consumers that any of its products listed on Amazon can’t be trusted.

Tumi, the luxury bag maker, sold its products at wholesale prices to Amazon for years. Last year, Tumi decided to sell its bags to another company, which then listed the items on Amazon. The arrangement gave Tumi more control over inventory and better sales data. A few months later, Amazon gave Tumi an ultimatum: Stop selling through the middleman, or do not sell to the retailer’s 150 million customers at all.

One morning in June, Mr. Fishman from Zulily, opened his Amazon app and typed “VitaCup” into the search bar at the top of the screen. On the results page was an ad for Amazon’s own line of coffee. He had been paying Amazon almost $200,000 a month for ads. Mr. Fishman posted a screenshot on LinkedIn and raged. “I have a major problem with this!!!” he wrote. What happened, what response did he get? As you can probably guess — his post was left hovering in the air. He has a major problem, he should solve it. Why Amazon should care.

Quartile, among the largest of a new breed of companies that help brands navigate Amazon advertising, tested the importance of the ads last year. It stopped running ads for 750 popular products. Immediately, sales shrank by 24%. That’s because the fewer recent sales a product has, including sales driven by ads, the lower it ranks on the site. At the end of 10 weeks, sales of the products without ads had tumbled 55%.

Melissa Burdick, a 10-year Amazon veteran who now advises major consumer brands.

Seems like it’s by far not just Nike. Many sellers and brands on Amazon are desperate to depend less on the tech giant. More than 12,000 people signed a petition on Change.org asking Amazon to alter an arcane rule on counterfeit products that they said could “destroy” an entire business.

Oh, another giant in the room: Apple AppStore and all its problems.

Okay, I am gonna say it. If people want to learn about your app, they’ll look for your website in their browser, not the AppStore. The App Store is simply not a search engine. Just put yourself in those shoes. You just heard about an app — you want to learn more about the brand, you don’t want their app before you learn more about the brand first and then, maybe, decide do you even care enough to get the app. What will you do if there is no website with the matching domain name? What if the name of the app is too complicated, too long, without any sense… who will bother to remember that?! What if it takes you more than two minutes to find them on the web? Come on, don’t lie to me. You’ll give up. I know you will. And that’s okay, the vast majority of people will do the same. You won’t take your phone, access the app store and search for the app. You don’t have enough time for that, a similar application will probably appear at some point, they haven’t tried hard enough to make it easier for you to access their brand — why should you bother?

With a website, you can provide your potential users with much more in-depth information, in a space that’s completely under your control. You can build a brand around your app. And you should. Why Nike acquired NikeFit.com? Why Snapchat has the website with the exact brand match domain Snapchat.com if it is just an app? Because it is more than that. It is a brand. And they want you to know it. They want you to spread the word about them easily. They don’t want to risk losing their potential users. They are famous brands today because they had that vision. Does your app deserve less than that? Sorry. Rhetorical question.

With third-party platforms, you have little or no ability to customize or personalize your brand and your products.

On average, 5 to 7 brand impressions are necessary before someone will remember your brand. What’s the name of your brand and does it relate to your target audience in any way? How many people will know your brand name after purchase? Will it be easy for them to find your website later and buy again? Do they even recognize your logo, brand colors?

Your customers expect consistent shopping experiences. You can’t have that on a third-party platform. Inconsistent branding across social media and third-party platforms can cause people to become confused and lose trust. Can you stand out if you follow a similar template to everyone else’s, giving it a generic look and feel? This is the reason why so many shoppers don’t realize that when they place an order with an online marketplace, they’re actually buying from individual sellers and not the marketplace itself.

What about your products? Is there something special about them? Well, sorry. You can have a short description of the product you’re trying to sell and that is it. There is no brand building. There is no customer recognition, loyalty, and competitiveness. You can’t build an emotional connection with customers. You don’t have a brand. However, if you have your own platform, your website, you can describe your products elaborately, highlighting how your product is better or different from others. You are building your brand in the eyes of the customer, who will come back to you on being happy with the product. When you own your brand, you’ve taken charge of what your message is.

Selling on third-party platforms doesn’t come cheap.

It hurts to lose even a minute percentage of your hard-earned revenue. However, Amazon, eBay, and other marketplaces take away a significant percentage of it from you. After all, they exist to make a profit and you’ve accepted that condition. That is why you will need to pay transactional or monthly fees in order to keep your products on the third party website. This amount can vary from one platform to another but, in the long run, this could end up costing you a lot of indirect costs (and headaches) than building your own, independent brand.

Adam Watson of Hollywood Mirrors

Everything could go down the drain — or into a dark corner of the platform.

If you opt for a third-party e-commerce site or the social media service there is a chance that the platform in question will go out of business. One round of bad press, one algorithm update, or one policy change could banish you from the sandbox. The companies that own the services can deny you from using them at any time — and you never know which one will go next. If that happens your brand could be left in the lurch. Do you have any control over that? You just wake up one day and your item is now on the third page of results. On the first page is the same item branded “AmazonBasics”. Oops, Amazon noticed. They tracked everything. They calculated. They entered the market as your competitor. Ha, compete with that!

And what if you… set up a Facebook store?

Facebook has taken a big hit in the past year, with privacy and security scandals, but how it is reflected on the brands that focused their marketing strategies on the social media giant?

