On March 4, thousands of Amazon Marketplace vendors began panicking over an email that wasn’t in their inboxes: a weekly purchase order from Amazon.
The omission prompted rumors that Amazon had cut them off unceremoniously, forcing these vendors to sell directly to Amazon’s customers as third-party sellers or risk losing out on hundreds of millions of consumers, including more than 100 million Prime subscribers. With no immediate or clear response from Amazon, many vendors panicked and took to social media and online forums to discuss the possible implications of the missing email, wondering how to adapt their businesses.
While some of the tens of thousands of affected vendors did receive purchase orders the following week, thousands of others did not. Even for the vendors whose regular orders were reinstated, the confusion raised red flags about whether or not this was a “blip” or a signal of policies to come.
Opportunity and obstacles
The internet, and ecommerce marketplaces built upon it, have created unprecedented access to a global audience for brands of all sizes. However, ecommerce is changing so rapidly that what works today may not work tomorrow. To continue to be successful, brands need to look four or five steps down the road. That holds true for both first-party sellers (those who sell directly to Amazon) as well as third-party vendors (those who sell directly to customers on Amazon’s marketplace).
Besides the panic from the missed emails, some rumbles from Amazon reiterate that dependence on the platform is unwise. There are rumored changes about the way Amazon does business with its outside sellers. These rumors include consolidating Vendor Central, which handles first-party sellers, and Seller Central, geared toward third-party sellers, into a single platform.
Amazon has also been investing more in its private-label brands, working with manufacturers directly to sell common household items such as adhesive bandages, batteries, and much more. According to TJI Research, Amazon now has more than 450 private-label and exclusive brands, which compete with, or entirely bypass, brands selling the very same items from the same manufacturers. These manufacturer agreements affect not only small vendors, but also major brands, because Amazon itself becomes a direct competitor with these companies.
Diversifying and thinking international
Despite this instability, brands can do several things to stay profitable and competitive. Other platforms, such as Target+ and Walmart—both of which are aggressively growing online—and selling direct to the consumer, can help diversify an online presence and ensure that revenue streams are less dependent on Amazon. Walmart grew 43 percent in U.S. ecommerce in the third quarter of 2018, while Target saw 49 percent year-over-year growth online. Google Shopping Actions is another emerging option, particularly as the tool continues to develop: It is currently being tested to allow consumers to buy directly from the search page instead of having to go to a site to review products. Instagram is also testing a similar system, which would allow users to shop directly from in-feed posts.
While Amazon leads the American market—it holds nearly half the U.S. ecommerce market and 5 percent of all retail spend—the 330 million who live in the United States are only a small fraction of the more than 7 billion people worldwide. Amazon is far less relevant in markets such as India, China and Latin America. In China, Amazon represents only 0.7 percent of the local market, where it is dwarfed by competitors such as JD.com and Alibaba marketplaces Taobao and Tmall.
China also has a strong shopping culture, especially around holidays such as Singles Day, which is the biggest shopping day in the world. On Singles Day 2018, Alibaba topped a billion dollars in sales in the first 90 seconds, which eventually swelled to $30.8 billion in sales; between Black Friday and Cyber Monday 2018, Amazon’s online sales only totaled $14.1 billion. Tapping into international markets is crucial. The winning brands of the next decade will be those that master the international landscape today.
A prompt for diversification
Although the email panic earlier this month made for a very stressful situation for many vendors, it also served as a wake-up call for some brands that had been content to rely on one marketplace. The problem is not with Amazon, but with the overreliance on a single platform.
Vendors need to have control over their own brand. This includes delivering a consistent customer experience, controlling their online reputation by maintaining consistent pricing across all sales platforms, and maintaining consistent brand content across all channels. Amazon—or any other platform—may change its practices or procedures at any time. Brands should stay abreast of all potential changes, evaluate them, and make a backup plan for each.
Change can be incredibly stressful, but the landscape has grown and evolved enough that vendors can more easily adapt. Diversifying platforms and playing a more active role in a brand’s success now can help avoid pitfalls in the future. There are plenty of options to help brands of all sizes succeed. Emails from Amazon should not incite panic.
Pattern provides marketplace management services for retailers selling on Amazon and other online marketplaces.