Photo Credit: Matt Hardy

The Silent Tsunami: Part 1

Risk Versus Uncertainty

Risk is exposure to danger while uncertainty is the unknowing: risks can be evaluated and potential outcomes predicted, while uncertainties are just that—unknown, unpredictable, ambiguous. Risks can be managed while uncertainties are uncontrollable; risks can be measured and quantified while uncertainties cannot.

Throughout my career, I have always found that it’s better to trade risk for uncertainty and one particular example is the decision to work for yourself or for a company.

When you work for yourself, there’s much exposure to danger—it's inherently a high-risk venture. However, there is often relatively little uncertainty: you know how many weeks and months of production are required to sustain your business. When working for others, there is much less risk—the organization may be exposed to danger, but your job is still secure—but there are incredible amounts of uncertainty: did your division just get sold off to another organization? Is leadership considering consolidating your department, leading to a redundancy and ultimate reduction in the work force? Will leadership remain stable and consistent?

Risk versus uncertainty. Many of our clients and vendor partners have developed strong businesses on the Amazon platform where there has been greater risk, but little uncertainty. This is changing. Fast.

Right now, both on Amazon and in ecommerce more generally, there are several forces collapsing down on brands which will force them to either stop participating in e-commerce altogether, or significantly restructure their internal operations to support the new requirements.

Amazon is making a hard course-correction in terms of the company's relationship with vendors, unfortunately at a time when states are demanding payment of sales tax from companies selling via e-commerce channels—a precursor to business and operating taxes. Additionally, Amazon has initiated this course correction at a point in time when we all recognize that e-commerce is the future of sales: millennials are shopping online and this shift in platform has fundamentally changed the shopping (and selling) experience.

With e-commerce, consumers now have the ability to get just about anything delivered directly to their front door, eliminating their need for certain long-standing tools (e.g. cars) in favor of tools better suited to this new platform. Any brand owner who fails to stay relevant will fail to grow as the shift to e-commerce only accelerates.

--Oscar

Oscar Barbarin
CEO
Have a question? Please reach out to us at info@getarmr.com

Welcome: Inaugural Post and How You May Have Already Forked Yourself

Welcome to the ARMR Blog. We hope to provide you insight on current Amazon Seller Central and Vendor Central strategies, tactics, and recommendations. Feel free to reach out to our team of Amazon experts to follow up on any questions directly: info@getarmr.com

What Does The Future Of Retail Hold?

Amazon. The landscape of commerce has forever changed with the advent of ecommerce. Never before have brands had the opportunity to reach a global audience in a matter of days. Amazon has taken the leadership position for US ecommerce and fundamentally changed customer expectations across industries. With Amazon's fulfillment capabilities, customers are able to receive most products within 2 days, and certain products within 4 hours. Amazon has the world's largest selection and they leverage an open market (and keep close tabs on competitor's prices) to have some of the sharpest pricing in the market. However, this is a two-way street. Global competition--be it domestic or foreign--utilizing Amazon's capabilities also have an opportunity to reach this audience. If someone has product, they can sell it to a global audience with world-class fulfillment and operations via Amazon's extensive global network.

If you are the brand owner or manufacturer, you may wonder if your products are on Amazon. Well, they most likely are. The question is how did your products get on Amazon…

We live in a physical world, and because of this, the customer's receipt of physical product is the fundamental element of your brand's ecommerce existence. This means that before content creation, marketing campaigns, pricing analysis, brand development, or anything else, the person or company which has the physical product in-hand to fulfill a customer order is going to win the sale. If someone has your product at home, in a storeroom or warehouse, they are able to create an offer on Amazon and sell directly to customers.

How you distribute your product matters. It directly effects the ecommerce customer experience.

Sellers on Amazon look for holes in the market. If they find a product that is not currently for sale on Amazon, not being sold directly by the manufacturer or brand owner, or is not sold by Amazon, they will create an offer or listing to fill any potential demand.

