How to Handle Existing Distributor Relationships While Transitioning to an Exclusive Seller

John LeBaron

January 13, 2021

Amazon is designed to work best for exclusive seller relationships. When multiple distributors are fighting for a single product’s Buy Box, things get messy and chaotic, and you start to see problems like price erosion, loss of control, and customer dissatisfaction.

The solution should be simple then, right? Companies should just start working with competent partners, cut off their inventory from other sellers, and leave behind the days of a chaotic Buy Box? Not so fast. While working with one distributor is the ideal situation for brands wanting to maximize their performance on Amazon, it’s tricky to cut off existing, loyal distributor relationships to make that happen.

You can avoid backlash for cutting off loyal distributors

A brand may face backlash if it suddenly stops selling its products to its loyal distributors to switch to an exclusive seller relationship. In many cases, these distributors started selling the brand’s products in brick-and-mortar storefronts before starting to sell them on Amazon. Distributors could be largely responsible for the brand’s present-day success, and it doesn’t sit right with brands to repay distributors for their loyalty by cutting them off and slashing their revenue.

It’s a complicated situation that many brands find themselves facing. Even though switching to a single Amazon seller is best for the brand and the consumer in the long run, it’s tempting to put it off to avoid any conflict with loyal distributors—especially if these distributors are still selling the product in brick-and-mortar stores (and could easily stop selling it if they’re upset with the brand.)

Handling this situation well will require forethought and strategy, but we believe that brands can switch to an exclusive seller relationship without having to sacrifice the relationships that they’ve spent years establishing with existing distributors. Below are four tips to help you handle this awkward situation so everyone—including your brand, your previous distributors, and your consumers—is happy in the end.

1. Set up a transition period

Many brands opt to set up a transition period so they can warn their distributors of the upcoming change and give them time to adjust to the news. Brands can use this time to optimize their channels by polishing their listings, updating their ad spend, and standardizing their pricing and customer service.

It’s a good idea to give your distributors sufficient notice about your decision to transition to a single seller—a season or two would be best—and explain to them your reasoning for doing so, including the many benefits to both your business and theirs. You may tell them that switching will help you create a more consistent buyer experience, streamline the return process, and make it easier to keep inventory available and prices consistent.

If you have Amazon distributors who also sell your product in their brick-and-mortar stores, tell them how they can benefit from this decision even if they won’t be selling your product on Amazon anymore. When your brand works with a single distributor, prices stay more consistent. This means that customers won’t be walking into their brick-and-mortar stores, finding the product they want for cheaper on Amazon (likely due to the price erosion caused by having multiple sellers), and opting to buy it online instead. Yes, they’ll no longer generate revenue from selling your product on Amazon, but they’ll likely increase their sales of your product in-store.

2. Consider profit-sharing a portion of your revenue

Some brands who transition to a single Amazon seller may go as far as profit-sharing a portion of the proceeds from their channel with their top distributors. This replaces some of the distributors’ lost revenue while also simplifying the distributors’ business operations, since they don’t need to worry about handling Amazon listings and distribution for your products anymore.

Even though this may not be a viable option for all brands, it may be worth it in some situations. Brands benefit from the local representation they get when brick-and-mortar stores carry their products. Consumers may go to a storefront to learn more about a product, try it on, or see how they like it in person before finally deciding to purchase it on Amazon. If distributors are regionally based, your brand could regionally share profits from Amazon sales with those distributors.

It may also be helpful to allow distributors to continue selling your product on marketplaces like eBay, Walmart, or Target even while you transition to a single seller on Amazon. You can explain that Amazon US is so important for your brand that you’ve decided to work with a specialist to maximize your success on the platform, but that they’re welcome to continue selling your products on other marketplaces.

3. Divide the assortment up and give each distributor an exclusive segment

While the ideal situation is to turn over your company’s entire inventory to one seller, it’s still a step in the right direction to divide your inventory and give each of your distributors an exclusive segment to sell. That way, you’re reducing the issues of managing a network of sellers without damaging your relationship with your distributors or drastically reducing their Amazon revenue associated with your brand.

Explain to the distributors that it just isn’t efficient to sell your whole catalog to them anymore, but that they can have exclusivity on one segment of your assortment. You can encourage the distributors to do their very best with their exclusive assortment, which helps you function at the highest level on Amazon while eliminating the fight for the Buy Box.

