What Manufacturers Need to Know about Selling to Amazon
Head Buyer X: “Hey, come take a look at this. ‘Insert Supplier Name Here’ is selling directly to Amazon.”
Me: “Oh boy. What does the pricing look like?”
Lately, this is how a lot of uncomfortable conversations start in my office. In fact, over the last 12 months I have had this conversation with my Buyer, Product Manager, Sales Team and CEO dozens of times. And it’s becoming more frequent.
If you are a supplier, distributor, or manufacturer you might think “So what? I sell to lots of different retailers.
I get that, I really do. But Amazon is different.
Selling your product line directly to Amazon has a unique and direct impact on your other retail partners/dealers/resellers. And the impact is unlike anything else going on in your marketplace.
Let me explain.
Amazon sells over 300 Million unique products through its marketplace. That may sound like a huge number, and it is. But if you think about just books and cell phone accessories, there are almost 100 Million unique listings in those two categories alone. But whatever Amazon product category your product line falls into, you can be confident that there are at least a few million product listings. The point of talking numbers here is that it’s very likely someone, a current retailer/dealer/reseller is already selling you products on Amazon.
So you get the call – in Amazon’s case it’s almost always an email:
Exciting stuff! One of the world’s largest retailers is interested in you. They are chasing you and there could be a six figure purchase order on the other end. But hold on cowboy, selling directly to Amazon could be a game changer. A game changer for your other retailers.
I see the supplier/manufacturer point of view. You make a product. You sell that product. You sell it a lot of different places. You have many different relationships. Your product is in big box retailers like Target and Home Depot, but you also do well with specialty retailers like catalogs and with a few regional niche resellers. You may even sell that item in grocery stores like Wegmans or Trader Joes. But I think selling to Amazon is different. They are not just another retailer.
It’s not about size. It’s not about reach. It’s not about price. It’s not about service. It’s not about convenience. All those different markets you sell product through already compete on those pieces of the value chain. What is different about Amazon is – control. Amazon has all those things – size, reach, price, service, convenience. They offer the widest selection of products, to the entire world (well almost) at the lowest prices all delivered for free (almost) in two days. The bar is really high from a competitive standpoint. And because of that – Amazon has control.
Seeing your products sold on Amazon is often followed by a loss of control. Maybe that is not all that important to you? I don’t know. But understand that Amazon now exerts influence over all the other “traditional” channels you sell through. Consumers showroom your products. They shop prices on their mobile devices, and that starts with Amazon. Customers read review – reviews from Amazon customers – about your products when in the store or on other websites or flipping through catalogs. Amazon controls all that media related to your product.
It’s not necessarily a bad thing. It’s just something to consider when you are chasing that six-figure purchase order dangling in the wind.
Oh – and your current retailers probably hate the idea of selling direct to Amazon. We can talk more about that later.
As always, if you have any questions you can contact me at firstname.lastname@example.org