Amazon Rewards Extreme Behavior

Throughout my tenure at Amazon and years working with Amazon sellers and retail vendors, I have learned that Amazon's platform equally rewards one of two extreme behaviors:
This "fork" in the road is how you control the distribution of your product:

  • Liberally: Willingness to sell to distributors, discount and outlet stores, and anyone that calls
  • Conservatively: Not using distributors and tightly controlling retail accounts

The more aggressively you employ either strategy, the more value you can extract from the Amazon platform. One caveat is that the more you emphasize one strategy or the other, the bar to exceed customer expectations is continually raised, demanding a high-quality product and exceptional customer service to ensure a best-in-class customer experience. A low-quality product cannot stand on its own, nor will you have massive Third Party Seller (3P) demand for resale and distribution.

Liberal Distribution Strategy

Continue to sell to anyone, let them battle it out for margin on Amazon. Each seller has their own margin requirements, the person willing to take the least will win the sale (for the same offer/condition type). ExampleAztec Secret Indian Healing Clay -- take a look at the of reviews and seller ranking.

Pros

You get incredible demand because 3rd party sellers are taking the lowest acceptable margin. This means your product is priced extremely competitively. You will see a lot of orders from several different buyers.

Cons

You loose complete pricing and brand control. You can’t drive any sales or marketing activity.  Additionally, people make create weird pack sizes, add other items, and the branding will be completely neglected.

Best Fit: Brands that want to move massive volume. Branding, price control, and price perception is irrelevant.

Conservative Distribution Strategy

Continue to sell to a select group of distributors or resellers and institute a "No Selling on Amazon" policy to take control of your Amazon offers. ExampleOZNaturals Hyaluronic Acid Serum -- again, take a look at the number of offers; they're not competing with any 3rd party sellers.

Pros

You have complete control over your brand, the images, the content, and the price. You can market your product and drive demand to your items. If you utilize FBA, you get to sell at the retail price, improving margin.

Cons

You are not priced as sharp as the market will bear, it’s work to maintain and build an Amazon presence.

Best Fit: Brands that want to control price (protect big retail clients, maintain margin in the market) and branding (images, content, respond to customers)

So Which Do You Choose?

The problem is, you probably work with several distributors, but you need Amazon's price control to attract or maintain other retailers, and you would like to drive traffic and provide marketing support for your brand.

Trying to control a product on Amazon that is liberally distributed in the market is a long and costly campaign. It is possible--but requires regular maintenance and tenacity.

If you are trying to transition from a liberal distribution model to a more conservative model that allows much greater control over your products and listings on Amazon, there are several tactics you should explore immediately:

  • Create a Minimum Advertised Price (MAP) Policy and require anyone who purchases your product (and anyone they may resell to) to sign it. Enforce it.
  • Create a "No Selling on Amazon" Policy and, again, require anyone who purchases your product (and anyone they resell to) to sign it.
  • Require Reseller Contact Information from your distributors. They should provide you with the contact information and Amazon seller names of any resellers purchasing your product--remind them you have a "No Selling on Amazon" policy, so there shouldn’t be any offers from these accounts.
    • Keep this information up to date! Check in with your distributors on an annual basis for an updated list; there is not currently any restrictions on how frequently sellers can change their account name on the Amazon platform.
  • Maximize The Economics of Being a Manufacturer/Brand Owner This is easily the most painful and effective way to beat the competition: simply sell your product for less than anyone else. If you're the manufacturer or domestic originator, offering the best possible price shouldn't be unreasonable.
  • Identify Ill-Gotten Goods This last one sounds more fun than it is but do keep a sharp eye out for illegitimately obtained product, including unauthorized sellers and potentially counterfeit product. Amazon can and will kick these sellers off the platform for violating terms of service.
  • Contact the ARMR Team Email us at info@getARMR.com and hear what we have to offer.

Thank you for reading this first post--we have a lot more to share and we are eager to engage with you and serve your business needs.

Oscar Barbarin, Founder & CEO and the ARMR team
info@getARMR.com