Brands Reluctantly Selling on Amazon

The “Everything Store”

Amazon surpassed Google in 2018 as the destination for initial product searches with 54% of consumers turning to the platform when they’re shopping for a product. Amazon is an online marketplace, yet it’s arisen as one of the world’s top search engines due to the sheer quantity of its offerings. Think of any product on the market that you’d like to buy, and it can probably be found on Amazon.com. Jeff Bezos claimed that his vision for Amazon was to become the “everything store,” and that’s exactly what it has grown into. Brands, even those that have been reluctant in the past, are coming to the Amazon party.  Even if not with the goal of growing direct sales on the platform, then they’re using it to challenge competitors and boost their SEO.

 

Why Brands are Reluctant to Sell

In March 2017, the brand Pampers suddenly disappeared from Amazon’s websites. At the height of its price war with Walmart, many speculate that Pampers was removed for refusing to drop its prices as low as Amazon wanted. Furthermore, the platform is known for removing CRaP – “Can’t realize a profit” – items from its site. These products are typically low in price but expensive to deliver, such as bulk-packaged water. These are just two examples of many power moves made by Amazon to exert control over sellers. As Amazon has grown into the world’s largest online marketplace, its power has simultaneously increased. Amazon knows that brands need their platform to sell, and it's using that to its advantage. This authority leaves many brands skeptical of selling on the platform, worried that they will lose the autonomy over their products that they’ve come to expect.

Another primary reason that brands withhold from selling on Amazon is exclusivity with other retailers. Many major retail chains are threatened by Amazon, and consequently ban partner brands from selling on it. For example, Sephora will not sell beauty brands in its stores they can be found on Amazon. No matter the reason that brands would prefer to avoid the platform, with its continual growth as one of the world’s largest marketplaces has resulted in brands joining the Amazon party.

 

Why Brands Have to Sell

Challenging Third-Party Sellers

Companies tend to focus on Amazon the retailer, ignoring the much larger segment of the platform: Marketplace. Amazon announced in a letter to shareholders that more than 300,000 small and medium-sized businesses began selling through its Marketplace service in 2018, and it accounted for more than half of all units sold on Amazon worldwide. Marketplace is used by third-party vendors to sell their products. It’s the place where major brands will be sold if they aren’t—or even if they are—directly supplying to the platform. Marketplace has allowed Amazon to expand its offerings to include nearly every brand, even if they want no part of it.

Brands are effectively forced to list their products on the site. If they don’t, it will find someone else who will, whether it be a third-party seller or a competitor. Nike is the perfect example of this. Nike spent many years holding out from listing on the site, even though Morgan Stanley estimated that it was still one of its most-sold brands. It’s now begun to sell a limited number of items on the platform; in exchange, Amazon has agreed to crack down on counterfeits and unauthorized sellers of the brand.

 

Growing Brand Awareness

For smaller brands, or even those that wish to remain relevant, Amazon can be a key to building awareness with consumers. With over one hundred million subscribers globally, it’s a great place to reach customers at the moment they’re searching for products. Often times, among the most popular products in an Amazon search result will be from smaller brands. In the past, retailers’ offerings were generally dominated by well-established, widely-known brands. By offering their products on Amazon, smaller brands have the new, unique opportunity to reach a wide audience and have their name be known.

 

Looking Forward

With over one hundred million Prime subscribers and growing, Amazon is unquestionably set to continue on as a retail powerhouse far into the future. As its reach across the globe continues to expand, the importance of selling on this platform will continue to expand as well. In the future, a brand existing on Amazon might be synonymous with a brand existing at all. Whether it's to grow brand awareness or maintain brand integrity, brands will continue to give in and agree to be sold on the platform.