Disruption is happening across all industries, and companies that are unwilling to adapt run the risk of being edged out. And there’s no denying Amazon’s role in this.
According to one report, the retail giant recently took the No. 1 spot in CE retail sales from Best Buy, despite Best Buy’s continuous 8.5 percent growth year over year. [Amazon ranked second, more than $2 billion behind Best Buy, on TWICE’s most recent Top 100 CE Retailers report.] In fact, Amazon’s CE sales outgrew the e-tailer’s profits at a whopping 18.5 percent in the same timeframe, with $5.3 billion in sales.
If there were ever a time to sell — or optimize — with Amazon, now would be it. Furthermore, CE and computers make up more than a quarter of all Amazon retail sales, presenting an incredible opportunity for tech brands specifically. Here’s what you need to know to be successful.
Tip 1: Decide if 1P or 3P is right for your brand
There are a few different ways that you can sell through Amazon: first party (1P), third party (3P), and a third option that combines the two.
Ultimately, 1P is most similar to a wholesale relationship for a manufacturer, and 3P is more similar to the typical direct-to-consumer (DTC) route. In the hybrid approach, brands can decide to manage both a 1P and a 3P relationship. While it may sound ambitious, this approach gives brands increased access to Amazon’s loyal customers.
So, which option should you choose? Start with a pros and cons list of each strategy, and align your approach with the relationship that makes the most sense for your brand goals.
Tip 2: Make sure your pricing is consistent
Every manufacturer should have a minimum advertised price (MAP), and the truly influential brands never allow resellers to waver on this number.
Related: Mapping Out A Map Strategy
Bose is one such brand that maintains ultimate control over its dealers and how it’s perceived in the marketplace through pricing. No matter where you go to buy Bose headphones, you’ll always find the product selling at essentially the same price across all channels — including the brand’s own DTC channel and Amazon.
How does Bose do this? By providing a superior product that consumers love, and by effectively managing dealer relationships, including Amazon.
Tip 3: Understand Seller Fulfilled Prime
Seller Fulfilled Prime (SFP) allows individual sellers to ship products directly from their warehouse to Amazon Prime members and to display the Amazon Prime badge. Most importantly, it offers significant exposure for sellers who are part of the program.
On average, Prime members spend almost twice as much money on annual purchases compared to their non-Prime counterparts and are actively searching for the Prime badge. Because of this, Amazon predicts that SFP sellers will see a 30 to 40 percent jump in sales.
See: What Makes Prime Shoppers Tick
As one of the first companies eligible to be a part of the program, we’ve seen firsthand the incredible value SFP can bring to brands, including a European CE vendor that more than doubled its monthly average sales.
Tip 4: Build a strong brand
When you’ve created a brand experience that Amazon can’t replicate, you’ll have more leverage.
What do we mean by a strong brand? Strong brands:
- have loyal fanbases;
- have created a brand experience that can’t be replicated; and
- can meet consumer demand on their own.
Strong brands are extremely attractive to Amazon, so Amazon is willing to give a little more to get them to sell on its site. Additionally, because these brands are strong on their own, they’re not at the mercy of Amazon and have more leverage when it comes to negotiating the terms of the relationship with the retail giant.
Selling direct to consumer is the best way to create a strong brand experience and stand on your own. While this option is not always straightforward or simple, working with an established partner can help.
- What Tech Brands Need To Know About Doing Business With Amazon - March 12, 2019