4. Give retailers promo dollars based on performance

If dividing up your assortment isn’t right for your brand and you want to fully transition to one seller, you can still offer other olive branches to your distributors in the form of samples, rebates, or other incentives. These programs can serve to thank your distributors for their consistent loyalty and partnership.

Distributor rebate programs offer distributors money back when they meet certain requirements or goals related to loyalty, order size, or any other metric. You can also start customer rebate programs that encourage consumers to buy your products, which in turn makes it easier for distributors to sell said products. Both types of rebate programs can help maintain your delicate relationship with your distributors while also improving your product sales in their stores.

SPIFFs (Sales Performance Incentive Funds) are another type of incentive you can offer to your distributors. According to Channel Mechanics, these short-term incentives can include dollar rewards, prizes, or loyalty points. You can offer them to reward any type of behavior you’d like, but the main goal is to increase your product’s sales.

Ready to start the transition?

It can be intimidating to transition to an exclusive seller relationship on Amazon when it’s important for your brand to maintain a positive working relationship with distributors. But that doesn’t mean you’re doomed to deal with the drawbacks of multiple sellers forever. With a little bit of tact and planning, it’s possible to maximize your Amazon presence with an exclusive seller relationship without jeopardizing your relationship with your existing distribution network.

Keep in mind that it does little for your brand to switch to a single seller unless that seller is experienced and committed to your brand. Otherwise, it can be risky—you don’t want to put all of your hard-earned eggs in an unreliable basket. This is where Pattern can help. We’re a best-in-class marketplace seller, and we’re eager to use our data and expertise to help you take your brand to the next level. Contact us using the form below to learn more.

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Sept 6, 2022

Global Ecommerce Weekly News: 6th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon announces new inventory and distribution service, AWD Amazon has launched Amazon Warehousing and Distribution (AWD), providing inventory and distribution services to its sellers as a means of addressing current supply chain issues. AWD is now available for sellers using Fulfilment by Amazon (FBA), i.e. outsourcing their fulfilment to the platform. Amazon has plans to expand the service outside the platform in 2023. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/02/amazon-introduces-new-service-to-help-solve-supply-chain-challenges/) Amazon Web Services (AWS) launches in the UAE AWS, Amazon’s cloud-computing platform offering, has launched its second region in the Middle East and now provides its services in the UAE. The move will now allow anyone in the UAE who utilises cloud technologies to harness AWS’s advanced platforms and APIs. An estimated $11 billion USD is expected to be added to the UAE’s GDP thanks to the implementation, with an average of 6,000 external vendor jobs to be created annually. AWS is now available in 87 zones across 27 regions, with sights set on expanding further across Australia, Canada, India, Israel, New Zealand, Spain, and Switzerland. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/30/amazon-web-services-launches-region-in-uae/) --- Other Marketplace News --- Lazada to launch in Europe Alibaba-owned ecommerce platform Lazada is set to launch in Europe, marking a refreshed internationalisation push from the company. The move follows toughening economic conditions and performance in Southeast Asia, advancing the need to tap overseas markets. In Europe, Lazada will face tough competition from giants like Amazon and Zalando. Lazada’s exact entry strategy is to be confirmed and will be reliant on macroeconomic and market conditions, according to Lazada CEO James Dong. [Read more on DigitalCommerce360](https://www.digitalcommerce360.com/2022/09/01/alibabas-lazada-to-take-on-amazon-zalando-in-europe-push/) Chinese ecommerce giant Pinduoduo to launch cross-border platform in the United States Pinduoduo, a Chinese ecommerce giant rivalling Alibaba and JD, has announced it will be launching a new cross-border ecommerce platform. The marketplace is set to launch in the United States next month, as part of the company’s larger push into new markets. Pinduoduo found success in China thanks to its rock-bottom price offerings and harnessing of social commerce marketing, emulating strategies similar to fast-fashion giant Shein. [Read more on Yahoo Finance](https://uk.finance.yahoo.com/news/pinduoduo-launch-international-e-commerce-034129263.html) Alibaba launches its biggest B2B sales event, ‘Super September’ China ecommerce giant, Alibaba, has now launched its month-long B2B sales event ‘Super September’. The event provides 40 million buyers and 200,000 suppliers with the ability to connect on the platform, showcasing a ‘virtually unlimited’ number of products. The event hopes to foster new cross-border business relationships to tackle supply chain challenges currently faced by businesses. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/01/alibaba-launches-super-september-b2b-sales-event/) --- Other Ecommerce News --- Klarna’s losses quadruple in first half of 2022 BNPL provider, Klarna, has reported losses of $581 million USD for the first half of 2022. This figure is almost four times larger than a year earlier, where $129 million USD in losses were reported. The company attributes the losses to employee costs, technology investments, and rising credit losses. Klarna’s figure reporting comes amidst worsening economic conditions, fresh legal and regulatory scrutiny, and pressure from Big Tech competitors. [Read more on The Financial Times](https://www.ft.com/content/483451db-9221-4ca4-83a6-b4ddc6bfcfbb) [Read more on the Guardian](https://www.theguardian.com/business/2022/aug/31/klarna-losses-more-than-triple-as-consumer-spending-slows) One fifth of Snap employees to be laid off amidst poor financial performance Social media platform Snap (‘Snapchat’) has announced it will be laying off 20% of its employees and closing out a number of projects following a year of poor financial results.The move will see 1,200 employees globally lose their jobs, saving the company an estimated $500 million USD in costs. Snap is currently valued at $20 billion, an 84% decrease from its valuation of $130 billion last year. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/01/snap-to-lay-off-20-of-its-workforce-and-wind-down-a-number-of-projects/)
Aug 30, 2022

