Why doesn’t eCommerce get past Amazon?
I’ve been in business for years now and still I am often astonished how little people know about how Amazon works and its general logic behind. I also have the impression that nobody wants to gather learnings from it. The ideology in short, because that’s what it is: Amazon doesn’t think in quarters, monthly Excel-sheets etc. The focus lies more on the long-term market power, which cannot be achieved with short-term success.
Amazon’s added value
The added value and the related value chain are at the top of Amazon’s agenda. The goal is to dominate all the processing steps of the value chain and to establish its own offer permanently at all stages. In case you didn’t know: Amazon originally started with the idea of selling books over the internet. We all know how it developed… All Amazon activities aim towards long-term growth, market shares and dominating the whole segments of the value chain. The short-term goals are no No. 1 priority. The profit is reinvested immediately, if it helps to achieve these goals.
What do you have to do to dominate all the processing steps?
Collect data. The knowledge of consumer needs is worth a mint. That’s why Amazon is a melting pot for marketplace sellers of all kind. That’s how it can aggregate knowledge and detect where needs exist or can be aroused or which kind of niches are not yet occupied. The sellers serve as market research units for Amazon and even pay for it.
Efficiency, optimization, technological belief. Amazon improves continuously its services. All of the processing steps are being analyzed again and again, at the same time the saving potential is reconsidered. The typical news about this subject are for example: AWS-Cloud – free computer capacities are being turned into money, which has become a distinct and profitable business model in the meantime. Drones are being tested for product delivery, robots tested and deployed for logistics. The warehouse is optimized according to mathematical models and in consideration of the experiences gained from Amazon orders. Last but not least: the idea to establish an own aircraft fleet would make Amazon independent from the big logistics groups like DHL, UPS etc. Therefore, this business will soon be in the hands of Amazon, too. Amazon Fresh is also going to turn the consumer goods industry in Germany upside down soon.
Certainly there are many more projects, but the previous lines should make it clear, that it is always about the big picture. By the way, one of the basic “ideological” principles of the new economies is: think big. Apple, Google, Facebook & Co. don’t do it differently. True to the motto: “There can be only one”.
Why does the competition have trouble dealing with it?
That would actually be a whole new article. Therefore, here’s just one essential reason: German competitors don’t think like Amazon. They are often not in the position to do so, because they are part of a group of companies that try to transfer their business practices and economic procedures to their eCommerce activities. True to the motto: What works there, works in online marketing as well. That’s exactly the wrong conclusion. The shelf-logic is deeply anchored in the heads of the decision makers of the stationery sales world. What matters is the following primacy: Anything that selled off successfully, will always remain successful. The following has still to gain acceptance: We need 1. a different way of thinking, 2. different goals and 3. even if you might not like to hear it – entrepreneurs and not managers.
Vendor Central or Seller Central
Now, let’s get to the main subject. If you understand these structural differences, it is clear to you, why Amazon offers these two sales concepts.
The Amazon logic requires some initial training. Not only when it comes to Amazon A+ content, but you also have to get into the general mechanisms that Amazon offers to the market players. The two options for establishing a business relationship with Amazon are Seller Central and Vendor Central. These are two very different opportunities, both with their advantages and disadvantages.
Actually, the result can be anticipated: Seller Central is the only sensible option for “smaller” retailers who want to use Amazon as a distribution channel, but do not have enough financial resources at their disposal. For the brand owners, the big retailers, is Vendor Central the only valid option.
Seller Central – a definition
The seller is so to say a third party (3P). He has a permission to sell products through Amazon’s own platform. These retailers have full control over their product range, the pricing terms and the product descriptions. If they want, they can additionally make use of the complete logistical service (in professional jargon: fulfillment) by Amazon. In that case, the products are located in an Amazon warehouse and Amazon packs and dispatches them. Legally, a retailer always owns the products.
