Currently operating in 14 countries worldwide, Amazon’s dominant position for ecommerce sales means that every brand should consider having a strategy for the marketplace. With plenty of signs pointing to the imminent launch of the marketplace in Poland and the Nordics, we thought it would be useful to outline what brands should consider as Amazon expands into new markets.
From deciding whether your products should be sold on Amazon, to optimising your channel strategy for a successful launch, we’ve answered some of the most commonly asked questions to help define your marketplace strategy.
Should you sell your product on Amazon?
First and foremost, consider whether your brand will benefit from having a marketplace presence. Whilst Amazon’s audience and reach is vast, not all products or categories resonate on the marketplace’s notoriously rigid layouts and clinical environment.
As Amazon expands into new markets, it’s worth judging how well the marketplace has performed in markets that may be similar to yours, plus how well your category traditionally performs on the marketplace. Assessing your category dynamics – is it convenience-focused or more lifestyle-oriented – will help with understanding if the experience and environment that Amazon provides is right for your brand.
Our infographic report provides more information on the differences in customer behaviour and Amazon’s offer in 12 countries around the world, including the top selling categories per market.
What impact will selling on Amazon have on your overall channel strategy?
Each sales channel has strengths and weaknesses. Undertaking a market mapping exercise to assess the strengths and weaknesses of your omni-channel partners, pureplay partners and online marketplaces can help you to understand who you should work with, and how you should work with them.
It will also give you an insight into how the channels all fit together. The exercise should identify if there is a gap in your retail strategy that could be filled as Amazon expands into new markets, or if you will be required to rethink how you work with certain retail channels in order to ‘fit’ Amazon into your retail landscape.
We recommend defining the role marketplaces can play in your channel strategy as this will go some way to ensuring that you meet your business objectives. The role of marketplaces isn’t always just sales – it can vary from increasing your brand awareness and equity, to building a defence strategy or as a shortcut to internationalisation.
How do you sell profitably on Amazon?
Once you have agreed the role that Amazon could play in your retail strategy, it’s crucial you determine which sales model works best for your brand. The two core methods for selling on Amazon – selling directly to Amazon as a Vendor or as a third-party Seller – are very different and brands should consider the best path for them before choosing one or the other.
This might differ by market. For example, Amazon entered the Israeli market by opening up Amazon.com to Israeli sellers who could do their own local fulfilment of orders. Other new markets may open up in this way before Amazon decides whether to invest in local infrastructure to provide Fulfilment by Amazon services. Large global brands will need a local seller to list their products and fulfil orders in market, unless they are prepared to do it themselves.
Likewise, choosing a ranging strategy that works in line with your other retail partners’ activity is vital. Your main objective should always positively impact your overall performance so that as Amazon expands into new markets, you aren’t cannibalising sales from your existing channels and negatively impacting profitability.
How to set up your business as Amazon expands into new markets?
If you’ve concluded that selling on Amazon could contribute to your business, you will most likely be thinking about how to do this operationally.
Working with Amazon is very different to working with other retail partners. Common frustrations include the complexity of managing logistics, high distribution costs and financial penalties, the need for continual optimisation and the heavy resource required to manage the channel.
To combat these issues, ensure you have the right team with the right skill set to manage your Amazon presence, or alternatively consider employing expert interim staff that can help you to better ‘win’ on the marketplace.
Whether your strategy is to work with Amazon, to compete against it or co-exist, the brands who are thriving in this digital era consider their position on the marketplace carefully and review it regularly.