The Amazon rumor mill is running at full speed. But more alarming than the usual rumblings of mergers, buy-outs, and robots delivering your orders is one big closer-to-reality story: Amazon is getting ready to eliminate first party sellers.
In early 2019, Amazon sent shockwaves throughout the eCommerce world when it briefly stopped issuing thousands of POs to vendors.[1] The eCommerce giant told those brands to sign up for the brand registry, a move many linked to Amazon’s desire to eliminate vendors that aren’t profitable – especially those that sell low quality of counterfeit goods.[2]
The forecast, reignited by a report from Reuters this week, is that a new One Vendor platform is in the works, combining 1st party and 3rd party capabilities.[3]
But right now, first party sellers and third party sellers on Amazon have completely different platforms for selling and advertising. The core difference? Fulfillment responsibility – who takes on the risks of inventory, pricing, customer service, and shipping – Amazon or Brands. Generally, Amazon absorbs the bulk of the effort for 1P sellers. Naturally, they want all their Vendors to become self-service.
Still struggling with what that means? Let’s lay it out…
| Amazon 1st Party Vendor Central | Amazon 3rd Party Seller Central | Impact | |
|---|---|---|---|
| Inventory & Pricing | Amazon sets price and issues Purchase Orders for wholesale items based on sales, demand, and category considerations. Vendors fill purchase orders and must ensure products are available for purchase on Amazon. | Seller manages inventory and sets price. | There is potential for a significant impact on manufacturing, demand planning and inventory management for 1P vendors, which are traditionally not set up for real-time inventory. |
| Pricing & Fees | 4-10% COOP fees for manufacturers | 15% referral fee paid by seller to Amazon | Any fees paid to Amazon eats into revenue. Price point matters, especially with fulfillment costs in the mix. |
| Fulfillment | Amazon houses, packs and ships inventory. Manufacturers receive chargebacks for incorrect labels or packaging | Fulfilled By Amazon brands need to pay fees to store product and fulfill orders. Drop shipping requires brands to stock, pack, and ship themselves, avoiding fees but shouldering the costs themselves. | Most large brands don’t have drop-shipping capabilities due to volume issues. It can cost millions to adapt, but it will be worth it as online shopping adoption rates skyrocket. |
| Customer Service | Amazon is responsible for handling shipping or customer service issues. | All issues managed by individual sellers. They have the opportunity to communicate directly shoppers | The email capabilities on Seller Central are great for promotions and driving loyalty. There are penalties for not responding quickly to customer service issues (including getting removed from Amazon) |
| Advertising | Access to all Amazon Advertising Tools. | Access to Advertising tools is limited to Sponsored Product and Sponsored Brand ads. | Marketing products and brands can be a huge effort. Smart strategy, fluency in the platforms, and a team of content creators is a must-have for selling on Amazon. |
What Brands Can Do Right Now: Get both 1st Party and 3rd Party Access on Amazon
Sometimes brands have both 1st Party and 3rd Party accounts so they can provide customers with options and inventory that Amazon won’t purchase on the 1st Party side. Brands with their own 3rd Party presence can mitigate resellers denigrating their brand with bad customer experiences.
What does this all mean for mid-sized brands on Amazon in 2019?
Here’s the bottom line: Amazon is going to need more from your brand.
The eCommerce platform will increase their expectations for brands to managing fulfillment, marketing, and manufacturing – without help from Amazon. The burden to fulfill customer’s high shipping expectations will fall squarely on the brands – which could seriously eat into profits. If you don’t have help.
[SOURCES]
1Leigh, Andrea, Vendors snubbed by Amazon’s ordering system – it’s not me, it’s you, LinkedIn Blog, 2019 https://www.linkedin.com/pulse/vendors-snubbed-amazons-ordering-system-its-me-you-andrea-leigh/
2Milnes, Hilary, Amazon walks back vendor purge as sellers look to reduce dependence on the platform, Digiday Blog, 2019 https://digiday.com/retail/amazon-vendor-purge-sellers-reduce-dependence-platform/
3Soper, Spencer, Amazon Is Poised to Unleash a Long-Feared Purge of Small Suppliers, Bloomberg, 2019 https://www.bloomberg.com/news/articles/2019-05-28/amazon-is-poised-to-unleash-long-feared-purge-of-small-suppliers?srnd=premium
Steve Jobs once said “Always start with the customer experience, not with the technology.”
Sure…it’s maybe THE mostly commonly quoted quote for CX’ers.
Because it’s true. 73% of all people point to customer experience as an important factor in their purchasing decisions.[1]
Digital marketing and technology leaders often focus heavily on User Experience (or UX). No doubt that is a critical piece of designing a good product. But UX and CX are NOT one-in-the-same.
Customer Experience AND User Experience
It’s important to note – It’s never CX instead of UX. User Experience is a subset of the Customer Experience.
User Experience is about the product and how a consumer interacts with it. How to achieve a task with as little friction as possible. It is considered a piece of the over customer experience.
The Customer Experience encompasses the entire end-to-end brand experience – beyond digital, beyond marketing, beyond purchase. Every touchpoint that the user engages with during their journey. It’s any service, employee, representative, collateral, design, website, app, or that the customer interacts with at any stage in their journey before, after, and during purchase. Holistically, these things come together to create an experience.
CX is observable, measurable, and helps our iteration process. We observe the end-to-end customer experience, then pull meaningful conclusions from customer actions. From there, we can manage the experience according to brand objectives.
Plus it pays to pay attention to CX.