Vendor Central– a definition
In Vendor Central you are 1P, that means first party in Amazon’s logic. As a vendor, the typical brand owner dispatches its products in large amounts to Amazon. Amazon acquires these products and becomes their new owner. Consequently, Amazon can also set the price, at least within an arranged span, and possibly takes over certain marketing activities. You can become a Vendor Central retailer only through an invitation from Amazon (as in 2017).
A short analysis of both systems and their advantages and disadvantages
Vendor Central retailers are preferred clients, who enjoy certain privileges. Amazon gets paid for this. The contractual elements between Amazon and the first party client are certainly negotiated from case to case. Insofar the costs can only be estimated.
What is certain is that a smaller retailer can’t afford Vendor Central in general. This option is not possible for him due to financial reasons.
What is only possible in Vendor Central?
Four essential services are basically possible only in Vendor Central:
- Sell directly via Amazon
- Generate Amazon A+ content
- Create brand stores
- Get access to exclusive marketing operations
Selling directly via Amazon …
… is an important argument for an end consumer, because it creates trust. Various hedges like returns, uncomplicated transactions etc. are linked to this. Those who have already bought something on Amazon understand how important this argument is. You can completely rely on the fact that you won’t get into a business connection with a dubious retailer, which is certainly the strongest argument for Vendor Central.
The opportunities of A+ content …
… are another strong argument. A+ content is the significantly enhanced content in form of images, texts, descriptions, comparison tables etc. at the bottom of the detail product page. This option turns a product placement into a premium placement. Amazon offers templates for this purpose that you can easily select. These placements are useful for several reasons.
- The products that need further explanation can be described in greater detail
- The content shows all the product- and selling-advantages
- The comparison tables and other contents can be linked to equivalent, similar or matching products
- SEO-optimization, i.e. search engine optimization (for Google & Co.) and the internal Amazon search are both possible
- The enhanced content ranks higher in the search engine results
Our agency comprehensively takes care of this field. There is a lot of potential especially in A+ content. It is important to take care of, adjust and optimize it continuously. You can’t create an A+ content automatically by using an upload feature or API, it can only be created manually by a member of the staff. Even our products DYNAMIC PIM® and DYNAMIC DAM® can’t provide A+ content automatically, simply because Amazon doesn’t allow it. But we can create it anytime, because we have the right content-team for tasks like this. You need further information? Place your request here.
Brand stores …
… make sense for popular brands. They are designed in the brand’s CI and show all the brand’s products that are offered. Brand stores are generally linked to enhanced marketing activities (AMS = Amazon Marketing Services), which also makes sense. Banners and displays for example, which are displayed after the programmatic principle. If this makes sense or not, has to be decided individually in a cost-benefit analysis. Consumers often cast a critical eye over the principle of brand stores, because they appreciate the transparency when they are able to compare the competitors’ products directly. From the point of view of the brand owners this is a question of positioning. And, let’s not forget, there are still consumers with a great loyalty to a specific brand.
Exclusive marketing activities …
… are also part of the Vendor Central program and can be realized only there. In contrast, a Market Place seller has no such options on Amazon.
What does only Seller Central offer?
The upload of product data through API (technical interface) is possible in Seller Central – at least for the content, that sellers can publish in general, like images and general product information. So sellers are able to publish data very quickly and very efficiently.
This has often caused a great deal of annoyance of the 1P, who are actually Amazon’s top clients. It is quite possible to overwrite images which a brand owner has uploaded. Even the product description can be overwritten. The reasons for this aren’t easy to verify. One possible cause is that sellers sometime sell products that actually are not available on the German market yet. If the seller has bought the products abroad and sells them now through the German Amazon-platform, the related ASIN has already been generated.
1P and 3P generally share the product description (not the A+ content). But this also means that bad or false content or poor-quality text generated via machine translation are published as a product description. At the moment, this can only be solved through constant monitoring and constant updates. In cases like this our agency is well-prepared.