What Is Amazon One Vendor and How Will It Affect Your Brand?
If you don’t know who Doug Herrington is, he may soon become the most powerful influence in the success of your brand. He has recently been placed in charge of the consolidated retail management within Amazon.
We have always focused our clients on being in control of who is selling their brand. All that will soon be impacted by the move by Amazon towards One Vendor, the vision of the new consolidated retail management structure. For those unaware of how Amazon currently works it is split between Vendor Central and Amazon Seller Central, which includes Fulfilled by Amazon (FBA) and Seller Fulfilled Prime (SFP) on the backend.
But One Vendor elects to consolidate the two, creating a single online store. First discussed on the Recode website the idea of greater control being placed on brands appears to be gaining traction.
The impact of this we have already seen unofficially from brands we consult with, but Amazon, as they always do effectively, is studying the numbers of how it can gain more revenue and more margin. Damn we’re envious of how good they are.
How Do Sellers Benefit from Two Selling Channels Today?
A company can currently sell first party “wholesale” via Amazon Vendor Central and third party “retail” via Amazon Seller Central.
This hybrid approach has worked for our clients and ourselves for some time:
Certain product lines earn higher margins on the marketplace
Certain brands and product lines are more premium, and the brand owner wants to control pricing and consumer perception.
Sometimes Amazon stocks out of inventory and the brand wants to continue selling direct to consumer from its marketplace account
How Amazon currently works:
The current set up allows flexibility in how a brand chooses to sell its product. It can control key elements of pricing and product details in it’s multi-channel offering.
What Is Amazon One Vendor?
Amazon are looking to get greater control of where and how brands are sold on its platform. By having one portal, brands will no longer be able to separate how they sell their products on Amazon. Amazon will dictate at ASIN level whether products are to go the wholesale or retail route through their channel.
As we have seen with the recent court cases involving Popsockets and Otterbox, brands are finding working with Amazon challenging at times.
Where brands have gone the Vendor route and tried to revert to a Marketplace operation they have often been prevented from doing so. The One Vendor program goes one step further. Even if brands choose to operate through third party resellers, Amazon can choose if they are allowed to sell. We’re still not sure how that works with their deal with Apple and the removal of unauthorised sellers?
How Are Sellers Reacting?
Like many recent changes that appear to be promoted as beneficial to the brand, they are being moulded to the benefit of Amazon. Remember, they have some hungry shareholders driving them and they will need to continue to grow revenues and margins. When is a company seen to be more shareholder centric than customer centric remains to be seen.
PopSocket CEO David Burnett, who has felt burned by the company in the past in a recent interview with Recode said. “Maybe for controlling the small players whose business depends on Amazon. But to endure this kind of treatment? There’s a lot of great brands out there who can make that choice to leave [Amazon entirely].”
In a Reddit discussion, one user shares Burnett’s sentiment, saying, “It seems insane. There are tons of legit, non-[private label], actual brands which are direct-to-consumer and sell on Amazon. Surely they know a d2c business is in no way prepared for such a massive [pay cut]?”
“Is 3rd party selling over??” writes another user.
Go Multichannel to optimise your risk.
While the status of One Vendor is yet to be confirmed the rumour mill from ex-Amazon employees and industry specialists suggests it is inevitable.
It’s not all doom and gloom but decisions will need to be made by large and small brands alike, to decide how to manage the platform which controls large sectors of eCommerce in a growing number of countries.
At Activ8 we have been saying all along that brands should be multi-channel and understand what that means and how to control it. The rush into Amazon PPC in the last 12 months is the equivalent of everybody one a boat going to one side to see what’s happening. It will topple over and the costs of this PPC are showing this.
Diversification ensures that you’re not reliant on any one channel. Building a brand is of paramount importance and managing these channels correctly is essential. As brands direct marketing spend away from more traditional channels, it may be actually worth revisiting them to see if the ad-spend or offer has changed.
If One Vendor were to drop in the UK tomorrow, you want to have options other than just selling to Amazon at wholesale prices. Remember those margin requirements that have crippled many brands on the High Street?
Building a strategy around your Direct to Consumer (D2C) website and leveraging the best parts of other channels will be key to providing a broad risk management structure.
One Vendor Program UK Key Points
If you're a brand and you sell on the marketplace, you potentially will no longer have control over which ASINs (if any) can be sold directly on Marketplace.
If you're a reseller, you may lose your ability to sell brands or specific ASINs that Amazon wants to sell through wholesale purchase.
In theory Amazon will push that they are protecting your brand as they will reduce non-authorised sellers - it’s the cost of that protection that will worry brand owners.
Amazon is systematically taking control from brands. This is already resulting in court cases even before the One Vendor program launches and we expect the big brands to start larger actions.
Going Multi-Channel is your best solution in building and sustaining your brand.