Amazon: Friend or Foe

by Shipearly on April 4, 2015 No comments

The timeless sandal brand Birkenstock is walking away from Amazon. The company sites withdrawing from the marketplace as the only option to combat the rise in counterfeits and unauthorized selling from Chinese merchants who have become increasingly present on the service.  62% of Chinese e-retailers sell goods on Amazon, and almost all of those retailers are selling in the U.S. “The Amazon marketplace, which operates as an ‘open market,’ creates an environment where we experience unacceptable business practices which we believe jeopardize our brand. Policing this activity internally and in partnership with Amazon.com has proven impossible.” According to Birkenstock USA CEO David Kahan.

Another example of a company who feels betrayed by Amazon is Rain Design. The company had been selling an aluminum laptop stand on Amazon.com for more than a decade. A best- seller in its category, the $43 product has a 5-star rating and 2,460 customer reviews. In July, a similar stand appeared for about half the price. The brand: AmazonBasics. Since then, sales of the Rain Design original have slipped. “We don’t feel good about it,” says Harvey Tai, the company’s general manager. “But there’s nothing we can do because they didn’t violate the patent.”

Birkenstock USA and Rain Design’s experience shows how Amazon and its knockoff merchants are using insights gleaned from its vast Web store to build private-label juggernauts that will ultimately compete head on with the brands listing on the site. AmazonBasics for example now includes more than 3,000 products in multiple categories from clothing to camera tripods. The strategy is a digital twist on one used for years by department stores and big-box chains to edge out middlemen and go direct to consumers — boosting loyalty and profits.

AmazonBasics first launched in 2009 focusing on consumables such as batteries, recordable DVDs and such. The house then brand slept quietly as it retained data about its sellers’ successes. But in the past couple of years, AmazonBasics has stepped up the pace, and is now using that data to roll out products perfectly tailored to customer demand with known sales volume for production planning. Amazon isn’t only copying products made by small, little-known merchants like Rain Design. Its private-label lines and surge of Chinese merchants are increasingly competing with name brands too, dramatically lowering the value of the marketplace and placing a “seller beware” tag on Amazon.

What Does This Mean for Branded Manufacturers Relying on Amazon?

“The bottom line for brands is they can no longer view Amazon as solely a channel and need to acknowledge Amazon as a competitor” says Nick Kolobutin, Founder of ShipEarly. “It also means that company’s selling on Amazon must look for alternative channels to diversify it’s revenue base.” In order to compete with Amazon a better collaboration between branded manufacturers and their traditional retail base is required. Amazon is now officially everyone’s competitor so brands have to be careful and invest a lot more in their digital and eCommerce strategies to mitigate the risk that Amazon will start selling in your category. The less sales data you provide Amazon, the less likely they or counterfeit companies will see an opportunity. So that includes deploying an omnichannel solution to lower fulfillment costs, increase delivery speed to consumers, and elevate sales in a channel many digital marketers don’t think about too often these days… Stores.”

How Can I Protect My Company from Amazon?

  1. Invest heavily in your own digital marketing strategy to become known in your industry so customers start their path to purchase on your website.
  2. When developing products consider your Intellectual Property options such as Trademarks and Patents
  3. Develop other Sales Channels other than Amazon such as Online and in-stores with an Omni-Channel eCommerce strategy

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