By Martin Heubel, Amazon Strategy Consultant at Consulterce
1P Vendors: Stop launching exclusive products with Amazon.
Launch channel-exclusive selections instead.
Let’s face it: Amazon is a notorious price follower.
Which leads to dreadful discussions about profit margins and a tense trading relationship.
It’s one of the key reasons why brands hate selling on Amazon.
And that’s why many brands want to launch exclusive products with the online retailer.
After all, if you only sell the product to Amazon, you won’t run into any margin challenges, right?
Wrong.
The problem most brands run into when launching exclusives is two-fold:
- They either give Amazon too much margin, thinking Vendor Managers will market the item for them.
In this case, brands won’t get the product visible enough to justify its exclusivity, or they:
- List the product with a suggested price that Amazon rarely displays to consumers.
Which leads to lost margin potential and a bad customer experience.
Both cases lead to frustration and finger-pointing at the agency or consultant who recommended the launch of exclusive products in the first place.
But it doesn’t have to come to that.
In fact, both issues can be easily avoided by following two principles:
1. Margin management
Ensure you grant Amazon only a tiny margin benefit on exclusive products.
As a benchmark, you can use your account Net PPM from the last twelve months. Exclusive items should only be slightly more profitable than the rest of your portfolio.
You drive profits through volume, not by giving up your margin and handing it to your Vendor Manager.
This way, you reserve enough profits to promote the product and establish its sales rank.
2. Anchoring prices
As already mentioned, Amazon is a self-proclaimed price follower. So it’s a terrible retailer to list exclusive products with.
If Amazon cannot anchor the price against other retailers, other factors like your inventory health will play a significant role in Amazon’s pricing decisions.
And as Amazon does not adhere to MAP or RRP pricing, you should consider launching channel-exclusive items, not Amazon-exclusive items with the online retailer.
Yes, you read that right. I don’t recommend selling products exclusively to Amazon.
You’ll need at least one other retailer or seller that functions as a (stable) anchor.
Once in place, you’ll have it much easier to promote the product and let it climb the sales ranks on Amazon.
For further information and support, contact Martin Heubel here
