How Brands Can Help Retailers Compete Against Amazon
It's no secret that Amazon makes life difficult for independent retailers. Every owner of an independent brick-and-mortar store has seen people come in, check out the products, and then order them online. Because Amazon is able to eliminate several layers of the supply chain and enjoy lower costs, it can offer low prices and tiny margins that most retailers just can't match. By selling through Amazon, brands are able to cut prices and compete more easily while still enjoying acceptable profits.
For up and coming brands, though, independent stores can be extremely valuable, particularly for manufacturers of niche products or new brands trying to establish themselves. Expert staff in specialty stores are some of your biggest allies when it comes to building brand awareness and educating customers about the value of your product. As a manufacturer, then, you need to consider taking action to protect your independent retailers from Amazon.
Responsible Amazon UseWhile removing your products from Amazon entirely is an option, you don't have to deprive yourself of the huge market that it unlocks in order to protect smaller retail partners. Amazon offers brands a few different ways to sell products on their platform. Selling your product to Amazon is popular as it delivers immediate income and makes Amazon responsible for marketing and sales. However, it also places your product at the mercy of their pricing algorithms, which essentially guarantees a low price that independent retailers will not be able to match.
Selling through Amazon yourself or through a trusted reseller allows you to maintain control of your pricing. While this can lead to lower sales, as Amazon has less of an incentive to move your product when they do not own it, it frees your products from their algorithm-driven pricing. If you want Amazon to be one of many sales channels for your brand, it makes sense to keep tighter control of your pricing this way. However, it is also a strategy that requires constant vigilance. If they are allowed to trade, unauthorized resellers on Amazon can quickly make a mockery of your pricing policy, which is why enforcement is so crucial.
Adopt a MAP PolicyIndependent retailers naturally have higher costs than large online sellers like Amazon, which is why unrestricted price wars are so dangerous for them. Setting a price floor using a MAP policy allows your retailers to compete on price up to a point, while still allowing them to enjoy an acceptable margin.
MAP policies are not foolproof. Set the price too high, and it makes your product less likely to sell; too low, and they won't protect independent stores from price-cutting mega-retailers. They also require constant, active enforcement. Allowing your product to be sold below the MAP price undermines its protective effect and angers your retail partners. If you plan to sell your products through Amazon, you will need to either do so yourself or partner with a tightly-leashed reseller, as Amazon will not enforce your MAP policy for you. However, a smart, properly-enforced MAP policy is an extremely powerful protective measure for your retail partners.
Limit Product AvailabilityShowrooming is a huge problem for independent retailers. Customers come in, view the merchandise, ask the expert staff lots of questions, and then turn around and buy the product on Amazon at a discount. But what if the product wasn't available anywhere else? Some manufacturers work with retail partners to produce exclusive products that are only available in that retailer's stores. This is especially common in the sporting goods world. For example, Adidas makes some sneaker designs that are only available at Foot Locker. If a customer wants that shoe in those colors, they can't get it anywhere else.
Whether or not exclusive products make sense for you or not depends heavily on your product and your market. Making an exclusive make-up for a single store is unlikely to be cost-effective, so it is easier to do with mid-sized and larger retail partners. Even without exclusives, though, you can still keep some of your products off Amazon by only making them available to certain retailers. If your retail partners don't have to worry about showrooming, they are more likely to direct customers towards your brand.
Selling your products through independent retailers while also using Amazon is a tricky balancing act. If done correctly, though, you can enjoy Amazon's unmatched access to customers while also benefiting from the expertise and brand-building opportunities offered by specialist stores. Amazon has traditionally been cast as a destroyer of brick-and-mortar stores, but with a few policy tweaks, you can ensure that your retail channels coexist peacefully.back to blog