Attention Brand Owners: Be Careful Who You Sell To!
E-commerce and digital marketplaces, particularly behemoths like Amazon, have rapidly transformed the business landscape, offering brand owners unprecedented opportunities to reach a global audience. However, with opportunity comes caution. Not all sellers contribute positively to your brand's reputation and value chain. In this post, we're delving into why brand owners and manufacturers must be judicious about who they entrust with their products.
The Dark Side of E-Commerce Ease: Valueless Sellers
The rapid proliferation of online marketplaces has democratized the ability to sell, making it possible for virtually anyone to become a retailer. While this can lead to increased distribution channels for manufacturers and brand owners, it also opens the door to sellers who lack a commitment to providing value or even understanding the essence of the supply chain.
These 'valueless sellers' often take a short-term approach—prioritizing immediate profit over sustainable growth and customer satisfaction. This mindset poses a significant risk, not just to your one-time sales figures but, more importantly, to the long-term perception and success of your brand.
Bad Sellers Can Dilute Your Brand's Integrity
Your brand is tantamount to a promise—a commitment to quality, service, and experience. When bad sellers enter the fray, armed with a transactional outlook, they can add several levels of separation between you and your end consumers. What ensues is a potential degradation of customer service, a dilution of brand messaging, and even sub-par product handling—each capable of tarnishing your brand's image or even limiting your ability to take your product to market.
The Lack of Investment in Brand Success by Inauthentic Sellers
Building a brand isn’t merely a financial investment—it’s a holistic effort that encompasses marketing, quality control, customer service, and much more. Authentic sellers who believe in your brand will invest in marketing efforts, educate themselves and customers about your product's unique selling points, and ensure that their service levels uphold the brand's standards.
Contrastingly, bad sellers tend to eschew these considerations. They do not invest in the brand's success because their business model isn't based on fostering growth or ensuring sustainability. Their lack of investment is not just in marketing, but in the customer experience as well, which can lead to negative reviews and feedback—further injuring your brand.
Unnessesary Price Wars and Eroded Margins
With minimal financial investment and low overhead costs, many sellers can accept lower profit margins. This is further amplified by the availability of free repricing software provided by major marketplaces. However, it is important to consider the hidden costs of marketplace fees, fulfillment, storage, and shipping, which may be overlooked by inexperienced users. Additionally, new government and marketplace regulations on price gouging pose further challenges. Failing to navigate these complexities can lead to disastrous consequences, including the removal of your brand from the marketplace altogether.
Have you ever encountered a product on Amazon that is being sold for just $0.01? While this may appear to be an extreme case, Amazon has implemented measures to address such issues through its pricing monitoring system. But you might be wondering, how does this occur? In most instances, the seller compensates by charging a higher shipping fee. Repricers take into account the total price, while Amazon calculates shipping based on a weight value gathered from the community and the seller's designated shipping template. It can be quite confusing, right? That's why many sellers opt to offer free shipping on Amazon. However, this may not always be the most suitable choice for customers who are purchasing inexpensive items or items in bulk. Sellers sometimes list offers with inflated shipping rates, which allows automated repricers to lower the product price below the distribution cost.
When this happens, astute buyers, including other retailers and distributors, take advantage of the situation. Although the seller profits from each individual unit due to the shipping cost, the buyer who purchases in large quantities suddenly benefits from costs that are lower than the manufacturer's distributor prices. Traditionally, the harm caused to the brand would have been temporary, as the seller would eventually run out of stock or realize that they are selling the product at a loss. However, since the Covid-19 pandemic, marketplaces like Google Shopping and Amazon have become increasingly vigilant about potential price gouging. Therefore, the rapid decrease and correction in the average sale price can trigger price protection policies, ultimately leading to the removal of the product from the marketplace altogether.
