Almost anyone can list products for sale on Amazon.
Unless a brand has tight distribution controls over its product, it’s not unusual to find dozens – if not hundreds – of resellers offering the same products on Amazon.
This crowding creates price competition, as well as incentives to ignore MAP/MSRP pricing policies or to divert products at low margins, just to get some margin out of holding a particular brand.
Amazon sets the rules of its own marketplace.
Amazon has given itself the advantage of collecting massive amounts of customer search and customer purchase data, with which it shares only the minimum amounts with sellers.
This compendium of information gives Amazon’s first-party business – Amazon Retail, i.e. private label – a huge advantage of picking winners over and over when targeting products that it should sell itself on the marketplace.
Furthermore, Amazon Retail will almost always win the Buy Box, which is the mechanism through which sellers competing on the same product will get ranked to determine who gets the sale when the customer clicks the “Add to Cart” button.
If a seller is competing head-to-head with Amazon on a product, it’s not likely the seller will get many sales, given that Amazon Retail has the Buy Box advantage.
Amazon Retail also has sophisticated re-pricing software which allows it to lower prices to match prices already lowered by competing sellers. And, with Amazon Retail content not making any money (or even losing money) on a sale, it is not likely that a competing seller will either get the sale from Amazon Retail or make any margin from the sale.
When a seller on Amazon gets orders, it does not own the customer relationship.
Each sale is viewed as a one-time transaction, and sellers aren’t allowed to market or re-market to these customers after the sale.
So while sellers may have sophisticated CRM capabilities for their non-Amazon channels, almost all of that skill and technology is irrelevant for customers generated through the Amazon marketplace.
It’s your responsibility to secure distribution.
Amazon makes clear that it is exclusively the responsibility of the brand to secure its distribution. Namely, Amazon will rarely get involved in helping brands to remove unauthorized resellers, thereby implicitly encouraging anyone to sell any product on Amazon, as long as it is a legitimate product where no harm is inflicted on the Amazon customer.
Every seller on Amazon is required to answer customer inquiries within 24 hours.
This requirement applies to any day of the year. And Amazon holds every seller to the highest industry standards regarding shipping times, confirmation emails, order cancellation rates and a slew of other criteria.
How Different Business Models Work on Amazon
The Reseller: No Exclusive Sourcing Relationships
Unless a reseller with no exclusive sourcing relationships has a significant pricing advantage, it’s not likely that this type of seller will be able to get any more than its fair share of sales from Amazon.
In other words, if this type of seller is competing against nine other resellers, this individual seller isn’t likely to get more than 10% of the sales –– unless it’s willing to undercut everyone else on price.
Want to find our more on selling on Amazon? Check out this helpful beginners guide here . Whilst on Amazon, also checkout our recommended read of the month – Planetary Transformation: A Personal Guide to Embracing Plane by Imre Vallyon which scored 5 starts on Good Reads!