Competition is nothing new to Amazon FBA and FBM. Sellers have spent years optimizing their listings, battling to ranking for high-volume keywords, get reviews and drive more sales.
Lately, a new competitor has emerged, which has a lot of sellers concerned: Amazon themselves. Having to compete with the 2nd most valuable company in the world is a daunting challenge for many third-party sellers and private label brands.
But Amazon’s private label expansion does not necessarily spell the end for third-party sellers. And there are several steps you can take to minimize the risk of getting squeezed out by Amazon.
Amazon is Launching More and More Private Label Products
As of October 2018, Amazon has more than 120 private label brands, an increase of more than 9x since the beginning of 2016. As a result, they are projected to earn $7.5 billion in sales this year, and $25 billion in 2022.
Amazon’s most recognizable brand, AmazonBasics, has over 1500 products for sale, covering a wide range of categories, including Home & Kitchen, Sports, and Electronics.
They also have many “secret” house brands in various niches, which don’t offer any sign that they are owned by Amazon. And while they are expanding their AmazonBasics lines (they recently began selling their own mattresses), they are also ramping up the number of brands they own.
The part that is scary for third-party sellers is that there is little way to compete with Amazon’s brands (on Amazon’s platform, that is). Amazon can simply alter their search algorithm to favor their own products. They already show ads for their own private label products on other sellers’ listings. So even outranking Amazon’s products doesn’t mean you are in the clear.
Amazon also has the advantage of a wealth of sales data at their hands, to know exactly what their customers want, and at what price point. The EU recently launched a preliminary investigation into Amazon’s use of third-party sales data to launch their own products. It’s unclear whether this will amount to anything. What is clear is that by selling on their marketplace you are effectively doing consumer research for Amazon.
Are FBA and FBM Sellers At Risk?
How much of a threat are Amazon’s private label brands? Will third-party sellers, such as those operating through FBA and FBM, become extinct?
Make no mistake, third-party sellers are still a valuable part of Amazon’s platform. They make billions each year from seller fees for things such as shipping and fulfillment. That’s a revenue stream Amazon is not likely to walk away from any time soon.
Also, brand diversity is one of the things that makes Amazon such a big player in e-commerce, and the reason big department stores have flourished for years. Amazon wants to be able to provide the biggest variety and have sellers competing with each other to provide Amazon’s customers with the lowest prices. Providing the same range on their own would be a massive undertaking, even for a company as large as Amazon.
While it’s unlikely that all third-party sellers will be pushed out, there’s no doubt it is a danger to some. There will be cases in which a seller has a fantastic selling product which Amazon decides to jump on. So sellers relying on a small number of listings or one niche may not necessarily be safe.
What Can Amazon Sellers Do to Survive?
Amazon is a juggernaut. But e-commerce is a huge industry, worth $2.8 trillion in 2018, and estimated to be rising to $4.8 trillion in 2021. Amazon will never control the entire market, and if your business can take a tiny slice of that pie, you’ll be happy.
There are some steps you can take to protect yourself and keep your share, even if you come in direct competition with Amazon.
Build an email list
The biggest reason Amazon has power over third-party sellers on their platform is they control your customers. When someone buys from you on Amazon, you have no way to market to them in the future. So you lose out on a chance to capture repeat customers – the heart of any business.
You can offset this with an email list of people who have purchased from you, or shown interest in doing so. To get emails while staying in line with Amazon’s terms of service, you need to capture the customer before they get to Amazon (through channels such as social media ads, Google AdWords or blogs).
Offer people an incentive for their email signup, such as a discount promo code, before sending them to Amazon to complete a sale. [LandingCube helps you do all this with coupon-delivery landing pages].
With a list of customer emails, you’ll be able to market to them for repeat purchases, up-sells and cross-sells. And if you have to move off Amazon, you have a list of customers already at your fingertips.
Diversify your business with your own store
If you’re concerned about being competition from Amazon, it’s best to be pro-active. Start establishing your reach outside of Amazon now, so if that time comes, you’re not forced to start from square one.
Many sellers already supplement their Amazon sales with their own online store. Shopify is a popular platform with Amazon sellers, due to how easy it is to set up a professional looking online store, even without any web development skills. They also help businesses with fulfillment and inventory control.
Diversifying outside of Amazon comes with a lot of challenges. You’re more reliant on having a strong brand, you don’t have the social proof of Amazon’s platform and it’s harder to get traffic to your store. But if you put in the work, it’s often worth it. If nothing else, it will further legitimize your Amazon brand.
Build a strong, recognizable brand
Having a brand that people know and recognize will help you stay afloat, both on-Amazon and off. While Amazon can push customers towards their own brands, it’s still up to the customer to decide. If you have a brand name people know and trust, it will be much harder for Amazon to capture your market share.
So how do you build a powerful brand for yourself? The first step is putting out great products and offering great service. Having a recognizable image of your brand throughout all aspects – design, packaging, messaging, social, etc – is a must too. But you should supplement this with creative marketing campaigns and initiatives to push customer engagement. The likes of which, you can only achieve outside of Amazon.
Also, enroll in Amazon’s brand registry program, to ensure your brand gets the highest level of protection from external threats, too.
Drive your own traffic, and build your own audience
It’s already been touched on, but it bears repeating. The biggest advantage of selling on Amazon is the relative ease of attracting buyer-ready shoppers. You need to get your Amazon SEO on point to get customers, but Amazon does the hardest part for you.
Amazon has more than enough customers going through their site to sustain your business. That is, if you can rank high. But relying solely on organic Amazon traffic leaves you at the whim of their algorithm. They can effectively shut you off if they decide to put a private label product up against yours. To mitigate the risk, become an expert at driving your own traffic.
If you’re already selling on Amazon, a good way to start is to export your customer list to create a lookalike audience on Facebook. That way you can get your ads in front of the right people, and keep your cost per acquisition (CPA) low. As you continue to run ads on Facebook, experiment with different audiences. Over time you will find out exactly the kind of customers that convert best for your business.
Once you know where to go and who to target with your marketing, you will rely a lot less on Amazon to deliver your customers.
Work with Amazon
You don’t have to compete with Amazon. Instead, you could work with them. They recently announced the Amazon Accelerator Program, which is offering marketing and customer support for businesses that wish to be part of Amazon’s family of brands. The tradeoff is that your brand will be sold exclusively on Amazon.
Going down this path may be an even bigger risk, as you will be totally at Amazon’s mercy. However, there is also a level of security to be had in partnering with such a massive company. They have considerable resources to offer in assistance. And they can give your products priority positioning in front of their massive base of customers.
The program is still in its infancy, so it’s hard to tell yet whether there are any major success stories. But it may be something to explore for up and coming businesses.
Amazon Private Label Brands – In Summary
Many sellers are worried about the e-commerce giant’s expansion of their own brands, and their concern may be warranted. If Amazon decides to launch a product in direct competition with yours, it will be hard to fight back.
What’s clear is that Amazon’s private brands are here, and are not likely to go away. Rather than take your chances, it’s best to take steps now to ensure that your business can’t be gutted overnight. Learn to drive your own traffic, build an email list, and make your brand more than just an Amazon store.