Global Ecommerce Weekly News: 30th August 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon set to shut down Amazon Care Amazon is closing its telehealth service, Amazon Care, which launched in 2019 as a trial program for its headquartered employees. Later the service was rolled out nationwide for employees and other companies. The ecommerce giant has now made the decision to move away from the healthcare space, believing it was not the right long-term solution for its enterprise customers. [Read more on CNBC](https://www.cnbc.com/2022/08/24/amazon-is-shutting-down-amazon-care-telehealth-service.html) Peloton closes new deal to sell on Amazon Following a recent deal, Amazon customers will soon be able to buy Peloton fitness equipment on the marketplace, marking Peleton’s first move outside a direct-to-consumer model. According to Peloton’s CCO, there are already around half a million searches on Amazon for Peloton products every month, despite having no presence on the marketplace. Some key products include the original Peloton Bike, retailing for $1,445 and Peloton Guide for $295. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/24/peloton-strikes-deal-to-sell-fitness-equipment-on-amazon/) --- Other Marketplace News --- 60% of Malaysians are buying from local sellers on Shopee A recent survey of nearly 3,500 respondents found that nearly half of the shoppers prefer to purchase from local sellers due to shorter delivery times. Other shoppers decide to shop locally due to the quality of the products made in Malaysia and an interest in keeping the economy running. As a result, smaller local merchants have been able to grow their businesses, and shoppers benefit from shorter delivery times, products of high quality and supporting local businesses. [Read more on The Malaysian Reserve](https://themalaysianreserve.com/2022/08/25/around-60-malaysians-are-buying-from-local-sellers-on-shopee/) Flipkart’s social commerce platform Shopsy crosses 100 million users Flipkart launched a social commerce arm, Shopsy, in July of last year, which has now surpassed 100 million users, ahead of its target timeline being the end of 2022. This acquisition of new users has made Shopsy one of the largest platforms of its kind in the country, and is expected to onboard a further 100 million by the end of 2023. The platform is centred around boosting local entrepreneurship and powering ecommerce for consumers across tier 2+ regions where users face challenges around trust and navigation when shopping online. [Read more on Business Standard](https://www.business-standard.com/article/companies/flipkart-s-social-commerce-platform-shopsy-hits-100-million-users-1220828006851.html) Meta joins Amazon and Walmart in bid for Indian ecommerce market Amazon mentioned earlier in the year that it would be building a logistics division in-house through its purchase of a 51% stake in Ecom Express, an end-to-end logistics firm, to make ecommerce deliveries more efficient in the country. Walmart operates Flipkart in India and is set to continue its investment in the marketplace. In an effort to compete in the Indian ecommerce market, Meta has partnered with Indian ecommerce company, JioMart, to offer customers a grocery shopping platform within its WhatsApp chat feature. [Read more on Pymnts](https://www.pymnts.com/news/retail/2022/meta-joins-amazon-walmart-indian-ecommerce-market/) --- Other Ecommerce News --- Ecommerce in Spain worth €57.7 billion in 2021 Spanish ecommerce saw 11.7% growth compared to last year, largely attributed to cross-border sales. In the final quarter of 2021, ecommerce sales in Spain were at €16.9 billion euros, at least 60% of which came from cross-border sales. Transactions from foreign locations to Spain generated a turnover of €1.56 billion in Q4, a growth of 27.7% compared to Q4 a year before. [Read more on Ecommerce News](https://ecommercenews.eu/ecommerce-in-spain-was-worth-e57-7-billion-in-2021/)
Aug 23, 2022

