One of the bigger stories of 2018 was Amazon shifting many brands to the Vendor Success Program, and as a result, taking away their Vendor Manager. This caused a great deal of consternation amongst brands, who saw their 7-figure revenue stream suddenly managed not by a human, but by an algorithm.
This is the new future
This is a trend we expect Amazon to continue, to expand, and to evolve. Amazon has been using algorithms to automate inventory decisions for several years now, with great success. Brands have seen their weeks of supply go from 10 weeks, to 6 weeks, to 2 weeks, with the algorithms driving these reductions. Pricing has been driven by algorithms far longer, with Amazon basing its pricing on the lowest price it can find elsewhere on the internet. In Amazon’s eyes, these are efficiencies, all created without any reduction in the consumer experience.
Becoming a Seller is more attractive
Brands should consider this an opportunity, rather than a punishment. There’s been no better time for brands to explore a Seller, or marketplace, relationship, as opposed to a Vendor, or wholesale, relationship. Sellers have far more control over their business than Vendors do. Above all, Sellers have full pricing controls, and no longer need to worry about what happens when Amazon’s algorithm drops the price far below MAP. In addition, tools ecosystem for Sellers is much more robust, with many services giving advanced analytics based around sales results.
Being a Seller used to come with many downsides, but Amazon has been working diligently to bring parity to the system. Using the Brand Registry, Sellers can own their brand on Amazon, controlling the Product Detail Pages and building a Stores Page. Registered Brands also have more access to Amazon’s display ads. Combine this with the ability to remain Prime-able via FBA, and being a Seller is an attractive proposition for brands that have lost a human to negotiate with at Amazon.
Even if you are maintaining your relationship with your Vendor Manager, we recommend taking a hybrid approach to Amazon. Odds are, most of your interactions with your Vendor Manager are for the same products, and the same concerns. You’ve “CRaPed” (can’t realize a profit) out, or your price has fallen too low, or they didn’t listen when you anticipated a surge and now you’re out of stock. For these products, you should consider selling on your own. The pricing and CRaP problems disappear, and by controlling your weeks of supply, you can be much more nimble around surges you’ve forecasted that Amazon won’t.