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January 27, 2021

Selling 3P on Amazon? Control Is Key To Optimum Growth

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Many brands have implemented a 3P strategy on Amazon, wanting to take a more active role in their destinies. Importantly, however, better outcomes do not come simply by moving to 3P, and a brand’s ability to assert necessary sales control is a key component of ultimate commercial success.

Simply stated, brands that sell 3P need to ensure their ability to capture the strong majority of buy box ownership. This is crucial to achieving both growth and preservation of brand value. When brands lack necessary control, they typically see a number of active sellers offering on their listings. This, in turn, can lead to a number of unwelcome outcomes – all of which will harm your brand’s performance under its 3P strategy. Several are discussed below.

As an initial matter, certain platform advertising units are not available if you are not in the buy box or if the buy box is suppressed. If you are not in the buy box but are advertising with remaining available levers, you may be unwittingly driving traffic and sales to freeriding unauthorized sellers. The inability to fully leverage key traffic generating activities leads to a diminished return on advertising spend (RoAS) and hindered growth.

In addition, when brands pursue a 3P model without implementing the right control strategy, they soon find themselves lost in a sea of other sellers. As the fight for the buy box ensues, they find themselves locked in the oft-described “race to the bottom”. When this occurs, the brand will simultaneously degrade in value and fail to reach sales goals. Making matters worse, distributors and retailers in other channels may start to move away from the brand or demand additional concessions.

Further, brands unable to assert sufficient channel control will likely experience a decline in product ratings. When numerous sellers offer products on your listings, it is difficult, if not impossible, to assert necessary control over inventory quality. Brands will see numerous poor product ratings and reviews arising from other sellers obtaining inferior product and selling on your listing. As negative ratings and reviews stack up, traffic and conversion are negatively impacted, and your brand’s overall performance can suffer immensely.

As many brands have experienced, when a 3P model is implemented without accounting for needed control, demand generation and conversion tactics lose their ultimate potential. To avoid this and fully realize the benefits available under the 3P models, brands need to implement an integrated eControl solution involving the following components: (1) internal alignment around the KPIs that matter; (2) an authorized seller control foundation; (3) an unauthorized seller legal foundation; (4) a data-driven enforcement strategy against disruptive sellers; and (5) the ability to track progress and iterate as needed.

For additional information on how your brand can assert better control over online sales, including to enable a successful 3P selling strategy, download our eBook, Achieving Brand Control & Stopping Unauthorized Sales Online or contact Daren Garcia at dsgarcia@vorys.com.