Customers Pay for a Good Experience
There is a value for good experiences. Customers would pay up to a 16% price premium on products and services that offer a quality experience.1 In the U.S., 65% of customers find a positive experience with a brand to be more influential than great advertising.1
Bringing CX and UX Together
Customer Experience and User Experience work together in a shared goal of creating connected, well designed experience. But UX doesn’t live in a bubble…just as good design or content shouldn’t be created without a strategic approach. You could design the hell out of the website and app, but if you don’t consider other CX touchpoints, you will never impact and improve the customer’s overall experience with your brand.
Putting the Customer First
The Scrum50 approach puts the customer at the center of our strategy. It’s a slightly different mindset than traditional marketing and advertising, which starts with the question “what do we want the audience to do?”
Instead, we ask “What does the consumer need?” This critical shift allows us to drive the experience with a consumer-centric based point of view. It lets us create meaningful experiences. That’s how loyalty and brand affinity are built – through connection, emotions and positive experiences along the customer journey.
The CX approach allow us to consider feedback, intent, and overall satisfaction in conjunction with the typical stats and conversion rates as success factors. It helps us test and learn to design better overall experiences.
The CX Difference
Is your brand considering the end-to-end customer experience? Let’s talk about how our Agile Marketing methods have helped major national brands reach and retain their customers through a holistic view of customer experience.
[1]PwC.com Report, Experience is Everything 2018
The sales and marketing worlds are colliding online. It’s a tumultuous and exciting time in your organization, but everyone is scrambling to figure out how to win on Amazon. Suddenly, the executive leadership is demanding significant growth in the eCommerce channel, Amazon didn’t send a PO last week and a brand manager is upset that an old logo is on a product page. Not to mention, there’s a random third party selling expired products and winning the Buy Box. What do you do first?
You’re going to need some help. Because going it alone is tough.
Here are just a handful of reasons partnering with an Amazon agency not only alleviates some of your pressure and workload, but makes the most strategic sense in an eCommerce channel that’s a constant moving target.
How to Sell an Amazon Agency in to Executive Leadership
The only constant on Amazon is change. Some agencies have full teams that just submit tickets, resolve issues, and dig through knowledge bases to solve problems that arise on a daily basis. Why isn’t that gallery image appearing? Why aren’t we winning the Buy Box? How do I create variations on Amazon? Why did a third party hijack my ASIN?
You can’t phone Amazon, but you can phone a friend—the next best thing.
By using an Amazon agency, you have access to a team of people who have already experienced and solved 90% of the issues you face on your own. Searching for solutions by Googling and digging through Amazon forums can get very time consuming. If an Amazon agency doesn’t know the answer, they have the manpower and contacts to quickly resolve a problem so you can focus on other things.
Would you bring your PR, Media or Print campaign work in-house? Just like any other channel, there’s an art and science to winning on Amazon. That’s a lot of responsibility (and pressure) to put on a small in house “eCommerce” team (or often, a single person). From logistics, to product setup, to content, keywords, pricing, and fulfillment, it takes a village to rise to the top.
It’s not enough to just get your product on Amazon. Successful brands on Amazon have internal people or teams that lead eCommerce functions, but have realized that adding an Amazon agency gives them the competitive edge. As a bonus, Amazon agencies save you time and money because they’ve mastered the nuances of the self-service model.
For the same reason that you hire a PR agency or a digital agency, an Amazon or eCommerce agency has the expertise, insights and resources to not just “get your products up on Amazon” but create a digital shelf that impacts the brand and drives sales. It’s been proven that the more (quality) imagery and valuable content provided during the shopping experience significantly impacts conversions.[1]
While your brand or digital agency might have the ability to upload images, they most likely don’t have the experience or understanding of unique Amazon shopper needs in your category. The strategies and tactics used offline (or not on eCommerce) are different, and investing in the right Amazon partner to create best-in-class content will pay dividends.
Before you can create and syndicate great eCommerce content, a manufacturer must ensure their assortment and availability is stable. If you’re a mid-to-large-size company, you’re most likely facing supply chain and inventory management challenges, the rectifying of which is required to win on Amazon. While your Amazon agency focuses on the digital experience, you’ll need to collaborate with sales, logistics, demand planning and last-mile delivery solutions to keep up with the new pull strategies required by Amazon. Do you have the right selection? Are people interested in buying? Can you keep it in stock? Can you get it to the consumer in 48 hours without melting or breaking?[2]
Did we mention Amazon changes every day? A great Amazon agency is already poised for coming changes, and will proactively provide solutions to avoid missteps and beat the competition. You can take advantage of what’s new and now on Amazon…and sometimes capabilities that haven’t even been widely released yet…with an Amazon agency that knows how to push the envelope and pull strings with elusive Amazon reps.
They’re experts on the latest Amazon best practices and can help optimize existing assets for Amazon or even create an Amazon testing environment for a brand, product or campaign. They can assess your ASINS, handle reporting, and provide Amazon success metrics. Amazon agencies at the top of their game possess a deep understanding of how different pieces of the Amazon puzzle click together to bolster clients’ efforts without breaking the bank…or a sweat.
A dedicated Amazon agency can also arm you with thought leadership and forward thinking strategy on a rolling basis in an often confusing and cluttered eCommerce space.
About CT Ad Agency Scrum50, an Amazon Agency that uses One-of-a-Kind Amazon Agile Methodology
Scrum50 is the first born agile advertising agency. Their mission is to marry world-class strategic creative with efficiency by embracing agile marketing approaches — employing shorter production sprints managed by uniquely-talented hybrid teams. They focus on three competency areas for clients: (1) Agency Services, (2) eBusiness, and (3) Digital Transformation.
[1]Lisac-Ramirez, Maria, The Sales Impact of Product Content, Salsify Transformers Blog, 2018 https://www.salsify.com/blog/the-sales-impact-of-product-content
[2]Pull Marketing Strategy, CFI https://corporatefinanceinstitute.com/resources/knowledge/strategy/pull-marketing-strategy/