Many brands are increasingly concerned that their brand is no longer under their control with regards to how it is presented and sold on Amazon. Losing control is felt most acutely when it comes to pricing.
The loss of brand control over pricing can negatively affect points across channels, as well as create channel conflicts. To give you a clear picture of this, I've listed out the problems you'll face so that you can prepare yourself.
Major Challenges Faced By Amazon Sellers While Selling Brands:
1. There is more competition
Thousands of new sellers realized that eCommerce and marketplaces were important during the pandemic, not just a few brands. It gets harder to keep top rankings when there are more competitors, and more advertising competition leads to higher advertising costs and a lower share of voice, which leads to a lower share of shelf.
According to Marketplace Pulse, there are 9.8 million registered sellers and 1.9 million active ones. In 2021,354,000 new sellers are estimated to have joined the platform - that's 3,408 new sellers every day, or 142 every hour, or even 2 every minute. Additionally, these competitors are better prepared, and better optimized for Amazon. Companies that expect to achieve stratospheric growth on Amazon will be disappointed.
In addition to expanding its retail presence globally, Amazon will add Sweden and Saudi Arabia in 2020, and will now be present in 20 countries. As Amazon adds new markets, it also sources and cross-sells products across those markets. Swedish customers may be offered a product bought from a local brand in the UK. You're competing not only against other Amazon sellers but also against Amazon themselves.
2. Margin Pressure
According to clients, vendor negotiations have been particularly "robust" this year, with marketplaces (especially Amazon) demanding significantly higher margins and concessions. Co-op marketing fees are increasing, payment terms lengthening and other services such as paying for a Strategic Vendor Services (SVS) manager or merchandising placements are being mandated. Indeed we have heard that Amazon is framing that the only way to even have a full negotiation with them is to pay for SVS services.
To understand benchmarks for negotiations, brands need to take advantage of agency relationships and broader knowledge. Brands might rely on their own past experiences and not be aware of other concessions that would be more beneficial to their business.
3. Consumer Uncertainty Around the Economy
Almost all eligible Americans will receive $1400 stimulus checks by the end of May 2021, beginning at the end of March. As the weeks leading up to Christmas approached, retail sales declined - likely due to people waiting until their checks arrived before spending more.
Between January 2021 and February 2021, National retail sales decreased by 3%. The sales of online and non-store goods decreased by 5.4%. This has a significant impact on consumers, and their spending patterns, and makes forecasting for brands quite challenging.
4. Global Logistics Are Still Struggling To Keep Up
US Coasts are clogged with ships and all aspects of receiving and transporting goods are under pressure, including timing as well as cost. Many brands have difficulty keeping products in stock.
5. IP Claims
IP Claims are the biggest threats of all. Once you are sued under IP Claims, it may lead to account suspension. As an example, a company might contact Amazon to file an IP complaint about a particular ASIN, alleging that the other sellers on Amazon are violating the brand's intellectual property.
It's well within the rights of a brand owner or rights owner to protect their own intellectual property. However, Amazon makes the filing of IP claims so easy that it is commonly abused. So this is the most dangerous part where you've to be very careful.
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