5 Key Challenges Household Brands Face on Amazon

6 mins read

Houshold Brands, from icons like Nike and Addidas to children’s favorites like Disney and Unversial, sell huge quantities of physical products across mass retail and via their own direct to consumer websites.

So why is it so rare to see these, and other household brands appear in Amazon for high demand products?

Why when we search for "Soccer Gloves" do we see 9 out of the top 10 selling based in China, with often unpronounceable brand names?

01. Amazon Isn’t Always the Top Priority: Is It Worth the Effort?

For many brands, selling on Amazon presents a different beast compared to traditional brick-and-mortar retail. Each product requires tailored content, a launch plan, and a ranking strategy. While these skills can be acquired, brands with limited product ranges might find the overhead costs of managing such a team prohibitive.

Moreover, many third-party agencies levy fees that erode the already thin margins left by Amazon. Brands bear inventory risks and expect decent returns, but is a 20% margin, minus management costs and stock risks, enticing enough? For most, it isn’t.

However, in scenarios where a brand’s product perfectly matches a search query, the profits can be substantial, especially in niches with limited physical retail presence.

For instance, think of an iPhone screen protector—a product many would instinctively search for on Amazon because of the deep range of options, low price point and next day delivery. The established brands are conspicuously absent.

02. The Control Conundrum:

At its core, Amazon is a marketplace, enabling anyone to list and sell products. This openness means that if a brand introduces a new product, any seller sourcing that product can list it, potentially at a lower price.

This unpredictability makes revenue forecasting challenging and can diminish the value of a brand’s offering. Brands with diverse revenue streams for a single product offering face this issue more than those solely focused on Amazon.

If the brand holder takes an ‘Amazon first’ approach to selling they would split their SKU’s and secure the benefits from both retail and online sales – this is not a straightforward process and requires input from all aspects of the production and marketing team.

However, brands can employ strategies like gating, using transparency barcodes, or refining distributor agreements to mitigate these challenges, albeit at a potential cost and with enforceability issues.

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03. Does Amazon align with the Brand Core Values?

Would luxury brands like Gucci or Chanel wish to be showcased next to lesser-known brands?

Even as more customers flock to Amazon, some brands might hesitate to list on what they perceive as a discount-driven platform. Amazon’s pricing policies, which can suppress offers priced higher than those on other platforms, further complicate this.

For certain brands, the solution might be highly selective with their product listings or simply recognizing that Amazon might not align with their brand image.

04. Direct-to-Consumer (DTC) and Fulfillment Challenges

For brands already engaged in DTC sales, Amazon’s logistics are straightforward: pack products per Amazon’s guidelines and replenish stocks at regional fulfillment centers.

However, brands without a DTC setup face a steep learning curve. They’d need regional warehouses and dedicated teams to manage Amazon inventory. Given these requirements, some might deem the investment unworthy.

05. Dedicated Advertising and Listing Management team

We’ve touched on before the importance of the Advertising on Amazon, but in 2023 and beyond this is becoming increasingly important. Brand owners need to monitor the ad spend on a daily basis on a granular, keyword level.

Advertising on Amazon is pivotal, especially as we move forward into 2023. Brands must monitor ad expenditures daily at a detailed keyword level. With Pay-Per-Click (PPC) expenses pushing Total Advertising Cost of Sale (TACOS) to 10% in competitive sectors, success mandates an expert advertising team deeply familiar with Amazon’s nuances.

In a Conclusion

Established household brands have enormous potential on Amazon, but they do face some challenges when it comes to setting priorities, maintaining control, dealing with Amazon’s reputation, handling logistics, and mastering advertising. Succeeding on Amazon requires a strategic approach and a deep understanding of how the platform works.

If you work with a household brand looking to increase their exposure and sales on Amazon, please get in touch with us.