Selling on Amazon as Big Brand vs. as a Challenger Brand

Moving from Goliath to David

Introduction

I’ve spent a long-time running Amazon business for brands as 2021 marked my 5-year anniversary in the Amazon Seller world but have have varied experiences. My experience spans two dramatically different types of organizations, and like most things in life those experiences are not created equally. In this article, I am going to walk you through the benefits and challenges of operating as both an established brand and a startup. Now - let’s get into it…

Operating as a Big Brand

My first experience with Amazon was helping an established CPG launch their items onto the marketplace. Amazon would be a new channel for the company, but the business had some built-in advantages. Almost all the company’s major products already had listings with 1,000s of reviews on the platform. This meant that we could avoid some of the procedural steps including gating, item set up and we were able to focus on advertising, branding, and product development — core competencies within larger consumer organization.

Benefits of Being a Big Brand

Infrastructure

Established companies have processes and shared service1 aspects of the company that can be tapped to support new channels. If you are running the Amazon business but aren’t an expert in supply chain - not a problem, there is a team in place. Need documentation on an item - that already exists. You do not need to create something new each time you have an issue, which will free you up to keep driving your business.

Advertising Budgets

The biggest benefit of working for a large organization is the marketing budget. Big companies expect to spend money on advertising and are less rigorous when measuring performance. Obviously bigger ad budgets are helpful for driving traffic and can help to kick start a sluggish sales trend, but the real benefit is access. Once you start spending a meaningful amount of money in advertising, you get face time with account managers and advertising executives. The goal of Amazon’s ad team is to help educate advertisers on the benefits of the ad products and to convince you to spend more money on advertising. While these discussions can be an elaborate sales pitch, you can use these conversations to your advantage. By having access to an ad exec, you can call an actual human being on the Amazon side to help you resolve your issues which is a huge benefit.

Brand Awareness

Generating awareness and trust in your brand is a major challenge for most sellers on Amazon. Having an established brand with years of history and customer trust will help to get your business off to a fast start. Having brand awareness will also help you accelerate new items, review velocity, and provides low-cost / high converting branded traffic.

Challenges of Being a Big Brand

Poor Existing Processes

The downside of having existing processes is that they are hard to change. If the organization’s value chain has been built to support a retail store model, it will be hard to shift fulfillment from bi-weekly trucks replenishing stores to small parcel direct to consumer fulfillment. Additionally, product development processes typically have longer lead times in larger organizations, leaving you challenged when trying to pivot and capitalize on changing product trends.

Brand Perception

While brand awareness is typically viewed a good thing, it can be a limiting factor as well. If your brand is viewed as antiquated, or if customers have had negative prior experiences you will need to work on changing that perception. The good news is that you can change perception and draft off Amazon’s halo of customer service excellence.

Buy Box Competition

One of the benefits of being an established brand is preexisting demand…this is also the problem. Other sellers will find ways to buy your product through discounts, wholesalers, club discounts and markdowns then list the item for sale on Amazon. This is commonly referred to as Retail Arbitrage and will materially impact your Buy Box percentage and ability to capture sales. There is not much that is more frustrating than someone else reaping the rewards of the demand your brand created.

Operating as a Challenger Brand

Working at a startup is fun — you get to go from being a manager to a builder. You are responsible for building process, product development, and customer service — all of which is incredibly exciting but not without its issues. 

Running your own business is hard, and building your own business is even harder — the romanticized versions of entrepreneurship on TV does a fairly accurate job portraying the exciting aspects, but don’t come close to explaining the downside. Here are the facts on what it is live to be a challenger brand on Amazon.

Benefits of Being a Challenger Brand

Develop Your Own Processes 

The benefit of working for a nascent business is that you can develop processes and operating procedures from scratch. You will not be hamstrung by the way things have been done in the past and can create the way in which your business should operate in today’s world.

Ability to be Nimble

Being small may be a challenge when looking for advertising dollars but is a comes with some advantages. Small businesses are typically nimble which is a major advantage when it comes to innovation. Less layers of corporate bureaucracy and approvals leads to shorter lead times for product development and finding new marketing tactic to drive awareness for your product. Remember - products and ideas are much easier to be approved when you are the one making the decision. 

Closer to the Customer

In a smaller company it is the norm that employees wear multiple hats. This means that the marketing team helps with customer service and that the finance manager packs customer orders on busy days. All of which brings each employee closer to the customer. Knowing your customer better leads to improved levels of customer service, better insight into the market and improvements in your marketing and messaging strategy.

Challenges of Being a Challenger Brand

Limited Resources

This should seem obvious, but new brands are typically not flush with cash. Having to choose between additional marketing spend and making payroll isn’t much of a choice at all. The inability to spend will limit your way to quickly test, learn and integrate or squeeze your competition out of a niche.

Split Focus 

We mentioned that wearing multiple hats and being closer to the customer was a good thing — and it is, but it’s a double-edged sword. By having to split your focus you will not be giving 100% of your time to any one issue while the bigger players have specialists for each function.

No Support

New brands get less support than the big boys on Amazon. There is some support available, but the experience for most sellers is they need to figure it out on their own. That means no interactions with account managers or ad executive to help solve a problem or fix a suppression, and the never-ending fun of dealing with seller support. There is a positive aspect to all of this — learning how to work these processes yourself will make you a much better seller and will teach you how to better operate on the platform. That’s a big way how the best sellers beat and compete with the bigger brands over time.

Key Learnings

After sitting on both sides of the fence, there are a few key takeaways that hold true regardless the size of your business.

• You Can’t Succeed Through Advertising Alone: Advertising alone is not the way to build long term success on Amazon. You really need to focus on building your and customer base by focusing your efforts on the point of purchase — your images, product title, bullets, and A+ content, and product packaging. Think about how you can communicate your warranty & return information. You will achieve a substantially greater return by focusing on this part of the purchase funnel.

• No Detail is Too Small: You need to be all over the details. From responding to performance notifications to managing your FBA replenish process you can’t miss a beat. I’ve had issues where I was late response to a notification which resulted in the suspension of an item. That might seem like a small issue, but they compound and if that continues to happen the result will be lost unit velocity and lower BSR rankings from which it is a massive challenge to recover.

• The Truth is in The Data: Tracking your key metrics is an obvious part of running any business, but victory is found in the organization of the non-obvious. Remember, if Amazon gives you the ability to pull a report on it, they track and value that metric themselves. Track everything from PPC to reviews and analyze the trends frequently.

• The Best Way to Grow on Amazon is to Grow Off of Amazon: It’s expensive to advertise on Amazon, and hard to get the attention of customers in the digital bazaar. You need to be ready to think across all customer touch points to build awareness demand for your product. Customers exist digitally across more than just Amazon and it’s important to think broadly when trying to build a following for your brand.

Most importantly, regardless of what side of the fence you sit on, remember there is success to be had, just make sure you are aware of what you need to overcome to achieve it.

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