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February 3, 2021

Why Control Is A Key Component of Your 1P Amazon Strategy

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Amazon is an increasingly important sales channel for brands, with many brands approaching the channel vis-à-vis a 1P model. Brands naturally spend a great deal of time deciding their assortment on the platform, their search and marketing strategies, as well as on optimizing their product pages. Often, however, brands fail to spend a commensurate level of time and attention focused on how they will maintain control of their sales on the platform. When this happens, brands can quickly find themselves in a state of erosion, with their brand value declining, MAP violations stacking up, channel conflict setting in and overall sales suffering. These factors can quickly negate the brand’s hard work and investment in demand and conversion activities on the platform, as well as disrupt longstanding relationships with distributors and retailers.

One of the first symptoms of an underlying lack of control is the presence of unauthorized 3P sellers on the Amazon platform. When Amazon is forced to fight against unauthorized 3P sellers for the buy box, brands will soon 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 and profitability goals. Making matters worse, distributors and retailers in other channels may start to move away from the brand, reject MAP policies or demand additional concessions. The below demonstrates ever-expanding ripple effect of unauthorized sales on a brands 1P business – both on the platform and off:

Even for those brands who are not experiencing the extent of the above illustration, it is important to be aware that certain platform advertising units are not available when Amazon’s offer is not in the buy box. 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.

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 1P model is implemented without accounting for needed control, demand generation and conversion tactics lose their ultimate potential, and erosion – both online and offline – can be the result. To avoid this and fully realize the benefits available under a 1P model, 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 focused against truly disruptive unauthorized sellers; and (5) the ability to track progress and iterate as needed. When the right solution is implemented, the following business benefits can be achieved:

For additional information on how your brand can assert better control over online sales, including to enable a successful 1P selling strategy, download our eBook, Achieving Brand Control & Stopping Unauthorized Sales Online or contact Daren Garcia at dsgarcia@vorys.com.