Platform Parity: Running Promotions on Amazon

It’s a little scary to think about, but the end of the Holiday season is fast approaching. Browsing the front page of Amazon over the last month you'll have seen the transition from Black Friday and Cyber Monday to 12 Days of Deals, curated Holiday Gift Guides, and soon, last-minute deals.

Both Vendors and Sellers are often eager to participate in Amazon's promotional programs but it's not always clear which opportunities are available or how to effectively pursue and execute different promotion types--you may have even built your 1st- or 3rd-Party strategy around the promotional opportunities available to you.

Fortunately, the disparity between promotion types available in Vendor Central and Seller Central has shrunk considerably since 2015, with fewer and fewer gaps remaining as new features are announced throughout the year.

Background on Platforms

If you are new to selling on (or to) Amazon or want additional context on the types of promotions available, I’d suggest familiarizing yourself with our Amazon Promotion Glossary. Traditionally, Amazon reserved premium merchandising, marketing, and promotional tools for Vendor partners: businesses selling direct (wholesale) to Amazon through Vendor Central. Access to Amazon Marketing Services, the use of Vendor-Powered Coupons, Lightning Deals and Best Deals have been Vendor-exclusive opportunities from their respective launches.

This strategy allows Amazon to maintain power in the vendor relationship and continue to dictate the economic terms for products. Because promotions are always Vendor-funded, Amazon maintains item-level profitability, while the Vendor (and Amazon) see growth in unit volume and increased baseline performance from that point forward.

The next You may be asking “If Amazon is able to exercise this level of control over Vendors, why bother improving functionality in Seller Central?” The answer is simple: cash flow. With FBA and MFN, Amazon is able to offer products without tying up funds in inventory. In Seller Central, the Seller retains ownership of all inventory and Amazon's platform commission is only taken when a customer purchases the product.

Analysis of the Current Landscape

Promotion Type Seller Central Vendor Central Best Experience
Public Discount Code Yes Yes, Requires Approval Seller Central
Individual Discount Codes Yes No Seller Central
Price Discount Yes Yes, Requires Approval Seller Central
Multi-Buy (BXGY) Yes Yes, Requires Approval Seller Central
Lightning Deal Yes, Invite Only Yes, Requires Approval Vendor Central
Best Deal No Yes, Requires Approval Vendor Central
Deal of the Day Yes Yes, Requires Approval Vendor Central
Coupons Yes Yes Neither
Subscribe & Save Yes Yes Neither
Discount Codes

A popular choice for Sellers and Vendors: businesses can distribute redemption codes through social media or e-mail campaigns to drive traffic and sales. Seller Central offers additional functionality to create individual (unique-per-customer) discount codes to better control who is eligible to receive the offer (and limit financial exposure.)
Advantage: Seller Central

Price Discounts

Sellers have the benefit of adjusting advertised prices almost instantaneously and Amazon's commission is taken from the new sale price. In Vendor Central, because Amazon owns the inventory, you have almost no ability to influence Amazon's price in the first place, and all promotion submissions must be reviewed and approved by Amazon; funding is based on cost-per-unit and deducted from the wholesale price.
Advantage: Seller Central

Multi-Buy Discounts or BXGY

Sellers have a distinct advantage through the self-service promotion setup workflow. Where Vendors need to submit these promotions for approval, Sellers are able to set them up as little as four hours in advance. In addition to having full control over the setup process and the ability to execute these promotions much more quickly, Sellers are also able to better control the monetary exposure by having full control over the base or non-promotion price.
Advantage: Seller Central

Best Deals

Exclusive to Vendors, these Amazon-sponsored promotions are merchandised on top-trafficked pages (including the Amazon Deals Store) and provide a longer discount period relative to Lightning Deals or Deal of the Day.
Advantage: Vendor Central

Lightning Deals

Both platforms offer the use of Category-Specific Lightning Deals (CSLDs), but Seller Central has far less flexibility. The pricing expectations are consistent between the two platforms, but which products are eligible may not be. Sellers are dependent on Amazon's “Recommended Products” assortment, while Vendors can submit a deal proposal on any product in their assortment. Additionally, where Vendors are only responsible for funding the price discount, Sellers must absorb both the price discount and are subject to fees ranging from $150-$500 simply for the privilege of running the promotion.
Advantage: Vendor Central

Deal of the Day

Deal of the Day is Amazon's premier featured deal-type, promoted across the site and via e-mail. Qualifying for Deal of the Day can be challenging, particularly for high-traffic days and the minimum product rating, discount, and sales forecast will vary by product category. All submissions must be manually reviewed and approved by Amazon.
Advantage: Vendor Central

Coupons

Only just launched in Seller Central (Q4 2017), this marks a significant shift in on-site merchandising and functionality for Sellers. In addition to funding the customer-facing discount, Coupons also incur a "clip fee," which is currently being waived if the coupon is promoted through Product Display Ads.
Advantage: Neither

Subscribe & Save

This functionality is on even footing between both platforms.
Advantage: Neither

So Why Does the Shift in Promotional Parity Matter?

Improvements to Seller Central functionality allows Amazon to showcase a larger assortment of products to consumers and drive additional sales on the platform without tying up funds in retail-owned inventory. Sellers now have the ability to truly compete on the platform, offering the same customer experience as Amazon retail deals.

For businesses, the opportunity to adjust your fulfillment strategy to 3rd-Party selling and improve your profit margin is now more viable than ever. Looking at the economics of a promotion, Vendor Central puts the onus of funding a discount on the shoulders of the vendor. Since the brand owner is selling at a wholesale cost direct to Amazon, the discount is taken from that price which can easily lead to unprofitable situations. Similar to Vendor Central, Sellers also shoulder the burden of promotional pricing--however, Sellers are able to capture the full retail price (with Amazon's commission scaling back accordingly.)

With increased functionality and improved profit margin, Sellers are poised to benefit from increased awareness and conversion through a variety promotional opportunities while still executing the lowest-cost option.

So Many Options! Now What?

As the promotional opportunity gap between Seller Central and Vendor Central shrinks with each passing quarter, you need to focus on the economic implications of the promotions they’re running and determine if your current Amazon strategy is truly meeting the needs of your growing business.

If you haven't already considered leveraging Amazon's 3rd-Party platform and the incredible power of the FBA model, it may be time to re-evaluate your strategy.

--Anders

Anders Palmquist
Director of Client Experience
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