Now that ads have a limited reach, and with all the data security concerns, many business owners around the world are asking, “Is Facebook right for my business anymore?”

“Delete SpaceX page on Facebook if you’re the man?”

In late March 2018, after Facebook’s data scandal, tech mogul Elon Musk tweeted: “What’s Facebook?”. Afterward, a follower told Musk he should delete SpaceX’s Facebook page if Musk was “the man.” Musk claimed he didn’t even know it existed and he has removed both, SpaceX and Tesla Facebook pages.

Early on March 28, Cooper Hefner, the son of late Playboy founder Hugh Hefner said that the magazine would be ditching Facebook. The company has deactivated the Playboy accounts that Playboy Enterprises manages, directly affecting some 25 million fans.

Statement from Playboy Enterprises, Inc.

Gamestop, J.C. Penney, Gap, and Nordstrom have all shut down their Facebook stores. Gamestop said that customers had no reason to shop via Facebook rather than go to the company’s own website. Gap’s explanation was similar.

Laura Russell, director of strategy at Adlucent

On Dec. 19, 2018, David Heinemeier Hansson, a partner at the web-based software development firm Basecamp, quit Facebook and Instagram. It was a decision he made alongside his business partners at Basecamp.

Basecamp, which develops productivity apps, deleted all of its Facebook-owned accounts due to concerns related to Facebook’s privacy policies.

David Heinemeier Hansson, CTO of Basecamp

On Instagram, Hansson removed most of his posts, saying goodbye to his 34,000 followers. Why? Because they’re investing in their brand. They’ve invested in a strong online presence, their best domain name. They’ve decided to build an empire.

And you must have heard about a fascinating story about Starbucks and its Facebook following. The coffee icon spent 10 years spending big cash each year to get followers on Facebook. Right now they have 36 million but slowly over time, the company started noticing their posts were only reaching 1% of their following. How is it possible? It turns out, you can reach the last 99% if you boost your posts and continue to pay for ads. Pay to play! And Facebook has every right to do this. It’s their platform. It’s their algorithm. It is their rule and they’ll find a way to keep making you pay.

You are limited to their own styling of the website and under their rules/restrictions when uploading your products.

Want to add an extra mailing list signup button so you can further your list building? You can’t do it. Want to change your policies? Again you can’t do it. Want to run a special promotion or you want to launch a new product? Who can stop you? Well, the platform you are trying to build your brand on.

When you’re building your brand on your website you can (and you should) educate the customer about a new product or create awareness about a concept. You can share your brand story, talk about your journey during the creation of the brand or the product, your values, your mission. When you are selling on a third-party platform? Well… not really.

Late delivery? Bad customer support services? What about payment methods? Are those suggested by the marketplace/social media platform favorable by your customers, convenient for you? Do you know that 25% of US customers abandon their carts because their preferred method of transaction is not there? You have no control over these aspects and there is nothing you can do to change or fix things. You are not in charge, you don’t have a brand. You are just there trying to sell something. Just like everyone else on that platform.

Now let’s talk about your content. Are you aware that once you put your content onto a third-party platform, that third party owns it? Yes, you can control the creation of the content but who will read it? For example, with Facebook, the social giant can use it as it sees fit — and regularly change the rules and features available to users. And it’s not unheard of for well-meaning sellers to have their shops shut down (without any warring) for inadvertent or trumped-up policy violations. Even if the decision is reversed, your page, your content, your Facebook store, and your loyal followers can be lost. It doesn’t matter how much work you put into your store. It doesn’t matter how much money you’ve made in the past. All of your hard work could be flushed down the drain because of factors outside of your control. It was your choice.

Your brand, your show.

Depending on any third-party platform is a risky strategy that leaves you in a place of vulnerability. There are no easy solutions to independence on the web apart from creating your own space, your own website, your brand. A website is your business’s home base, its flagship store, where you’re the boss. Loyalty schemes, discounts, coupon codes, special offers, events, announcements — you can implement whatever you want (whenever you want). You don’t have to go through platforms you don’t own and follow their fees and policies in order to make a sale.

Without rules and restrictions holding you back, you can build a meaningful and memorable brand that gives your audience a reason to shop with you. That will give you more referrals as your brand presence is higher. That leads to developing a relationship with your customers. And they’re far more likely to return as loyal customers. Where? Again to the hub of all of your online marketing efforts — your domain name, your site, your brand. When you invest in creating a brand that is distinguishable, has a great reputation for keeping customers happy, and consistently converts customers, again and again, you can grow your business to new heights. A customer acquired through your domain name is yours and going nowhere with any algorithm change or a platform shutting down. It is your stage, it is your show. And you won’t need to search for your audience paying them to come and see you. They will come. And they will stay.

Every dollar, every minute you invest in your own brand is that — an investment. The stronger your brand gets, the cheaper and more effective it gets to promote your products and services. Third-party platforms are traffic aggregators — you pay for their traffic and that’s great as long as you have to throw the cash in. There is no accumulation there — the moment you stop paying, that traffic stops. So pick wisely when building a strong and independent brand.

I hope this will be of use to you in the process of creating and strengthening your brand. If you have any questions, need any help or just want to chat to someone about the process, book a free consultation using the form below. We are always happy to hear from you.

Written by Kristina Mišić

Originally published at https://markupgrade.com.

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