Over the last few years, eCommerce has become an indispensable sales platform for products and services. In 2020 alone, more than 2 billion people across the globe made purchases online, pushing sales to over USD 4.2 trillion. While eCommerce was already poised for growth, the pandemic accelerated online shopping in virtually every corner of the world. In the UK alone, approximately 75% of consumers have swapped the brick and mortar stores of the high street for e-shopping. Whether brands already had an online presence or not, one thing is certain, adopting an eCommerce sales strategy is now vital for their survival.
With global sales rising by 27% year-on-year, Amazon is an eCommerce powerhouse that has the influence and recognition to reach the target market of nearly all brands. Remaining viable in 2021 and beyond requires a presence on Amazon. However, selling on Amazon isn’t without obstacles.
To better understand the challenges as well as the countermeasures needed, Luzern recently partnered with Censuswide to conduct a survey of over 250 eCommerce decision makers across the UK, France, Spain, Italy, and Germany who have or had experience working with Amazon.
Overcome the stumbling blocks of selling on Amazon
While the survey uncovered a number of issues that brands face when selling on Amazon, this article will highlight the most frequently encountered challenges and how brands can overcome them.
- Control the brand: Creating a positive brand image takes time and effort and it’s something that the brand needs to control. However, 45% of eCommerce decision makers cited that retaining control of their brand on Amazon as one of their most difficult challenges. Regardless of whether you’re selling direct to Amazon (1st party vendor, also referred to as 1P) or you use the platform to self-retail (3P), pricing is where loss of brand control is most noticed. For brands using the 1P programme, Amazon acts as a retailer with the ability to independently make price changes, while 3P retailers encounter steep competition on price and reputation. To retain pricing autonomy and regain brand control, many brands are combining 1P and 3P for a hybrid sales model.
- Sustain profitability: Selling on Amazon typically results in diminished price control which affects margins and profitability, sometimes to the point where the brand makes little or no profit on certain items. This concern was validated by 42% of respondents that emphasised the importance of being able to set an average order value (AoV) that aligns with their pricing strategy. eCommerce decision makers are taking a short- and long-term view to reduce margin pressures by entering new markets and adding new products to their Amazon offerings.
- Navigate the eCommerce landscape: Although more than 80% of eCommerce decision makers agreed that eCommerce is an important aspect of their digital transformation, 40% stated that navigating the constantly changing eCommerce landscape as problematic. To keep pace with the continual eCommerce changes and improve their ability to deliver digital customer experiences, brands need to prepare for ongoing technology advancements across artificial intelligence (AI), virtual reality (VR), and customer experience management (CEM).
- Reach target markets: Although high quality content is required for successful trading on Amazon, competing listings mean more brands want to advertise, and 40% of respondents find it difficult to reach their target customers. To improve content and listings, the majority of eCommerce decision maker respondents expect their Amazon Advertising and Demand-side Platform (DSP) budgets to increase.
Although more than 86% of eCommerce decision makers stated that selling on Amazon is critical to their long-term survival, they agree that a broader strategy to increase sales and improve profitability is required.
Survive and thrive in the eCommerce world
To gain the level of autonomy not afforded by 1P selling alone, an increasing number of brands are embracing a hybrid 1P and 3P sales model. The flexibility of this approach provides brands with control over their products and pricing, while protecting their 1P relationship. As part of this strategy, many brands are partnering with an Amazon specialist to help them to regain ownership of their Amazon business, adopt the latest technology, and improve their competitive standing.