BY ADAM BAKER
Iread with interest an article published on Pet Product News’ website titled “How Amazon Trumps Independent Retailers.” It outlined the challenges that indepen- dent retailers face as they try to compete against Amazon. Amazon offers two-day
free shipping (with Amazon Prime) and impossibly low prices, and it operates on ra-
zor-thin margins that would never sustain an independent retailer. Indeed, the biggest
threat to independent retailers is no longer the big-box stores—it’s Amazon.
But there’s another side to the story—“How Brands that Sell on Amazon Trump
Independent Retailers,” to be exact. We’re quick to point the finger at Amazon, but, in
truth, Amazon is simply a platform, and the rules of engagement are straightforward.
Pet supply brands are complicit in creating the challenges for independents. The way in
which brands sell on the Amazon platform is the real issue, and it reveals a company’s
larger distribution and lifecycle strategies. The purpose of this article is to take a look at
the Amazon opportunity from a brand point of view.
When a consumer buys a product from an independent pet retailer, that product is priced high enough to support the independent retailer, the distributor that sold it to them, the free shipping
to the distributor, the distributor trade show costs, the promotional discounts given by the brand and the salesperson/sales agency
that took a commission on the distributor sale. By contrast, when
consumers buy on Amazon, they are buying direct from the brand,
whose only costs are the Amazon fees and shipping costs. By eliminating several layers of the supply chain (middlemen), Amazon is
significantly more efficient.
This efficiency (aka cost savings) gives brands the ability to
heavily discount their products on Amazon, drive massive volume
and still make a higher profit than when they sell through the traditional distributor model. This is why Amazon is so attractive to
brands, but selling on the platform doesn’t come without risks and
PRICING AS A BRAND STRATEGY
Some brands choose the low-price/high-volume strategy because
their businesses are mature. They might already sell in most or all
of the independent retail accounts, and they are looking for ways
to continue growing top line revenue. The Amazon opportunity is
tantalizing, and its strategy is to “harvest” its brands, driving large
volume in increasingly broad distribution at lower pricing. Brands
like this are late-stage brands.
Other brands, such as mine (SodaPup), are young and have many
growth opportunities that don’t involve lowering price. Amazon is
not a platform that promotes brand storytelling, so our strategy is to
“invest” in pet specialty brick-and-mortar retailers who can help us
build brand awareness and who can educate consumers about our
premium-quality American-made products. By working with pet
specialty retailers, our company is able to maintain our price and
positioning, and grow our market share. Brands like SodaPup are at
the beginning of their lifecycle.
Each brand must decide what approach is best for its business.
SELLING “ON” AMAZON VERSUS SELLING “TO” AMAZON
There are several ways to sell on Amazon, and not all of them are
bad for independent pet specialty retailers. Three methods are sell to
Amazon, sell to an Amazon reseller or be the seller on the Amazon
The advantage of selling to Amazon is that it owns the inventory,
and it has an incentive to sell it. However, because Amazon owns
the inventory and it controls the platform, it has a strong incentive
to tilt the playing field to its advantage—and it does. Unlike a fine
art auction where participants bid up the price of a valued object, the
Amazon platform is designed to pit sellers against one another to bid
down the price. When Amazon is the seller, its algorithms continuously update pricing to ensure it is the lowest-priced seller of a product. It will win the “buy box” almost every time. When Amazon is
How Brands Can
Against Amazon S H U T T E R S T O
• Make a great impression.
• Keep customers coming back.
• Handle daily challenges.
• Pet Retail Basics
• Engaging Customers
• Customer Satisfaction
• Suggestive Selling
• Cashier Service Basics
It’s a breeze.
© 2017 PIDA