Here’s How Beauty Brands And Agencies Think Amazon Should Change To Enhance E-Commerce Competition
In a landmark lawsuit against Amazon filed last month, the United States Federal Trade Commission is accusing the e-commerce giant of overcharging sellers on its platform and preventing them from lowering prices, among several activities it deems monopolistic, to stifle competition.
As Amazon holds its two-day Prime Day sales event, for the latest edition of our ongoing series posing questions relevant to indie beauty, we ask nine Amazon agency leaders, beauty entrepreneurs and brand executives the following questions: What’s been your experience on Amazon? If you had the power to change its practices, what would you improve to make Amazon more favorable for sellers and e-commerce in general more competitive?
- Vanessa Kuykendall COO, Market Defense
After helping 100 beauty brands on Amazon, I have lots of examples where Amazon was difficult, frustrating and confusing, but I don’t think Amazon is a monopoly. The FTC claim that Amazon overcharges sellers does not ring true for our experience in the prestige beauty category.
When managed well, a brand’s margins mirror their margins at other beauty retailers, and the opportunity Amazon provides to acquire new customers is so much larger. Brands can really control their presence on Amazon: They can communicate directly with the consumer, they can host Live programs, they can create a beautiful storefront that rivals their website. It is expensive to sell on Amazon, but there is great value in the tools and reach they provide.
The claim that Amazon makes it difficult to offer a discounted price on other retailers is absolutely true. If Amazon crawls the internet and finds that you are offering another retailer the same product at a discount, they make that product less easy to find for customers and adds extra clicks before they can add it to their basket.
To remedy this, brands have to drop the price on Amazon to match or suffer through a big drop in sales while their other retailer is discounting. It really does make it a challenge for brands to offer each of their retailers a special promotion.
If this lawsuit was successful in putting pressure on Amazon to make only one change, ending the practice of suppressing the buy box would be the most meaningful for beauty brands. They would be free to offer friends and family events to all their channels without fearing a drop in Amazon sales. Amazon may not like it, but the beauty consumer would benefit.
We've been selling on Amazon since 2016, and I think it's safe to say that the platform today is completely different than what it was when we started, mostly for the better.
It's been a long, bumpy road as an Amazon seller. There have been many struggles over the years, one of them being the unfortunate experience of having certain product listings potentially de-ranked by the algorithm if/when it detects a lower price on another platform. We've also felt over the years that being a direct-to-consumer or Shopify brand was at odds with selling on Amazon.
That being said, a lot of that has changed for the better. Amazon has become more communicative with its sellers and built seller outreach programs, and with tools such as Buy With Prime on Shopify, it feels like now more than ever, Amazon is supporting its sellers.
In summary, one way Amazon could enhance the experience for sellers is by sharing more data with them. This data would enable sellers to make more informed decisions to better serve their customers.
Additionally, it would be beneficial for brands to have the flexibility to adopt a more omnichannel approach without the constant pressure of maintaining the lowest price on Amazon.
- Jacob St John Founder, Navigo Marketing
While Amazon's dominance in e-commerce is undeniable, it's essential to acknowledge the presence of formidable competitors like Walmart and Target. One common concern is the high fees Amazon charges sellers, though these fees are comparable to other platforms like Sephora and Ulta, which purchase products at a 50% discount.
Amazon is not a place for low margin products. Its referral fees and shipping fees make it difficult for bulky or inexpensive products to succeed on the platform, but that concept will hold true on any similar online platform.
One significant pain point our agency has experienced across more than 100 brands is Amazon's “Favored Nation” rule requiring the lowest market price. This rule suppresses the buy box, limits advertising and negatively impacts brands.
Addressing this rule would be the most impactful change, especially when external promotions like Ulta's Fall Haul disrupt brands' Amazon channels, forcing them to either accept losses or engage on Amazon.
- Joseph Maine Co-Founder, Trademark Beauty
We firmly contend that Amazon's fees are exorbitant. We also partner with wholesale accounts that pay half the retail price for goods, impose extra fees and demand advertising expenditure. In both scenarios, the customer isn't truly yours.
I find it surprising that the trade commission believes they have grounds to pursue a case against Amazon, yet not against other major U.S. retailers.
A more pressing concern is that Chinese manufacturers utilize Amazon's data to replicate products and sell them directly to consumers on the platform. This allows them to offer products at reduced prices, outpricing American businesses.
