How Brands Can Beat Third Party Sellers on Amazon
Amazon has become the largest Ecommerce platform globally. There are millions of sellers in the ecosystem of Amazon trying their best to capture market share and customers.
When you start selling on Amazon as a first-party seller, you can face certain problems like competition with third-party sellers.
What is a 3rd Party seller?
First party seller is a manufacturer of the brand selling inventory directly to Amazon, which afterward is sold to customers by Amazon. These items are labeled with "Ships from and sold by Amazon.com." In this scenario, Amazon is considered a merchant of record (MOR), which means the legal owner of inventory.
The second party seller is the Amazon supplier, not the product manufacturer. Amazon uses 2p sellers to supplement its inventory. These items are also labeled with "Ships from and sold by Amazon.com."
The sellers using the Amazon platform directly to sell their products to consumers are third-party sellers. These items come under the label "Ships from and sold by the retailer" or "Fulfilled by Amazon." 3rd party sellers acquire their inventory directly from product manufacturers or retailers.
64 percent of the global e-commerce sales are generated through third-party sellers. Based on Amazon Algorithm, 3P sellers' items will rank high because they have more customer base and higher sales ratio. But you can take advantage of certain important things on Amazon to compete against these 3P sellers and gain market share.
Winning the Buy Box
Whether you are 1st party or 3rd party seller, if you control the buy box, Amazon will suggest your products to shoppers as trustworthy and Amazon-approved. If a 3rd party seller controls the buy box, it will take away the sales from the 1P seller. Two threats can make you lose buy box: out of inventory and undercut on price.
There is a term called "Lost Buy Box due to price." For avoiding this from happening, you should keep your LLB rate below 3 percent. If it's above 3 percent, then it can have a damaging impact on your conversion rates and ranking.
When you get out of stock, the third-party seller can take your place on the detail page section of Amazon. It is vital to create a reliable supply chain for winning the Buy Box. If you can't fulfill orders, another will come in your place to do so.
If you want to maintain your business market share, then controlling the supply chain and managing product variants on Amazon is very important.
Controlling Supply Chain
The ultimate tool to compete against 3p sellers is by controlling the supply chain. Identify those 3P sellers that are selling your products on Amazon. Then explore from where they are sourcing their stock. You can get cheap stock from those suppliers and compete with 3P sellers.
Limiting Promotions: Amazon 3P sellers’ sales are increased significantly in the promotional period. When resellers witnessed massive discounts, they used to buy bulk quantities of that product at heavily reduced prices. When you do this, the cheap stock is flooding the market. Resultantly, when the promotion is off, 3rd party sellers can undercut prices for a longer time. The solution is setting limitations: when you introduce promotion on Amazon, introduce per customer limit for ensuring that customers can buy up to a specified amount.
Catching Counterfeits: One more risk is counterfeit merchandise. You must keep noticing Amazon's search page for intellectual violations or copyright and report them if you find anything inappropriate.
Brand gating: If you made every possible effort to control the supply chain but still lose your buy box, start trying brand gating. You can negotiate with Amazon in creating a barrier for 3P sellers to sell through your listings. It can discourage resellers and counterfeits from targeting your brand.
If you want to sell Amazon business, you must have strong supply chain management to get an attractive price for your business.
Management of Product Variants
Amazon highly discourages duplicate pages in search results. It’s up to the brands to remove duplicates and manage different product variants. The conversion and search rank of the product is improved by combining your product variants (different colors, sizes, and shapes) onto a single page, easing consumers to browse every option available. It will improve performance when shopping is done on one single page, sales are increased, and collects all reviews on one single page to provide useful feedback by customers.
When your product variations are combined, you can request Amazon to merge 3p ASINs into your detail page. It will benefit you by controlling your brand and increasing the search ranking.
Millions of people search for online products on Amazon, and it's very hard to maintain a strong competitive position as a seller. You cannot compete with every 3rd party seller and take their market share. Following the strategies mentioned above can help you see the right direction of competing with 3rd party sellers.
Having control of your product page, maintaining strong performance in search results, improvement in the supply chain and a bundle of positive reviews can turn your sales higher. Regardless of the number of 3rd party sellers operating on Amazon, if your management strategies effectively control your brand, you succeed.