Global Ecommerce Weekly News: 23rd August 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon to add mental health support to primary-care service Amazon is set to move into mental health therapy with its primary-care division, following its recent acquisition deal of One Medical. The plan is to partner with virtual behavioural therapy service, Ginger, to offer its Amazon Care users with on-demand access to mental health services, licensed therapists and psychiatrists. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/11/amazon-plans-to-add-mental-health-support-to-primary-care-service/) GMB union calls for £15 an hour minimum pay at UK Amazon warehouses Amazon recently offered its warehouse workers a 3% pay rise, which in comparison to the June inflation rate of 9.4% left employees disappointed. Following this, hundreds of Amazon warehouse workers stopped work last week, protesting against the minimal pay increase, seeking a minimum of £15 an hour. Recent protests consisting of employee walkouts and sit-ins aim to get a better offer out of Amazon. [Read more on The Guardian](https://www.theguardian.com/technology/2022/aug/09/gmb-calls-for-15-an-hour-minimum-pay-at-amazon-warehouses-in-uk) Amazon third-party sellers have received their first-ever holiday fee hike Amazon’s third-party marketplaces account for close to half of the company’s online sales. The company introduced a 5% fuel and inflation charge to its third-party sellers earlier this year, and has now implemented another inflation increase charge. Commencing 14 October, any seller who uses Amazon’s fulfilment service is subject to the price hike, which is set to be an additional 35 cents per item for products sold in the US and Canada. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/17/amazon-third-party-sellers-have-received-their-first-ever-holiday-fee-hike/) Amazon puts a pause on UK grocery shop roll-out as the cost of living increases Amazon has slowed down on its UK roll-out of till-free Amazon Fresh grocery stores following disappointing sales and the rise in cost of living. Allegedly, the company is no longer looking for potential sites to expand and if more stores are opened, they will likely no longer use a till-free system, as consumers become more cautious about spending. [Read more on The Telegraph](https://www.telegraph.co.uk/business/2022/08/21/amazon-pauses-uk-grocery-shop-roll-out-following-disappointing/) --- Other Marketplace News --- Shopee overtakes Alibaba across international markets Shopee has surpassed Alibaba and taken the top spot for sales outside of China. Singapore-based marketplace saw a year-on-year increase of 51.4% at the end of Q2 of this year, while Alibaba saw a 3% drop during the same time period. This can be seen as a promising development for start-ups and their ability to compete with some of the largest ecommerce giants in the market. [Read more on Exchange Wire](https://www.exchangewire.com/blog/2022/08/18/shopee-surpasses-alibaba-in-international-sales-amazon-searches-for-entertainment-exec/) H&M reopens its official store to Alibaba’s Tmall ecommerce platform It has been nearly 18 months since Alibaba removed H&M from its Tmall platform, following H&M’s criticism of human rights abuses in Xinjiang. It is estimated that over a million people, predominantly minorities in the area, have been unlawfully detained in camps across the city. Brands including Nike, Adidas, Burberry and Converse were swept up in the controversy, however H&M was one of the first to be targeted for speaking out about the issue. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/16/hm-returns-to-alibabas-tmall-platform-16-months-after-xinjiang-controversy/) Klarna launches new feature allowing UK consumers to view full online order history Buy-now-pay-later company, Klarna, has launched a new feature on its shopping app, which allows UK consumers to view their full online order history, regardless of whether they purchased the product using Klarna. The feature also shows delivery tracking and aids consumers in managing their online purchases more conveniently. [Read more on The Industry](https://www.theindustry.fashion/klarna-launches-new-feature-allowing-uk-consumers-to-view-full-online-order-history/) --- Other Ecommerce News --- Online marketplaces responsible for £280 billion business turnover in the UK Nearly 900,000 UK businesses are currently selling on online marketplaces, generating an estimated £282 billion worth of sales each year. This figure represents 6% of the UK’s annual business turnover, highlighting the notable contribution that marketplaces make to the UK economy, along with the potential for further growth in this area. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/09/online-marketplaces-responsible-for-280-billion-business-turnover-in-uk/)