Amazon has devalued the significance of brands and paved the way for direct sales from foreign manufacturers. Such a trend poses a significant threat to the U.S. economy and its job sector.
- Laura Meyer Founder and CEO, Envision Horizons
While I don't support breaking up Amazon, I do hope for positive policy changes. They've already dropped the planned fee for sellers using their own fulfillment.
Amazon's price-matching policy is a challenge for brands on Vendor or Seller Central, but it's not unique to Amazon. I'd like Amazon to allow brands to transfer genuine DTC site reviews to their Amazon page instead of relying solely on Amazon-generated reviews. The current system hinders new brands and rewards review manipulation in some cases.
- Abbie Mietz COO, Fairy Tales Hair Care
We have experienced challenges with Amazon regarding pricing as I’m sure most brands have as well. While Amazon offers a competitive platform to sell products on, the guidelines on which you are awarded further marketing and promotional privileges are subject to the brands willingness to compromise on pricing.
Amazon favors the lowest price sold online no matter who it’s offered by. They don’t take into account the validity of the 3P [third-party] seller, including considering how many pieces are available, shipping methods and seller rating. This lack of consideration forces brands to evaluate pricing concessions in order to keep the buy box, which drives traffic to the brand’s listing.
This is an unfair practice and needs to change. Brands work hard to build a pricing structure that works for all levels of distribution, and when an online retailer continues to push MAP [minimum advertised price] lower, everyone loses, most importantly the brand. In a perfect world, we would love to see brands have the ability to dictate their own pricing and promote as they wish according to the brands needs and budgets.
If you are a brand owner selling on Amazon, you should have preferential treatment on your ASINs. [Amazon standard identification numbers]. The buy box should be tied to said brand owner, not to the 3P seller that is discounting your own products on any given day. While we understand the free market strategy, there should be pricing parameters that consider MSRP [manufacturer's suggested retail price] and MAP.
- Lisa Richards Founder and CEO, RPZL Hair Extensions
At this point, Amazon has become a loss leader for RPZL—it is the only platform we are not profitable—since Amazon seller prices are too high coupled with pricing and other mandates. I’d love to see more favorable business terms/seller fees, especially for new businesses/startups. It would be great to give startups a better term for a year to compete in this landscape.
Also, they should be more reasonable with “small and light products” rather than charging the same shipping and packaging pricing as large and heavy items. Think of it as shipping and handling a lip balm versus a lawn mower, yet seller costs are the same!
My perspective largely aligns with an overarching theme that has persisted over the years. Amazon has undeniably revolutionized the e-commerce landscape, offering unparalleled convenience and accessibility to consumers while providing a remarkable platform for small and medium-sized businesses (SMBs) to distribute their products and establish entrepreneurial ventures.
The fundamental issue lies not in Amazon's existence, but rather in certain policy shifts and a perceived lack of support and transparency, which can give the impression of predatory behavior or rule changes that primarily benefit Amazon. However, the reality is often somewhere in the middle.
It's crucial to acknowledge that Amazon is not always solely to blame for the challenges faced by sellers. For instance, when business models like drop-shipping gain traction, they tend to become saturated and competitive, making it less easy or economically viable for newcomers compared to when the opportunity first emerged.
In this evolving e-commerce landscape, it's imperative for Amazon to improve its support, fee structure for sellers and enhance transparency in its policies. Additionally, sellers like us need to be proactive in understanding market trends, P&L and anticipating changes. Therefore, it's a shared responsibility to strike a balance that fosters healthy competition and sustainable growth in the e-commerce ecosystem.
- Xin Shui Founder and CEO, Filterbaby
Innovation Is Key: You need to keep innovating a product to stay relevant on Amazon. The need for PPC [pay-per-click] ads is mandatory these days in order to stand out and compete yet those costs/CPC [cost per click] are getting higher than in the past.
Reviews: Securing reviews, especially as a new brand, is more difficult as it's a closed platform. You cannot import/migrate reviews from your own website.
Amazon Picks: If your product does well, and you sell out as an “Amazon Picks,” a similar product is shown to customers, basically hijacking your product page which makes it hard to revert to when stock becomes available.
Price: It has become more expensive to do business on the platform as the listing fees are increasing on a regular basis.
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