2020 was quite the year for ecommerce, particularly for ecommerce brands on Amazon. Close to 60% of Amazon sales came from third-party sellers in 2020, and that number is expected to keep climbing, showing that a 3P strategy can be a real tour-de-force for any brand willing to enter the fray.
Becoming a 3P seller can be a daunting step for your business, but it can also be a great way to increase sales and the best way to take control of your brand online. In this month’s On-Demand Pattern Webinar, ecommerce leaders from Pattern, Vorys eControl, and Megafood sat down to discuss the challenges and benefits of having a 3P on Amazon and how a 3P strategy can help your brand grow.
There are several methods for selling on Amazon, but two of the most common are 1P selling and 3P selling. In the 1P model, your brand operates as a wholesale supplier to Amazon, who handles most of the selling and pricing details. In a 3P model (or third-party relationship), you are an independent seller on Amazon, making your own pricing and shipping decisions. These models work for different brands for different reasons—buyers are more likely to trust 1P sellers because their product comes from Amazon, while 3P sellers have more freedom to customize the purchasing experience.
“The easier entre is 1P,” said Steve Ellis, VP of Sales at Pattern, “but [brands] quickly find that based on some of their business practices, their pricing practices, and how they distribute their product, that 1P is not a good fit for them, and then they have to course correct halfway in.”
According to Ellis, a 1P strategy can be great for a brand that doesn’t care about the price their product is sold for, but for growing brands on the Amazon platform that want to be in control of their own destinies, the 1P model doesn’t quite cut it.
“When you’re selling in a 1P model, you ship your product and you have very little control from that point forward,” said Daren Garcia of Vorys eControl.
In a 1P strategy, Amazon can sell your product at any price they want, and you have limited control over how much of your inventory is available at a given time. That can lead to lower margins and endless frustrations.
Nancy Eichler, VP of Ecommerce and International at MegaFood, said she’s worked at companies with 1P and 3P strategies. She said the 1P environment was far more resource-demanding—”I spent more time proving to Amazon that we had shipped something than I did actually working on selling the product and my marketing”—and brand control was continually an issue.
“Pricing always was impacted,” Eichler said. “I felt like it was a fairly frequent issue that I would log on and see our products either dropped down significantly or slightly up. It was kind of all over.”
Lack of control manifests itself in other ways. As a brand gets bigger on Amazon, it tends to experience more channel conflict, like unauthorized sellers interfering with 1P sales. Unauthorized (or gray market) sellers can easily distribute a brand’s products at marked down prices, eroding pricing across every one of that brand’s other channels and negatively impacting their reputation and distributor relationships.
Brands want to be able to tell their offline customers that they’re doing all they can to maintain control, Garcia said. They want to incentivize high quality partners to sell their products, and do everything necessary to promote them. When a brand has no control online, things like marketing initiatives, displays,and pricing in their brick-and-mortar stores become tougher to prioritize and every corner of the business suffers.
Brands are ultimately switching from 1P to 3P or taking a blended 1P/3P approach because they want more control, they want to drive business, and they want a true growth partner in their corner.
A 3P strategy allows brands to take back the reins in the Amazon space on inventory, pricing, distribution, content, and more. With a 3P strategy, instead of Amazon sending you purchase orders, you can dictate when you’re sending product into the ecosystem, which is a huge shift for most brands, Ellis said. You won’t get turned away during new product launches because of inventory issues.
A 3P strategy can also help brands navigate unexpected policy changes or scenarios that Amazon may throw at them. Eichler gave an example of a time Amazon automatically dropped the prices of authorized resellers without their approval, creating confusion for the brand and its sellers. Having Pattern as a 3P partner in their corner allowed them to navigate this scenario (and a few others) much more easily, Eichler said.
Another benefit of moving to a 3P is that, if you have one seller, you can have that seller distribute your whole catalog, Ellis said, that way your footprint on Amazon becomes more comprehensive. 3P relationships are particularly effective when they’re exclusive, because they maximize your control, leverage the expertise of your partners, and allow you the freedom to personalize the customer experience.
That said, switching to a 3P model can be difficult.
“It takes time, it takes discipline, it takes rigor within the business, and there’s a lot of clean up that has to happen,” said Ellis.
