Selling on Amazon is a Darwinian survival of the fittest, and third party sellers are facing competition from all angles. Merchants are not only in competition with other sellers, but also with Amazon themselves.
We see many longtime sellers squeezed out by razor thin margins. It’s a reality that only the smartest Amazon sellers will survive. With this in mind, have a strategy prepared for the competition’s most cutthroat tactics.
We’ve put together a few tips to help you achieve success and leave your competition in the dust.
Avoid Direct Competition With Amazon
Competing directly against Amazon on a product listing is extremely risky and often leads to retailers being forced to sell below cost.
Even retailers with strong supplier relationships can’t compete with the prices that Amazon is able to negotiate.
We recommend avoiding selling any products Amazon is selling, or has sold within the last 30 days, since direct competition with Amazon is usually a losing battle. Try sourcing smaller, niche brands that Amazon is less likely to have its eye on.
In addition, because of Amazon’s size, they’re not focused on limited time opportunities like closeouts. Even with the SKUs they do sell, they’ll go in and out of stock on certain brands and products. The right data analytics software will allow you to automatically spot these weaknesses – including when Amazon stocks out, or if there are certain SKUs, colors, or styles they are not selling. Stick to investing in those products for a safer bet.
Overall, we recommend avoiding battling Amazon head-on. However, if Amazon does jump on your product listings, there are some methods you can use to come out on top.
What to Do If Amazon Jumps on Your Product Listing
When Amazon jumps on your listing, your first reaction might be to liquidate immediately. (Or worse: simply hope that things get better without taking any action.) However, since they are such a large company with automated buying processes, it’s possible to take advantage of their size.
Here are 5 recovery strategies to practice when Amazon jumps on your listing:
- Amazon is focused on a lean supply chain, so they don’t like to take risks on large amounts of inventory. As a result, they often stock out. It’s important to keep track of these stock outs so you can take advantage of the situation.
- Another strategy is to work out an exclusivity agreement with your supplier for particular colors or styles that Amazon isn’t selling. This is a win-win for both you and the supplier, as this allows them to maximize on an opportunity by selling you their fringe items and gives you access to exclusive styles.
- You’ll want to take price volatility into account. One strategy is to lower your price during high demand time frames to win the Buy Box, then cycle your price back up when there is less demand. This is called the Yo-Yo Strategy, and can be automated or done manually.
- Contact your supplier and see if they will do a stock exchange. This is an old-school retail strategy, but it’s still effective if you find yourself in a pinch.
- Lastly, you always have the option to liquidate. It’s important to know when to call it quits and use that money to invest in more profitable products.
Prepare for Brands to Start Selling Direct
Due to Amazon’s increasing popularity, brands are realizing the growth opportunities they have by selling direct to Amazon, particularly given the ease of using FBA for fulfillment and customer service. If you get your inventory directly from the manufacturer or brand, prepare for the possibility of this happening.
We’ve seen this happen to many of our clients. Even if you have built a solid relationship with a brand over the years, it’s important not to assume loyalty.
Hedge against this situation by ensuring that you have a diverse portfolio of brands. Every brand has a lifecycle–you just just don’t know exactly how long it is.
If you think it may be a possibility that your supplier is going to start selling direct to Amazon or to consumers, make sure you have an ample supply of their best sellers. Take this opportunity to generate profit before anyone pulls the plug.
Not all sellers decide to “break up” with their suppliers when they start selling direct. In some cases, brands wish to continue selling to their retail partners and coexist on the market.
Use MAP to Your Advantage
Part of maintaining a good relationship with your brand is to become a partner rather than just a reseller. By adhering to MAP, you will gain their trust, and potentially also gain access to exclusive deals.
Cooperation and transparency play into your favor. If you notice another reseller violating MAP, report it to your brand with the seller’s information. Brands often have trouble identifying who is breaking MAP. You can become an ally to your supplier by helping monitor your competitors.
Exclusive deals with suppliers are potentially much more lucrative than chipping away at MAP. Build trust–and sales volume–with your brand to gain access to these deals.
In order to compete successfully on Amazon, you must avoid direct competition against Amazon at all costs. If Amazon does jump onto one of your listings, decide which strategy works best for that particular product and your overall business goals.
Secondly, maintain a diverse portfolio of brands. Every brand has a lifecycle, and you never know when a brand could start selling direct.
Finally, use MAP to your advantage. Gain your supplier’s trust by adhering to MAP, and alert them to any of your competitors that may be breaking MAP. Once you gain a trusted partnership, you could open up doors to exclusive deals.