Getting your ecommerce business up and running on Amazon is no small feat. From effective inventory management to engaging product advertising, many brands struggle to find the sweet spot of sustained sales growth in the world’s leading marketplace. On the surface, resellers present an attractive option. Outsourcing storage, sales and customer service of your product seems like a win-win. But that freedom comes at a high cost to margin, brand reputation and customer relationships. Not to mention, you may be handing over your brand secrets — and market share — to a potential competitor. The hard truths about resellers may in fact sink your brand value just when you’re trying to swim.
Although retailers like Target and Walmart are considered resellers, we’ll focus on businesses that buy your products for resale on Amazon. Unlike retailers with a national footprint and known brand of their own, Amazon resellers run the gamut from single owner entities to businesses selling multiple products across a portfolio. In addition to the types of resellers that exist on Amazon, there are varying — and unverified — degrees of quality to these providers. No third-party exists to evaluate an Amazon reseller’s product markups, product descriptions, customer service or general business practices. Although a reseller can expand your reach on Amazon, there’s a purposeful opaqueness to how they do business on behalf of your brand. In our view, the cons of working with Amazon resellers far outweigh any short or long-term pros. Consider these hard truths before you get in business with an Amazon reseller:
How above-board is your reseller? Without third-party verification, there’s no transparency into product markups, descriptions, customer service and business practices.
Resellers are motivated by one thing: sales. Although that may sound like music to your new business ears, those sales may do more harm than good. (See Slap Ya Mama case study below for proof.) Your brand is your baby and you’ll take the greatest care about protecting it and your customer experience. For example, how much of a markup are resellers assigning to your products? If you’ve taken great pains to deliver an affordable, high-quality product as part of your brand’s USP (unique selling proposition), be wary of the sliding scale in price that resellers may pass onto your customers.
Speaking of brand value, consider the following questions when engaging with resellers — or managing those existing relationships:
Your brand should feel sticky and memorable with every interaction. Descriptions and photos should match no matter where a consumer sees them. Premium brands, in particular, will feel the blowback in lost loyalty of a less-than-stellar customer experience or a product that doesn’t match up with expectations. All of the above can damage your brand reputation in a hands-off reseller relationship. Inconsistency across a number of resellers not only impacts customers but can quickly escalate into a management nightmare for your business.
If you sell your own products, you earn the most profit. With resellers, you’ll receive a percentage and a potentially shrinking one at that. Factor in rising inflation, costs of materials, shipping to resellers and whatever fees they charge in addition to Amazon fees passed back to you, and it may cost you more to do business this way. If resellers run out of your product, you’ll want to restock them fast which means rush fees that again eat into margins and profit. Also remember, every day you’re out of stock on Amazon, your product is delisted, losing search momentum and future sales.
Because resellers take on the risk of buying your products upfront, they’re singularly focused on making their money back and more. Every day they store your inventory without moving it, costs them money. That explains why resellers don’t necessarily feel bound by your suggested retail price. They push their costs onto your customers. You may be shocked to see the sliding scale of price that different resellers assign to your products, and even more surprised to learn you won’t benefit from those upcharges.
Can you afford your reseller? With rising inflation, materials costs, shipping and other fees, it may cost more to use a reseller.
When you hand over your products to resellers, you’re also handing over the keys to your brand secrets. They’ll learn what consumers respond to, how they buy, when, how much and where they’re located. You’re essentially turning over your market and customer intelligence to a company that could undercut you in the future by developing a knockoff product at a cheaper price with a built-in customer base. When you want to turn off your reseller agreements, you’ll be at square one building those customer relationships directly and competing for the Amazon Buy Box. Managing this exit may be harder than you imagine as you’ll need to reach out to each company to cease and desist.
Does your brand require extra care in packing and shipping? Beverage brands know from experience the standards they must maintain in order to sell on Amazon or pay the price of being suspended. Managing delicate items, let alone expiration dates, requires careful attention and expertise as well as transparency with customers. Worse yet, imagine your products are delivered missing parts, broken or even counterfeited? Who’s to blame? Although an unreliable reseller may be, your brand name will bear the brunt. Bad experiences have big consequences as consumers rate your products, which can in turn lower your overall standing on Amazon.
If a customer has an issue, the reseller is their primary point of contact. Are your resellers treating customers with care? Are they even responding? When a customer wants to return a product, how is the reseller managing that experience? And what happens to returns? Are they examined carefully to evaluate if they can be recirculated into supply? Quality control throughout the supply chain is critical to delivering a positive customer experience and winning future sales.
How frictionless are returns? Quality control — or the lack thereof — can do irreversible damage to your brand and its value.
The vast majority of consumers consult product reviews before making a purchase decision. Your product reviews have as much to do with the seller experience as your product. When you manage your own sales, you can respond to customers directly to understand their concerns and potentially win them back. Not so with a reseller. With a large product portfolio, resellers may be less diligent or concerned with bad reviews for your products. With your reputation on the line, every review counts not only on Amazon but the effects reverberate on other marketplaces as well as consumers comparison shop.
Customers want to be heard. They went through the effort to share their experience, and if it’s a negative one, you do have an opportunity to turn that situation around. But resellers have little incentive to pay attention to your product’s negative reviews. Product reviews are a great pathway to sales but they also provide a wealth of actionable feedback. Customers of your product can be the best ambassadors to help sell. They also share innovative use cases or problems solved that you may not have even thought of. All of that intelligence can fuel your product development and it comes free of charge — if you know where to find it across your reseller portfolio.
Cajun seasonings maker Slap Ya Mama had a winning formula for creating delicious flavors. Managing Amazon sales in-house proved too time-consuming and complex. Focused on expanding their product line, they turned to Amazon resellers to expand their reach and grow sales. With a mixed bag of sellers, a host of problems emerged. From a lack of transparency to no quality control and frequent out-of-stock days, Slap Ya Mama was left with a bad taste for resellers and their broken promises.
“We knew we needed to be able to control the product that was out there,” said Slap Ya Mama Co-Founder Jack Walker. “Whether there was bad product, damaged product or expired product – we had no idea who most of the sellers were on Amazon.”
Slap Ya Mama sought the expert help of Whitebox, an Amazon Advertising Network Partner. Whitebox quickly cleaned up Slap Ya Mama’s sales channels, reducing the competition and winning the Amazon Buy Box, which accounts for nearly 85% of all product sales on the marketplace.
As a full service logistics and fulfillment provider and Amazon agency, Whitebox unites Slap Ya Mama’s inventory management and sales in one data-driven partner. Slap Ya Mama now has its own branded store on Amazon to represent its robust and growing product offerings. Streamlined inventory management means products are always in stock and fresh. In addition, Whitebox actively monitors product reviews to remove any complaints that may impact ratings.
Read the full case study here.
Ready to reap Amazon’s rewards minus the pains of resellers? Whitebox can help. With premier access to tools, resources and data, Whitebox can unlock greater value for clients on Amazon. Deep Amazon expertise coupled with our data science team and proprietary technology enables brands to compete and win on the marketplace. Boost sales, reduce costs and remove the complexities of managing, storing, packing and shipping your products to customers wherever they are. As a direct-to-consumer ecommerce fulfillment partner, Whitebox gets your products closer to customers with 99.8% on-time shipping rate and a 99.9% order accuracy. Reach out to schedule a free consultation today.