For millions of brands, Amazon.com — ranked the second largest retailer in the world in 2018 — has provided opportunities for more revenue, introduction to more consumers, and increased brand recognition.
But the open and highly competitive nature of the Amazon marketplace also creates many risks for brands. In this post, we’ll discuss some of the biggest threats to your brand on Amazon, and what you can do about them.
3 Ways Amazon Could Be Harmful to Your Brand — and What to Do About Them
1. Unauthorized third-party sellers
An unauthorized 3P on Amazon is a retailer who lists your products without your company’s permission, and with whom you have no official relationship. These companies often use deceptive tactics to acquire your inventory with the intention of undercutting your legitimate retail partners, because they know those sellers are abiding by your MAP pricing or resale policy and won’t be able to compete with them on price.
Because these rogue sellers don’t care about maintaining a relationship with your brand, they often spin up new ASINs and publish unprofessional-looking listing pages for your products, perhaps with inaccurate or misleading information, and create a poor buying experience for consumers. Because shoppers don’t necessarily know which retailer is an official part of your brand’s network and which isn’t, they will attribute all of these negative experiences to your brand.
The problem is, Amazon bills itself as an open marketplace and welcomes competition for the same products, regardless of whether or not the sellers are officially recognized by the product’s brands or manufacturers.
If you complain to Amazon that you’ve found retailer on its marketplace advertising who is not part of your authorized dealer program, that will not be reason alone for Amazon to intervene on your behalf. In fact, even if you can demonstrate to Amazon that the unauthorized 3P is listing your products below your MAP pricing policy, the marketplace is still unlikely to step in to help. Amazon views pricing-policy disputes as issues to be settled by the brand and retailer.
What you can do about it:
You do have a few strategies available to help reduce unauthorized sellers on Amazon. For example:
- Sign up for Amazon Brand Registry, which can help you take greater control over your brand’s content published on Amazon. This is a crucial step when addressing counterfeit or gray market product issues.
- Begin an authorized dealer program, to help limit gray-market sellers’ ability to acquire your inventory and to give you some teeth in advanced delisting activities.
- To make it easier for shoppers to identify your authorized dealers from the rogue sellers, implement a digital dealer badging solution that lets your official sellers advertise their relationship with your brand via a trust icon.
- Finally, you can work with a team of Amazon marketplace experts to monitor the marketplace for unauthorized sellers and help you pursue violators on the site.
2. Online price erosion
The competition for customers on Amazon is so fierce that some of your sellers might believe they have no choice but to lower their advertised prices of your products on Amazon below your MAP-approved levels. And when one retailer does this, expect others to follow.
And of course, the unauthorized 3P sellers we mentioned above will have no problem listing your products on Amazon at lower-than-MAP prices. That’s part of their business model, in fact — because they know it’s a surefire strategy to appear higher in the search results than your legitimate retailers who are following your MAP guidelines and pricing your products higher.
This is why one of the many risks Amazon poses to your brand is online price erosion, as multiple sellers try to lure customers by dropping the prices of your products. This, of course, can lead to angry retailers in your network (the ones who honor your MAP pricing guidelines) and, eventually, the loss of shelf space at your value-added retail partners and a public perception of your company as a “discount” brand.
What you can do about it:
The solution here is to keep a close eye on how your products are being priced at all times, all across the Amazon marketplace and the Internet ecosystem as a whole.
Because Amazon has so much digital real estate — hundreds of millions of sales listings — and because some unauthorized sellers even use methods to disguise your products from you, so you won’t catch on to their tricks, your company can’t cost-effectively monitor the entire marketplace manually and take action on all the violations. This is why we recommend an automated brand protection software app to monitor your brand on Amazon (and the rest of the internet) 24/7/365.
3. Amazon’s price manipulation
Amazon uses its own sophisticated, dynamic pricing algorithms to deliver shoppers the lowest available price at the point of purchase. This could create several problems for a brand like yours.
First, let’s assume Amazon’s retail operation sells a product competitive to yours. With its dynamic pricing, Amazon can undercut your retailer’s listing at the moment of purchase and steer the customer to your competitor.
This means your retail partners could consistently find themselves losing sales and, if they realize they can’t compete against Amazon while honoring your MAP pricing, they might ultimately decide it’s no longer worth the effort to carry your products.
A second way Amazon’s price manipulation can work against your brand is if you find yourself in direct competition with Amazon’s own products — such as its AmazonBasics line. If that happens, you or your retail partners might also find Amazon using its pricing to lure customers away from your listings and to its own competitive version of your product.
What this could mean for your brand, if you (or your retailers) continue listing your products on Amazon), is that you have no choice but to commodify your products and compete with Amazon on price. This, of course, could hurt your company over time, as consumers begin to view yours as just another discount brand.
What you can do about it:
Unfortunately, there is no simple strategy for dealing with the ever-increasing downward pressure on prices on Amazon.com. Amazon continues to engineer its marketplace to be highly competitive and to encourage sellers to compete on price.
To safeguard your brand for the long term, then, you might find your best strategy is simply not to jump into the price battle at all.
Instead, you can try to take the path of high-quality brands like Birkenstock, Coach, and Apple — and focus on building a brand that doesn’t need to compete on price, and can still win customers even when priced at a significant premium.