Beauty Brands’ Top 5 Questions About Amazon

Amazon was always going to dominate the e-commerce space—the question was never if, but when. Premium beauty and Amazon are not mutually exclusive. It is possible to protect the integrity of your brand and retailer relationships while reaping the revenue benefits of the largest e-commerce marketplace in the US—it just takes know-how. In a recent webinar with Amazon beauty experts Market Defense, we tackled the topic of How Prestige Beauty Brands Win on Amazon. There were 5 questions that were top of mind for brands. The answers will help you navigate the best path forward for your brand on Amazon.

1. What is the Buy Box and why does it matter?

The Buy Box refers to the box on the right side of the Amazon product detail page, where customers can add items for purchase to their cart. There could be many sellers selling this product, but only one seller can be in the Buy Box at a time. We call this “winning” the Buy Box. On other marketplaces (like eBay), every seller creates their own product page leading to thousands of listings per SKU; customers choose who they want to buy from. On Amazon, its own algorithm chooses the seller; the customer has no choice as to which seller is in the Buy Box. The algorithm considers each seller’s criteria for that product (seller rating, how fast the item will ship, price, etc.) and determines which seller should be in the Buy Box. Since lowest price is the leading criteria, the seller who has the lowest price is often the winner of the Buy Box; they win 100% of the sales while they are in the Buy Box. Amazon does not split the Buy Box, so if you allow multiple authorized sellers to sell your product, they will have to compete against each other to win the Buy Box. Once you understand the Buy Box, you understand how being the only seller of your product on Amazon provides you the most control of price and customer experience.

2. What is the difference between Vendor (1P) and Seller (3P) models on Amazon?

Vendor Central is a first-party relationship (1P), which means Amazon acts as the retailer, and the brand is the wholesale supplier. Amazon will send you PO’s and take care of the entire selling experience, including manipulating the price of your products and telling you how much inventory to ship. Seller Central is a third-party relationship (3P) where the brand is the retailer, and you sell directly to buyers via the marketplace. You set the price and only discount if you want to. You control how much inventory to ship, and how your listings and images appear to the customer. Though selling directly to Amazon can be convenient, you pay for that convenience with higher fees and less control of your brand.

3. What are the benefits of hiring an outside Amazon agency versus trying to do it in-house?

When beauty brands try to manage their own Amazon sales channel, they realize that they don’t have the necessary Amazon experience. To build your Amazon business, you need a team: someone to set up the account and manage it on a daily basis, someone to run the advertising and marketing side, and someone to make sure your brand is protected from unauthorized resellers and take legal action, if necessary. This can be time-consuming and expensive—and without experts, you will find that Amazon changes can be TOO MANY and TOO FAST to keep up with. The other option is to hire and manage one or more Amazon agencies. With multiple agencies, you may still find yourself spending valuable time and resources ensuring the agencies are accurately executing your vision, and ensuring the process is seamless for the customer. The final option is to hire a single Amazon agency, like Market Defense, that handles the entire Amazon ecosystem.

4. Why do premium beauty brands need brand protection specialists?

Ignoring Amazon is a dangerous strategy. Counterfeits and knockoffs can cause serious harm to a brand’s hard-earned reputation and possibly physical harm to an unsuspecting customer. Diverted products sold at a discount can harm a brand’s financials. And product shipped by a lazy reseller in outdated packaging, or without proper care and handling, can lead to a raft of poor customer reviews that can damage your hard-earned brand equity. If you have created a reputable brand that you intend to grow, you need to button up Amazon with brand protection strategies that only specialists know how to secure and optimize.

5. How are the top brands sold at Sephora growing their Amazon business?

“Amazon is not a place where demand is created; it’s a place where demand is fulfilled.” This is one of Market Defense founder Chad Annis’ favorite quotes because it describes what is needed on Amazon for a brand to grow: DEMAND. If you are a buzzy Sephora brand or heritage brand with an engaged customer base, resellers are already selling your product on Amazon; the demand is already there and it’s not going anywhere. So, your main goal is to wrestle that existing demand away from unauthorized resellers and control the price. You also need to invest in marketing to keep lesser brands and knockoffs from poaching your customers by buying up your brand-related keywords. The Sephora brands in our portfolio don’t tolerate poaching or unauthorized resellers; they commit half of their ad spend to defensive strategies and the other half to driving visibility and conversion. You need that strategic keyword advertising to ensure you’re visible to your engaged customers, and expert listing optimization to convert them when they get to your listing. Our brands who are sold at Sephora are experiencing an 8-10x return on their ad spend because their first priority is removing unauthorized resellers from the buy box and controlling the price; advertising is an investment in their brand equity. It all starts with the Buy Box, and no one removes unauthorized sellers off beauty brands on Amazon faster than Market Defense.
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