For brands selling on Amazon, figuring out the right distribution strategy can be a painful and time-consuming task. Your choice should depend on a variety of factors—there is no single strategy that works best for every brand.
As a top exclusive 3P seller on Amazon, Pattern talks with hundreds of brands who are constantly reevaluating their ecommerce distribution strategy. To help brands make the right decision for their brand, we’ve put together a list of pros and cons of various distribution strategies.
Ecommerce Distribution Strategies
Here are the different distribution channels brands can choose from when selling on Amazon:
- Multiple Resellers & No Controls
- Brand Sells All Applicable Product Line 1P
- 1P/3P Hybrid
- Brand Operates Own 3P Storefront
- Exclusive 3P Seller
Pros and Cons of Ecommerce Distribution Strategies
The following chart describes the pros and cons that need to be evaluated when considering which distribution strategy is best for your brand.
|Distribution Strategy||Pros||Cons||Best Candidates|
|Multiple Resellers & No Controls||Requires no effort on the part of the brand.||Brand will have no control over its online sales, brand image, product quality or consumer experience. Brand will likely face a high degree of intrabrand competition, significant erosion of its value, and material channel conflict. Online sellers will have no incentive to invest in a brand’s growth.||Companies that have no real concern for long-term brand value (i.e. those selling highly commoditized, low margin, short life-cycle products and relying predominantly on raw sales volume as a success metric).|
|Brand Sells All Applicable Product Line 1P||Requires minimal brand involvement. Amazon will likely win the majority of sales in the channel given its ability to secure the greatest Buy Box percentage.||Brand is unable to have a meaningful MAP program, as Amazon will typically not follow MAP policies. Products are captive to dynamic pricing algorithms, which will benchmark off of unauthorized 3P sellers and other retailers, often automatically reducing price to keep Buy Box. This creates significant downward pressure on advertised prices and, over time, material erosion of brand equity. “CraP’d” products and frequent concessions demanded.||Companies that want to actively engage with Amazon’s platform and have no strategic need to preserve brand value over an extended timeframe for products at issue. Again, brands whose key metric is pure sales volumes. Best suited to companies selling high volume, short life-cycle products, and companies not susceptible to intrabrand competition.|
|1P/3P Hybrid||Affords the company the ability to insulate strategically important and/or new product launches through 3P distribution. More commoditized and pure volume plays can continue to be sold 1P.||Company will continue to face control challenges associated with IP products.||Companies that sell a differentiated mix of products, with some commoditized items and others that are more strategically important from a brand value and consumer perception perspective.|
|Brand Operates Own 3P Storefront||Highest margin in marketplace channel. Brand maintains full control of all marketplace activity.||Requires commitment of material internal and fulfillment infrastructure to maximize potential. Brand must realistically evaluate whether its internal resources are capable of driving equivalent performance on an expert 3P seller.||Companies with deep internal experience in marketplace sales and growth tactics, as well as the resources to execute on the same.|
|Exclusive 3P Seller||Company obtains a true “partner,” highly incentivized to protect and grow its brand. Ability to leverage true marketplace growth expertise. Typically respect MAP policies—company not subject to dynamic pricing algorithms. Company maintains control over brand image and presentation. Oftentimes companies can achieve growth well beyond current performance. MAP stability on Amazon channel.||Requires company’s dedication to restoring order to distribution channels and clearly defining how products may be sold in an authorized manner across channels. Brand must have a clear strategy for ensuring an authorized 3P seller is capable of winning the vast majority of the Buy Box.||Companies that desire a “partner” in marketplace channels to which to largely outsource marketplace management. Companies facing erosion of brand equity due to presence of unauthorized sellers, competing marketplaces, or other market dynamics. Companies seeking to materially increase sales on marketplace channels. Companies seeking to reduce channel conflict and protect long term brand value.|
For many companies seeking to maximize growth while protecting brand value, selling through an exclusive 3P seller often is the best Amazon distribution strategy.
This strategy can be the quickest way to resolve challenges associated with channel conflict, price erosion, and an overall lack of control in the channel, all while realizing improved growth metrics.
Partner with an Exclusive 3P Seller like Pattern
Many brands can significantly alleviate—if not solve—their biggest pain points on ecommerce marketplaces by moving towards a distribution strategy that works for them, which more often than not is an exclusive 3P strategy. By placing your products with a strong 3P seller on Amazon and conducting robust enforcement against remaining unauthorized sellers, brands can stabilize their brands on Amazon and across their other channels while realizing increased growth.
Pattern is a global exclusive 3P seller, data provider, and strategic partner. If your company is considering using an exclusive 3P seller, confused about the best go to market strategy for your products, or has marketplace challenges you want to solve with an E3P solution, get in touch today to learn what Pattern can do for your brand.