Brands have to identify who their gray-market sellers are and have a coordinated strategy through either multiple authorized sellers or one authorized seller, otherwise a 3P relationship can present some of the same control issues brands deal with in a 1P relationship. Those control issues get worse the wider your distribution is.
Your brand may have done really well in the brick-and-mortar space for several decades, but Amazon has dramatically changed the game in the past 5-10 years. A revenue at all costs strategy no longer works. Unless you adjust and make fundamental changes to how you go to market, you’re going to see massive brand erosion and market share erosion.
According to Garcia, the first step to having an effective 3P is to get your authorized sellers under control, meaning you have to make necessary policies and agreements with your distributors, retailers, and co-ops that spell out how and when your product can be sold. You have to really define your channel.
Secondly, Garcia said you have to have an appropriate legal foundation to stop unauthorized sales. This is where brands have things like special quality control programs and differentiating warranties that apply to products purchased from their authorized sellers. With a legal foundation, you can both enforce your policies and support your exclusive sellers.
“Going out with a 3P strategy without those necessary control foundations in place is a losing proposition, because your designated seller will become lost in a sea of resellers that aren’t invested in your brand,” Garcia said. “You won’t be able to get sales, you won’t be able to begin to approximate your 1P sales, and the strategy may fail.”
Brands need to be willing to put teeth to their policies and, along with weeding out unauthorized sellers, put authorized sellers back into their lanes when they slip up.
While many brands have talented ecommerce teams, they don’t have the internal capabilities, numbers, or tools to get into the 3P space alone. Having a partner like Pattern by your side can not only give you the expertise and tools you need to grow long-term, it can also give you support that can’t be found in a 1P relationship.
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Peak season is almost upon us and with all signs pointing to it starting earlier than ever, with Christmas gifting searches now ramping up in August and September, it’s time to start preparing for peak. In this article, we’re sharing our top five tips for planning and preparing for peak season with Google Ads and the strategies required to get your Paid Search ready so you can drive success over this crucial period.
In 2021, gifting search terms started increasing in popularity in August. The general trend is that people are looking, researching and weighing their options early, so it’s best to start your Paid activity early to ensure that you’re capturing that early research traffic. This will help drive revenue alongside aiding those consumers who are in their research phase.
From 2020 to 2021, spend during Cyber Week actually only rose 2% but in the weeks leading up to it, it increased by 16%. However, Cyber Week is still the biggest period during the latter half of the year, accounting for 23% of all online spend by consumers over peak. Being prepared and starting early will help you to maximise your time during this period.
According to Google, 48% of global consumers have stopped buying or using a service due to privacy concerns. Privacy is front of mind when consumers are shopping online and we know that Google is phasing out 3rd party cookies in 2023. This is going to make it much harder to track users online and it’s something that brands need to think about this now – waiting isn’t an option.
From a Google Ads point of view, you want to ensure you have set up the Google Ads tag across your site and have enabled ‘Enhanced Conversions’, which ensures all conversions are tracked and allows you to monitor other actions such as ‘Add to Cart.’ This is relatively easy to set up, especially if you use ‘Google Tag Manager’.
It’s also vitally important that you build up your first-party data during this time as this is data you own and it can be used when targeting consumers that have provided your brand with their email address. Pattern’s own experience shows that by segmenting and using first-party data, you can see a 10% improvement in revenue and ROI.
A full-funnel approach is now more important than ever as consumers become more discerning and have more choices than ever of where to shop.
Pattern has seen success with Google Ads’ ‘Discovery Campaigns’ (image-based ads that appear on Google platforms such as Gmail and the Google app), which have driven success both from a traffic and revenue perspective.
The performance of these campaigns is significantly enhanced by adopting a segmented and nuanced approach to first-party data and incorporating these into your campaigns. Other options for a full-funnel approach include YouTube and testing bidding on keywords that are more representative of the research phase. (e.g. ‘best baby clothes’ for a baby clothes brand)
Earlier this year, Google announced that they were moving away from Smart Shopping and launched Performance Max. This is a new campaign type that incorporates features and placements from Smart Shopping but expands them onto other platforms such as Gmail but also alternative creative options, such as images and videos.
