Why Authorized Reseller Programs Could Be the eCommerce Answer for Manufacturers and Distributors
Programs Offer Brands Control by Partnering with Distributors as Third Party Sellers
One of the first challenges for any building material manufacturer has with the notion of selling online is channel conflict. How does a brand go about selling online while not creating bad blood with their traditional distribution?
That same question leads to where does a manufacturer sell their products online to avoid the issue? Directly on their own branded web site or on existing marketplaces like Amazon or HomeDepot.com? While brands are tempted to say selling direct is the easiest road to manage conflicting interests, the reality of the investments in operations, support requirements and marketing budgets to compete with online marketplaces can quickly make selling direct a non-starter for many organizations.
Enter the argument for selling on a large, established online marketplace web sites
Online marketplaces are derivates of the retail sales channel and offer significant sales volume from a loyal customer base for a wide variety of products. In fact, Forrester Research expects that 48% of all retail sales will be attributed to online marketplaces by 2020. Thanks to Amazon and Prime membership status, who stacks the stats deck in online selling, marketplaces offer the most trusted online selling environment to consumers.
Online Marketplace Dominance: How Did We Get Here?
There are several factors that have led to the marketplace dominance in online selling, including:
The usability of a search engine – marketplaces allow easy, one-stop-shopping and push the notion of simple discoverable product listings.
Frictionless selling – marketplaces have worked hard to make the setup of selling on their sites very easy. In fact, sites like eBay don’t even require product listing development or assets. If the category exists, sellers can choose from a list of stock imagery and descriptions
Subsidizing from marketplaces – sites like Amazon or Home Depot invest heavily in offering better pricing, free shipping, more products and easy searchable products/user experience.
Ratings and reviews – possibly the largest contributor to growth because reviews build trust in the unknown. Recent studies show the use of customer reviews is still growing, where 81% of consumers say they’ve used reviews in the last 3 months (up from 59% in 2018)
Innovation to resolving issues – while purchase experiences don’t always go as planned, marketplaces invest in quickly handling and correcting any customer experience issues along the way. Amazon ranks highest in problem resolution, where 36% say their poor experience was “very well handled”.
The Downsides: With a Maturation of Online Marketplaces Come Challenges for First Party Brands
As the marketplace sales channel has matured, so have the challenges for manufacturers in managing and controlling their brand, pricing and product quality perceptions. Thanks to anonymity of 3rd party sellers and bot-infested price monitoring, online consumers seeking the lowest prices are often unknowingly purchasing counterfeit, damaged or discontinued branded product. The result is unhappy customers who leave scathing poor reviews that follow a brand for future customers to see.
There are several challenges in the marketplace environment for first party brand sellers, including:
Reviews are becoming questionable – thanks to bots and fake reviews, it’s difficult to know what in an authentic review. Additionally, the average rating scores are not an aggregate or true average---which is misleading. There are unclear mystery algorithms that determine average rating scores, including types of buyers leaving the review, how recent those reviews were, etc. There is even evidence that Amazon Sponsored Product advertisers have 2x higher rating averages compared to non-advertisers, all of which is deteriorating the value of a review.
Price management challenges – with price scraping software and bots, pricing is often automatically adjusted continuously by the marketplace algorithms in order to match or beat other listed prices. Amazon reportly changes pricing every 8-10 minutes. That creates a significant challenge for brands to manage MAP (Minimum Advertised Price) policies or offline pricing programs with traditional distribution.
Quality control problems – as mentioned previously, the product counterfeit issues. In fact, consumers are now more inclined to purchase products directly on a manufacturers web site when the brand value is high with the customer base.
Patent violations – Chinese counterfeit items are increasingly showing up on marketplaces at reduced prices and quality. In fact, there are several cases in court where issues and even fatalities occur with counterfeit items, yet the US-based brands are prosecuted because consumers don’t even realize the product was not authentic.
Data disadvantages – it is well documented that online marketplaces like Amazon are using every ounce of data from their users to capitalize on creating new private label products or using the data to help competing products drive more sales.
How Marketplace Authorized Reseller Programs are Helping Brands Get More Control
Similar to traditional dealer relationships, an authorized reseller is one that purchases official branded products directly from a manufacturer and is a partner with the organization to sell products on online marketplaces like Amazon.
Who Controls What in a Reseller Program?
The advantage to an authorized reseller program is control. The brand essentially controls the branded product listings, products sold and overall content while the authorized seller acts as the approved selling and fulfillment partner. The authorized seller, which can be selected group of distributors that have product knowledge and last-mile fulfillment expertise, are then left to sell and fulfill orders that occur from their product listings. Not only does this arrangement allow the brand more control for who sells their product, but it also sets the stage for pursuing compliance and legal removal of unauthorized sellers.
There are other details of the relationship that need to be defined and assigned to be successful, but that’s for another time---not in this article.
Authorized Resellers are the First Step to a Cleaner Online Channel
Pursuing a “clean channel” is the name of the game for brands today as the online marketplace challenges continue to rise. And Authorized Reseller Programs with online marketplaces is one way to start. Wtihout them, those first party brands find themselves often devalued by diverters, which are those wholesalers that are unauthorized or eroding the brand because they’re selling without the brands best intentions in mind.
There is a cause and effect to the clean up done by a brand in the online selling channel. As a result of getting only authentic product and brand representation in the space, in the longer term it positively feeds the Amazon Flywheel algorithms, helps increase pricing and margins, drives more buy box control, offers more negotiation and better visibility within searches.
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