At the end of May, smaller retailers and wholesale merchants that had long enjoyed a lucrative, consistent supplier relationship with Amazon experienced a moment of panic when reports circulated that the retail giant was halting all future wholesale orders from small vendors. As reported by Bloomberg, the move was an effort by Amazon to focus more on bigger suppliers to compete with Walmart and Target on pricing and order fulfillment, forcing the “mom and pop” wholesalers to instead move to the company’s third-party selling platform, Amazon Marketplace. Amazon has since refuted the report, stating that the sources were incorrect and that the retailer is simply reviewing “our selling partner relationships on an individual basis as part of our normal course of business.”
Whether the reported purge of smaller suppliers is going to happen or not, there’s one thing that’s certainly true: Amazon holds all the cards when it comes to its relationships with suppliers and sellers. It’s the nature of a large and influential company to make changes that better serve its own business goals and financial bottom line. For cross-border retailers who are relying on the name recognition and market penetration that Amazon offers, this tendency to change its policies and evaluate relationships can be a problem that ultimately outweighs the benefits of being there. Larger brands selling through Amazon may be able to weather the storm of operational changes that may be coming their way, but smaller brands who are just getting off the ground with their international business expansion efforts need a more reliable strategy for reaching international consumers.
Here are four reasons why small and mid-sized online brands and retailers who are going global should consider a direct-to-consumer strategy.
1. Less effort to differentiate your brand through search.
Due to the nature of the Amazon Marketplace business model, it’s not in the company’s best interest to champion any one brand in a specific retail category over the others. The mission for Amazon Marketplace is to become a one-stop-shop for consumers, and that means offering a wider array of items from a larger pool of vendors. For cross-border e-commerce merchants who are still working on building brand awareness in foreign markets, this can make it even more difficult to stand out. In certain markets where trust in retailers from outside of the native country is already a barrier, this may be a bridge too far for customers to cross.
2. Better margins.
Small and medium-sized retailers on Amazon Marketplace who are trying to engage a more price-conscious global consumer are more likely to experience challenges with their margins because they have to advertise to be discovered on the platform. Smaller brands with niche products who want to reach global customers on Amazon Marketplace will have to invest in additional marketing just to ensure that their listing ends up higher in Amazon search results. Quite simply, this additional cost could make it even more challenging to turn a profit. Selling directly to cross-border consumers becomes a better value because brands are able to maximize their margins by not having to pay additional Marketplace fees for advertising.
3. Greater brand and image control.
Small and medium-sized retailers who have product listings on the Marketplace should be prepared to lose control over where and how their listings appear. By its very nature, Amazon Marketplace doesn’t give merchants the ability to control this, which means your product listing might appear at the top of a search results page with a list of brands or items you don’t want to appear adjacent to. Further, brand differentiation and the ability to communicate your unique value is a key part of establishing your brand image to your consumers and audience, especially in international markets where your brand might not be as well known.
4. Own your customer data.
Building a unified view of your customer is the key to presenting the right offers to the right shoppers at the right time. But brands who rely on Amazon Marketplace have limited access to the customer data needed to help inform their marketing strategies. Just recently, Amazon announced plans to offer Amazon third-party sellers access to aggregate demographic information about customers, but many retailers are already saying it’s not enough to deter them from having their own direct-to-consumer presence.
Not only does a direct-to-consumer strategy give cross border e-commerce merchants more control over many aspects of their business, but it also allows retailers to excel in global markets where Amazon hasn’t been able to enter. In some countries, for example, Amazon is being overshadowed by local marketplace options such as Alibaba in China, Mercado Libre in Latin America, and Jumia in Africa.
It may be tempting for emerging cross border e-commerce brands and retailers to hitch their wagon to Amazon’s star and reap the benefits, but if the ability to retain brand and pricing control are too important to relinquish, then a direct-to-consumer model may be the more reliable path. The good news is, you don’t have to go it alone. With Flow’s flexible, modular e-commerce platform, online retailers can ensure that every part of the international buyer journey is localized and that your brand’s key value proposition is clearly communicated to shoppers. With Flow, your brand will have total control over costs, retaining the ability to optimize margins and get the most out of your cross border e-commerce business. Find out more by contacting a Flow expert, or download our International E-commerce Kit.