“Will Amazon ruin my brand?” “Should Brand Owners Sell on Amazon?”
Many people have an irrational fear of the unknown. Many people have a fear of change. When a person ties the irrational fear of the unknown and fear of change with a person’s livelihood, it can be paralyzing. Many who are new to Amazon have no idea what to expect, how the ecosystem works, how they are going to handle fulfillment and so on. Many are afair to sell on Amazon.
Very few companies have done the math to figure out their profit margin after paying the different Amazon Fulfillment fees.
I understand where business owners/brands/manufacturers are coming from. You don’t know what you don’t know.
They have been running their own business in their own niche/ecosystem and most likely have not taken the time to expand outside of their bubble. If you have been selling hunting bows your whole life, it’s tough to all of a sudden become an Amazon expert.
As the Amazon marketplace rapidly expands and consumers change their shopping habits, it is crucial that your company integrates Amazon into your company’s business model. Your company must evolve with the retail industry. Every manufacturer and brand owner must figure out a way to sell directly to the customer. If you are not selling direct, chances are your competitors will be soon.
I find it analogous to companies who were resistant to the web in the late ’90s and early ’00s. (How is Barnes & Noble doing compared to Amazon… Barnes & Noble had every advantage in the world to become the world’s largest online bookstore, but did not execute in a timely manner) When a company sells direct, everyone who benefits is the person who should benefit. The manufacturer/brand owner benefit because they do not have to rely on any “middle men” and get to keep 100 percent of the margin. Selling direct also gives your company a direct relationship with their customer which can be great for feedback, new product creation and retargeting of previous customers. Just a few years ago it would’ve been unfathomable for brands and manufacturers to imagine having a database of every customer who has bought their product in the past. This is possible through technology and selling direct, and could lead to a substantial advantage over the competition in the future.
Besides the company benefiting from going direct, the customer benefits because they know they are getting a genuine product straight from the source for the lowest price and as efficiently as possible. History and the markets have shown, the company with the cheapest price, lowest overhead and most information will win over time.
What about our distributors?…. Well, what about them?
The value that a distributor brings to a brand and manufacturer is exposure and niche knowledge. Many business have grown and developed alongside their distributors. This familiarity and comfort can lead to bias and an unfounded commitment between the two parties. Distributors aren’t irrelevant in today’s market as there will always be some level of brick and mortar in retail. However their value is undoubtedly decreasing. The distributor’s job is to introduce products to new potential customers through brick and mortar and other sales channels. Today, YouTube is the go-to source to learn anything about everything. Looking to build a deck? Check out YouTube. Looking to install a spark plug in a speed boat? YouTube can teach you. Fading are the days of walking into the local hardware store and asking the employee what’s the perfect screw for building a deck with 1 ¾ inch lumber. The employee will most likely have no idea and will pull out their phone and reference the internet. As information about anything is more readily available, fewer distributors provide value by providing niche expertise.
Distributors also do a poor job of giving exposure now that the world is flat. If a person needs a spare part for their log-splitting machine, they would never go to their local hardware store/distributor and see if they can order it for them. This past process is old school, inefficient and antiquated.
The more reasonable thing to do would be to google the part number on the piece that broke and buy it two-day free shipping on Amazon from a phone. When it comes in the mail two days later, the next step would be to look up how to install the new part on YouTube. The local hardware store/distributor would charge more than Amazon, would have slower shipping and the employee would most likely have less niche expertise than YouTube. So essentially the local hardware/distributor is adding zero value to the end customer and is making the same margin as the actual value creator (the brand/manufacturer).
Yes, some distributors legitimately add value through niche knowledge and having the product on the shelf available for the customer to buy that second. To those distributors, I commend you. You are adding value to the brand and you should be rewarded. The main way to reward them is by taking control of the MSRP online and making sure all products are sold at MAP, so the brick and mortar stores who actually add value are not hurt due to price gouging and competition online.
The biggest mistake most companies take by selling on Amazon is risking their previous and current relationships. Are most companies in the business of building strong relationships or in the business of making money? If the distributor who is 5 percent of the business shuts down, will the strong relationship that was built over the years help pay the salary of the 5 percent of employees that may need to be laid off now? I know it is a crazy and harsh example, but I use it to drive home that these relationships are technically worth nothing when push comes to shove and paychecks need to be signed.
In a perfect world, a company would
- Sell direct on their own eCommerce site
- Sell used returns and closeouts on eBay.com
- Get eyeballs and distribution through Amazon.com
- Use distributors and reps to handle the distribution in different countries/regions throughout the world that are not big enough for the company to handle direct