16 Sep Amazon Vendor Insights: Avoiding the Mid-Market Dilemma
Let’s start by stating the obvious. If you are in the business of selling, your consumers are on Amazon. Period.
1 in 3 Americans is an Amazon Prime member and 9 out of 10 consumers visit Amazon in some capacity on the path to purchase. So, what’s the roadblock stopping your company from thriving in this endless land of opportunity?
Simply put, Amazon has become the wild-west of eCommerce. New sellers and resellers appear every day, companies are regularly optimizing and re-optimizing their content and Amazon is constantly pushing out new tools for sellers to better reach their consumers. The second a company thinks it has Amazon figured out, they implement a new packaging regulation, introduce a new advertising medium, or attempt to strangle more money out of a coop agreement. A quick glance at their advertising blog reveals the dynamic nature of their business. For vendors attempting to defend and grow their share of this promising marketplace, it is easy to get caught in the middle of the chaos.
Enter the “Mid-Market Dilemma”.
On an Amazon platform with limitless opportunity, competition favors two types of sellers. These sellers are big players with large ad budgets or agile, little guys with the ability to quickly change their strategy in the marketplace.
Larger vendors on Amazon have the buying power to leverage Amazon’s extremely efficient marketing technologies (AMS). This allows them to maintain dominance in key categories and counter imposing brands. Amazon is constantly releasing new ways to gain exposure to its customers. But the most effective digital mediums are often reserved for the most lucrative spenders. Unique access to these innovative advertising mediums allows these lucrative-spending vendors a leg up on the platform.
Smaller sellers on Amazon have the ability to capitalize on low barriers to entry and implement dynamic ad strategies. These sellers look to chip away at small pieces of larger brands’ market shares. Amazon’s FBA program provides many 3P sellers with the quality assurance necessary to overcome a lack of consumer trust in smaller brands. Statista recently performed a study showing that 3P sales have increased almost every quarter since 2017 started. The volume of these types of sellers in the marketplace poses a very serious threat to bigger players in any category.
So what does this mean for the 80% of companies that find themselves in the middle? It means that if you are serious about growing your eCommerce business on Amazon (either Vendor Central or FBA), you need to riithink (shameless plug) the way your company addresses its strategy.
At Riithink, there are three main steps we take to make sure our clients don’t get lost in an endless cycle of defensive ad strategies.
- Prioritize innovation and support out-of-the-box thinking. Amazon profits when their vendors who spend more on advertising, make more money. Their system is designed to reward high spending with a high market share, so if your strategy looks like the big guys, you will only win a small portion of the market. Staying in the box will likely mean staying in the red long-term.
- Commit yourself to quality. In a marketplace full of intense competition, companies will take shortcuts. Do not be one of these companies. We have seen that the quality of products and customer service are often the first things on the chopping block when competition increases. Maintaining consistency in these critical areas can be the differentiation your brand is longing for.
- Become more agile decision-makers. At Riithink, we have witnessed over and over again the cost of getting caught in bureaucratic decision-making processes. Amazon has thousands of smaller sellers who can thrive off of a small portion of your market share. These businesses have incredibly low overhead and can afford to act quickly. If you want to defend your brand(s), you have to be prepared to play the game at their pace.