Consider the following real-life scenario: Plexus™, a highly regarded plastic polish, has been widely used in the aviation industry for decades. I came across this product while working as a buyer for a private jet company. Our aircraft detailer strongly recommended using Plexus™, as they had firsthand experience with it during their time in the military, where they were responsible for cleaning Air Force aircraft, including Air Force One. Given its reputation, it made perfect sense for us, as a respected aviation supply resource, to stock this product.
Upon discovering more recent supply constraints, we promptly assigned an employee to source additional stock to support our valued customers. Regrettably, unbeknownst to our team, this individual exploited the situation for personal gain. They not only proceeded to establish a competing online store but also monopolized the available supply. In their haste, they launched into online channels and slashed prices below manufacturing costs, without comprehending the intricacies of specific marketplaces. Consequently, the average sale price of a unit of Plexus™, typically retailing for $35-$50, plummeted to a mere $9.78 on Amazon.
By the time the pricing error was rectified, it was too late. The product had already been flagged for violating price policies and offers were subsequently removed from the Amazon platform. Moreover, the remaining supply has become even scarcer and more expensive. Main suppliers like ourselves, Aircraft Spruce, and even Boeing Global Distribution are currently out of stock. Consequently, not only is the product no longer available through the most popular retail channels, but long-time customers are being forced to explore alternative options, thereby costing Plexus™ its loyal user base.
Crowd Sources Listing Control and Brand Representation
In recent years, marketplaces have made significant strides in improving brand representation. Amazon, in particular, has introduced its brand registry to safeguard the image of brand owners and empower their sellers. However, the process of listing a product on Amazon used to be quite simple, requiring only a UPC/EAN, a title, and a price. This resulted in numerous inaccuracies and duplications in the product catalog, as many sellers relied on product data feeds to contribute to Amazon's catalog. Often, products were listed with the wholesale supplier as the brand, making it challenging for brand owners to make corrections to landing pages. Moreover, Amazon would randomly prompt sellers to fill in missing information, leading to a lack of consistency in values. Consequently, incorrect data often went unnoticed outside of Amazon, and even values like pack count could change randomly over time.
Today, brand owners face a new challenge. While sellers are no longer able to list new products with brands they don't control, they can still list items with generic brands. This relatively new and revised feature allows sellers to list items that may be branded outside of the brand's control. Additionally, Amazon doesn't permit other sellers to generate offers on these landing pages or make changes to these generic listings.
Practical Steps to Protect Your Brand
As a brand owner, safeguarding your brand online should be a paramount concern. Here are some actionable strategies:
- Thoroughly vet potential resellers: Before granting distribution rights to new sellers, conduct a comprehensive background check to ensure they align with your brand values and uphold your commitment to quality.
- Enforce stringent seller guidelines: Implement and uphold policies that dictate how your products should be marketed and serviced.
- Establish a clear pricing policy: Clearly outline and communicate your pricing policy to maintain consistent value propositions across all channels.
- Monitor online activity: Keep a vigilant watch on where and how your products are being sold, and by whom. Consider utilizing brand protection services, if necessary.
- Foster close communication and educate your retail partners: Maintain open lines of communication with your retail partners and educate them about your brand's values and goals.
- Educate consumers: Empower your customers with knowledge to distinguish between authentic sellers and opportunistic ones, encouraging them to make purchases through approved channels.
In an era where anyone can sell online, brand owners must be more vigilant than ever. The accessibility of the e-commerce world presents both opportunities and threats. Selecting the right partners to sell your products is not merely a logistical consideration; it can determine the fate of your brand in the vast digital landscape.
Remember: every seller who carries your product acts as an ambassador for your brand. Choose these ambassadors wisely, as they can either elevate your brand to new heights or become burdens that weigh it down. Safeguard your brand's integrity, monitor its online presence, and remain true to the values that set your brand apart in the marketplace. Your diligence will yield dividends in the form of a stronger brand reputation and a healthier bottom line.
At Pilots HQ, we strive to be a value-adding distributor and retail partner. That's why we offer a comprehensive range of marketplace consulting services, including product listing and detail page management, marketing, policy consulting, and brand and trademark policing.