A Brand’s Dilemma with Selling Through a Distributor on Amazon
More than 1 million new sellers joined Amazon in 2018 alone. Competition on the channel continues to increase and the battle for the Buy Box is more intense than ever before. When a brand has products that aren’t profitable, selling through a distributor on Amazon can be a solution. Continue reading to learn more about the common dilemma brands face and what to consider throughout the process.
Why Do Brands Sell Through a Distributor Instead of Directly on Amazon?
There are cases where brands have products in their catalog that aren’t performing as expected. In some cases, it may make sense to take a closer look at these products, and the catalog as a whole, to evaluate the root of the problem and the best path forward.
However, this is where the dilemma can come in; due to Amazon’s pricing terms, many brands make more money when selling through a distributor that also sells on Amazon, rather than selling directly to Amazon. It may seem like a no-brainer and a simple business decision. However, there are many variables to consider before committing to selling through a distributor.
What Problems Does Selling Through a Distributor Cause?
A common problem for larger brands that sell on Amazon and also sell through a distributor, is competition with their own products. Distributors have more flexibility to offer steep discounts, especially when brands don’t have a Minimum Advertised Price (MAP) policy in place. Because of this, distributors can discount products to a price point unattainable for brands. As a result, it’s important for brands to decide which products it makes sense to sell through a distributor and which are best to sell directly through Amazon. The team at Marketplace Strategy helps clients make this distinction on an ASIN by ASIN basis to avoid product overlap and competition.
Another caveat to selling through a distributor is the lack of support and oversight products and listings will receive. Distributors usually don’t place a heavy focus on technical optimization or creative. So, sales and traffic can decrease as a result. To overcome this, brands have to take on the responsibility of supporting the distributor by providing them with creative assets, copy, and monetary investment.
Despite these complex challenges, sometimes selling through a distributor on Amazon is the best option.
How Can Marketplace Strategy Help Brands That Face This Dilemma?
At Marketplace Strategy, we have supported several clients considering whether selling through a distributor on Amazon was the right move strategically. As our clients’ partner, we helped them evaluate the viability of each product in their catalog.
Our strategists contributed to conversations and led them to decisions that made sense for their overall business. For clients that decided to pursue this path to profitability, we provided guidance and insight into where to focus moving forward to maintain the ideal control over the catalog.
The support and expertise of a full-time team were important throughout the process. Marketplace Strategy also has the privilege of leveraging our agency partnership with Amazon to evaluate the implications of each decision along the way.
If your brand could use support from a strategic partner to make decisions regarding whether to sell through a distributor, schedule a free consultation. We’re also here to answer any questions about your overall approach to Amazon, as always.