The Importance of Product Differentiation

Attention: Amazon Vendors — Embrace Product Differentiation Before You Consider Abandoning the Vendor Central 1P Ship.

If you work, support, or frequently talk with Amazon vendors (those whose products are purchased directly by Amazon) you’ll note that the biggest challenges (in no certain order) are profit margins, annual cost increases during AVN, and the creeping sense of doom. Semi-kidding about the doom.  To be more precise, vendors tend to share the pervasive feeling that – compared to Amazon 1P – there must be more advantageous sales channels and/or a better business model than Amazon 1P. 

While it might seem easy to offer or suggest a range of solutions based on the challenges noted above, the reality is that every brand, product category, and scenario includes nuance and complications. 

“Should a brand sell on every marketplace, and leverage marketplace diversification to prevent or mitigate Amazon dependence?”

While it might sound compelling to sell every item in your catalog everywhere.  Please proceed with caution! Experienced vendors, who’ve been there and done that, will no doubt perk up with the understanding that complete marketplace diversification has the potential to create a problem capable of quickly growing to the size of the Incredible Hulk.

Amazon is no longer the only game in town. Over the last five years or so, numerous other retailers have created dozens of online marketplaces that enable product-buying customers to not only just buy in-store but to buy online and pick up same-day in a preferred parking “fast lane” or just like Amazon, purchase online for home delivery. 

Be careful what you wish for. Since Amazon is no longer the only (or primary) marketplace for vendors to sell via a “platform” – there are hazards many have not fully considered. Products being spread across multiple markets almost always negatively impacts 1P vendors. 

Here’s why: Unless vendors have truly differentiated their products by sales channel, any level of product similarity will immediately trigger Amazon’s price-matching web spiders and algorithms. From a product-purchasing customer’s perspective, you can almost always guarantee that Amazon’s price will be the same if not lower than other online marketplaces.  Here’s how Amazon speaks to that: “We constantly compare Amazon’s prices to our competitors’ prices to make sure that our prices are as low or lower than all relevant competitors. As a result, we don’t offer price matching.”

What they fail to mention is that they are constantly scouring the web to ensure that prices for every ASIN are not being undercut by other retailers for the exact same SKU.

What’s a Vendor To Do?

While we are pragmatists and realists, we know this next suggestion will take time.  But with that said,  we firmly believe that Amazon 1P vendors must ensure that every product sold on every discrete sales channel should include unique and different packaging while at the same time eliminating all duplicated data points.  This means by channel, a product should not share similar descriptors such as barcodes, GTINs, or SKUs

It’s a really big ask.  We get it.

But we’ve seen this pay major dividends, here are the tactical elements to keep in mind:

  • Be sure you understand your best-selling items based on each unique sales channel and do all you can to differentiate those items to ensure there are not comparable and/or used against you, as the vendor, by any platform.
  • If your products are found to be similar, Amazon will match the lowest price which means your margins decrease. 
  • Differentiate your product’s packaging, the item’s name, and even the colors of the products for each sales channel. Not only does this help to make price matching more difficult, but it also provides vendors a quick visual tool for identifying “leaky” sales channels (for example, now you can see when/if a Walmart-only SKU appears on Amazon). 
  • Create bundles to develop an additional layer of differentiation for each channel and then relaunch the most successful products as Amazon exclusives.  

Differentiation of product selection is a powerful tool and the first step to creating (and sustaining) better margins on Amazon. This process takes time, capital, and long-term planning.  But getting it right will help to ensure that your business is running efficiently as possible.

Please reach out to our team today!  We’d love to hear your questions about this latest post.


2023 Prime Day Prep

Can you believe it’s already the second week of May? If you are thinking about what exactly, is looming for the next 90 days, we hope you can say Prime Day preparation has been completed. If not, please note that the submission window for Prime Day member deals and lightning deals has likely passed by the time you read this. 

When is Prime Day 2023? Amazon has not officially announced this year’s date for Prime Day, but increasingly, it looks like smart money suggests it will happen during the second week of July. 

So what must a 1P vendor do to prepare for Prime Day 2023?

  1. Evaluate the product detail pages for all of the promotional ASINs. 
  2. Plan for inventory demand before Prime Day.

Product Detail Page (PDP) Evaluations

In preparation for Prime Day – 14 days to go:
  • Are there any incorrect variations listed on this ASIN? Ensure that only the correct variations are linked to the Parent ASIN. 
  • What is the current share of voice for this product, organic versus paid? Are customers currently finding this ASIN through search advertising only, or is it due to high rankings for specific keywords? 
  • Check keywords to ensure that customers can find your products quickly. Video content on the product detail pages drives conversions. 
During the days leading up to Prime Day:
  • What, if any, content for your Prime Day ASIN(s) has changed – including reviews, stars, and customer questions?  Stay on top, and create a baseline.
  • What are the competitive changes related to the share of voice and/or deals offered for similar ASINs by competitors?
  • 3P offers by ASIN – did any of your partners sell below the minimum advertised price?
  • Were there any pricing changes in the preceding days on non-Amazon websites? Ensure that buy box suppression is not accidentally triggered by another promotion. 
  • Total price change per ASIN – was pricing elasticity upwards or downwards?

Inventory demand

  • Look at your forecasts for July – do you have enough stock in FBA warehouses, and have you also planned for a spike in sales? Amazon will enforce chargebacks and reroute customer traffic if your product is out of stock. If needed – plan to drop ship merchandise to FBA warehouses.
  • Reserve a specific amount of stock that you can dropship. 

Let Equity Commerce help you ensure that Prime Day 2023 is a success.  Reach out today.