From its humble origins as an online bookseller, Amazon has already ridden the rise of e-commerce. According to new research, though, it’s on track to overtake Walmart as the largest retailer in the US by 2025. By then, Amazon will also account for nearly two-thirds of the estimated $1 trillion in online consumer goods sales.
For consumers, it makes sense: with one-click ordering, access to products from over 8 million sellers, fast shipping, and (often) the best price, buying on Amazon is an easy choice.
It’s not as easy for sellers, though. Yes, Amazon opens the door to millions of additional buyers, but it controls the marketplace and introduces new competitive pressure. It’s important to protect your brand on Amazon, especially from third-party sellers that can undercut your sales or damage your brand loyalty. There’s more, though: retail arbitrage is an ecommerce business model that’s growing rapidly, and it’s important to understand it and protect your brand against it. Put simply, retail arbitrage is when people buy retail products (online or in person) and resell them on Amazon and other online marketplaces for a higher profit. It’s happening all the time, to brands that are sold regularly on Amazon as well as those that are restricted—which means that they’re not to be sold on Amazon.
Because third-party sellers and retail arbitrage are widespread, you must have visibility into your product and brand portfolio. This is where the performance analytics Line Item can be essential for monitoring your e-analytics to protect your portfolio. Let’s look at why.
Amazon third-party sellers
Third-party sellers are growth drivers within a rapidly growing market. In fact, according to research from Planet Retail RNG, third-party sellers on Amazon already account for more than half of all sales—and by 2022 will account for as much as $130 billion of total gross merchandise value on the platform. This means they are a force you can’t ignore—and more sellers open accounts every day.
Before looking further at the risks, let’s define terms. First-party sellers are brand manufacturers that sell their inventory directly to Amazon. Amazon then sells to customers. Second-party sellers are Amazon suppliers that are not the product’s manufacturer; Amazon often relies on second-party sellers to buffer inventory. Third-party sellers strategically use Amazon as a marketplace for direct-to-consumer sales.
Amazon buyers may be indifferent about purchasing from these different types of sellers. But brand manufacturers are not. Think of it this way: every third-party sale of your products is a sale you lost out on. And these sales are only projected to grow. Why? It’s become very easy to resell on Amazon. All you need is an Amazon Seller account and products to sell. To make it even easier to net a profit, there are price-tracking apps that give resellers real-time info simply by scanning or entering product codes.
Third-party seller risks to your brand
Third-party sellers can cost your brand, so monitoring and acting on any activity is critical. The risks include:
- Unauthorized sales
- Price undercuts
- Losing the buy box
- Lower search results, ranks, and conversions
- Losing control of your curated detail page because of Amazon Fulfillment Center out-of-stocks
- Quality problems with selling condition
- Erosion of brand equity and consumer loyalty
Restricted brands
Amazon tries to control counterfeiting through restricting certain brands or even certain products on Amazon. But third-party sellers have found many ways around this, so even if your brand or product is restricted on Amazon, that doesn’t mean it isn’t being sold.
What brands can do about third-party activity
CPG and e-commerce brands must understand the scope of any third-party sales on Amazon and other platforms. To tightly control the supply chain, you must evaluate:
- How many resellers will your brand authorize, who are they, and on what retail sites are they selling
- Whether authorized resellers are upholding your brand, including product quality, customer service, and pricing
- If customer reviews are trending negatively, including unaddressed customer service needs that may ultimately damage consumer confidence—and your brand.
Line Item can help by identifying third-party activity as well as verifying pricing, including list price, selling price, and price undercutting. Let’s look at how Line Item can help when it comes to third-party activity on Amazon.
- Line Item can help you identify new, unauthorized third-party activity on Amazon.
- Line Item can track e-analytics related to item pricing, helping you understand if your products are under- or overpriced, or when a third-party seller undercuts your price.
- Line Item captures e-analytics including e-tailer, review score and count, selling price and more, so you can gain visibility via a single platform into every aspect of your online sales.
- Line Item can identify if your reviews are letting you down, giving you insight that can help you address brand loyalty and consumer confidence for online sales.
- Line Item can tell you if out-of-stocks are hurting your revenue, helping you track inventory to retain greater control over your sales, curated detail page, and more.
With Amazon on track to take over as king of global retail, now is the time to put the right safeguards for your brand in place. It’s not just about Amazon sales; with Amazon a major driver of online sales beyond the platform, it’s about ensuring your brand viability and sales across all online channels. This is where Line Item can be a game-changer for your Amazon and online sales, helping you protect your brand from third-party seller risks and giving you e-analytics insight to grow your loyalty alongside your sales.