Since Google has already started automatically upgrading Smart Shopping campaigns to Performance Max, expect to see some fluctuations in the first 2 weeks following the switch over but results generally seem positive. We recommend upgrading sooner rather than later to limit any potential impact to peak period.
Peak period will be even more competitive than in 2021 and you’ll need your budgets to support this period, we recommend boosting budgets in October to start capturing that early peak traffic. As we enter November and the Cyber Period, start early and make sure you are capturing those consumers looking for early bargains, ensuring you are being nimble in your optimisations and reacting to the data that you are seeing.
Overall, peak period is vital to help drive your sales and by preparing early, you will see strong results and drive success for your brand. If you want to discuss how your brand can navigate this next peak period, contact us to discuss your options with our performance team now.
Entering the ecommerce landscape is a huge undertaking for any brand—it usually requires a large investment in resources and expertise to really be successful. Any brand can quickly get in over their heads trying to navigate the nuances of SEO, fulfillment and logistics, distribution control, listing optimization, and meeting the numerous other requirements and administrative tasks to show up well on marketplaces.
Unfortunately, because it’s so easy for third party, gray market, and unauthorized sellers to obtain and sell products online, many brands find themselves pressured to execute an ecommerce plan without the right resources to succeed on marketplaces and their other channels.
So, for brands looking to enter the ecommerce space or improve their current and future performance, it makes sense to partner with an ecommerce consultant.
Pattern’s global presence and proven success with hundreds of brands has allowed us to develop highly effective ecommerce consulting services. We can guide your brand to navigate issues both large and small in marketplaces worldwide. To maximize your ecommerce efforts, you’ll need to understand what an ecommerce consultant does and how to select one who drives the right value for your brand and products.
An ecommerce consultant is a specialist in the ecommerce space who can give you personalized guidance on how to market your products and grow their presence on digital marketplaces.
An ecommerce consultant should be able to analyze your brand, audience, category, opportunity, and current roadblocks and help you understand how to utilize your resources (or what resources are missing) to be most effective in capturing your opportunities in the ecommerce space.
Not sure how to evaluate a consultant? Here are 4 key attributes to look for as you make your choice.
At Pattern, we prioritize brand obsession for a reason—we know that a brand-centered mindset makes a crucial difference in the outcomes and results our partners achieve. So in our experience, when you begin your search for an ecommerce consultant, it’s important to look for a partner who is specialized in ecommerce, invested in the product, and passionate about helping brands build and improve their strategies. Typically, this means finding someone that consults exclusively for ecommerce marketplaces, rather than choosing a consultant who offers many different services.
It’s also important to avoid choosing a consulting partner who can’t deliver the right experience for your brand. The best indication of whether your potential consultant can do that is to review their history, data, and results with other brands. Ask if they’ve helped others in your selling category, if they’ve solved specific issues your brand is facing, and why they feel you are a good fit. The key is to leave the conversation feeling confident that you understand your consultants’ capabilities and whether or not they match up with your needs.
It’s best to pick a consultant who knows how to guide a brand onto and through multiple marketplaces worldwide. You’ll want to take a look at your long-term strategy and think about the regions and platforms you’re currently on and where you might want to take your brand in the future. If your consultant is truly great at what they do, they’ll be able to help you perform well enough with your current product roadmap that it’ll be a no-brainer to expand your presence at the right time.
The most effective partnership with an ecommerce consultant will be able to give you both recommendations and point you to solutions for making those changes in your planning, processes, and execution. Your time and money is valuable, so you want to make sure that you’re spending it as efficiently as possible as you follow your consultant’s advice. So, before you commit to an ecommerce consultant, ask about the resources and concrete solutions they typically recommend to the brands they work with.
Finding an ecommerce consultant that checks the boxes can be a difficult task. At Pattern, our entire focus and drive centers around giving brands the tools and resources they need to succeed on domestic and international ecommerce marketplaces.
With over 100 global ecommerce consultants across 10 global offices, we have the right tools to partner with brands across the world to achieve better ecommerce success. We give specialized advice, then make sure our partners have all the adequate SEO, social media, CRM, Amazon multi-channel fulfillment services, and ecommerce outsourcing services they need.
Interested in ecommerce consulting services? Set up a call here to learn what Pattern can do for your brand on global marketplaces.