A Recent Shift From Amazon Retail Has Brands Scrambling. What's Next for Sellers?
Since the beginning of this year, Amazon Retail has notified thousands of small to medium-sized brands to inform them that it will no longer make available a Vendor Manager to interact with the brand. Now brands are expected to use the new Vendor Success Program (VSP), a self-service option where there is no opportunity to negotiate directly or discuss with someone at Amazon. This shift certainly leaves many brands scrambling to figure out how to proceed effectively with the Amazon channel.
Each Vendor Manager today can have up to 200 brands to manage. With Amazon now actively reducing the total number of Vendor Managers, even a brand selling millions of dollars of product each year to Amazon may find itself without a Vendor Manager. Instead, that brand must use the VSP program, featuring automated reordering and computer-based contract negotiation.
Many brands are going to find this shift frustrating; who really wants to be treated like just a collection of widgets for sale, without a human to discuss inventory, pricing or marketing issues? If Amazon Retail is basically marginalizing or breaking up with smaller brands, now is a highly suitable time for those brands to reflect and re-evaluate how they do business with the Amazon marketplace. Are there other effective ways to get their products to market on this channel? Are there other effective ways to promote and merchandise their products on this channel?
Fortunately, there may be several suitable options beyond dealing with an automated buyer. A brand should consider selling on Amazon through the third-party marketplace, either in conjunction with an authorized reseller that knows best practice for selling and advertising on Amazon, or as the seller of record of its own brand (essentially a direct-to-consumer model). And if the brand doesn't have or want to have the in-house Amazon channel capabilities, there are several firms that can be hired to be the outsourced teams running the day-to-day operations of a brand's third-party business on Amazon.
Related: How to Protect Your Brand on Amazon
As a third-party seller or working through a known third-party seller, the brand is likely to find it has more control over a) what selection is carried on Amazon, b) how much inventory of those items is stocked, and c) what pricing is used to sell the items on this channel. I view these three levers as critical levers for which most brands gave up control when they sold through Vendor Central.
To be fair, brands engaged at any point selling product to Amazon Retail (through Vendor Central) are subject to the Product Availability Policy for Manufacturers (also known as the Amazon MOA), where Amazon expects the brand to offer Amazon Retail the option to source the brands' products at competitive terms for sale as Retail items only. Yet, if Amazon is going to marginalize your brand by forcing you into the VSP program, the likelihood of Amazon trying to enforce MOA on your brand is greatly reduced, leaving you the significant opportunity to evaluate shifting from being a first-party seller to a third-party seller, where the level of control of key business issues should increase, while your take-home margin as the seller (or wholesaler to a third-party seller) is likely to be much better than the wholesale margin you were earning while wholesaling to Amazon. If done properly, that incremental margin will help to fund additional Amazon channel investments you make in your brand (including listing optimization, advertising, and new product development).
So I ask, if you've just been dumped by Amazon Retail, isn't it time to get back on your feet, and take back control of your brand on this channel?