How Amazon Is Putting Its Sellers in Peril

It threatens not only other ecommerce retailers but also brands using the platform

43% of online purchases were made through Amazon in 2016. Getty Images
Headshot of Erik Huberman

Rarely does anyone write about Amazon without including the word “giant.” Research shows that 43 percent of all online retail purchases were conducted through Amazon in 2016. Incredibly, this scary growth continues as Amazon’s net sales grew by more than $10 billion between the third quarters of 2016 and 2017.
Just because something is big and intimidating doesn’t mean you should quake in fear when interacting with it. But if you don’t want to be swallowed up by Amazon’s unwieldy power, exercise caution when partnering with the giant.
As CEO of Hawke Media, I deal with Amazon in one capacity or another every day. I’m fully aware of its power and admire a lot about its model. Yet, despite continuously growing revenue, signs say Amazon is evolving into more than just a threat to competing ecommerce retailers; it may also be growing into a threat to the very brands that sell on its platform.
Recently, a client of ours who is an established vendor on Amazon was told that Amazon would feature one of its consumer electronics products in a special promotion. After spending weeks setting up interconnected campaigns across channels to make the most of the opportunity, the product simply wasn’t included in the promo.
Amazon provided no explanation and didn’t even mention this to our client.

Signs say Amazon is evolving into more than just a threat to competing ecommerce retailers; it may also be growing into a threat to the very brands that sell on its platform.

I began considering all the ways Amazon could be misusing its power, which led me to Adi Govindarajan, a Hawke employee who deals with Amazon regularly. My question was, “Is it really worth it for all ecommerce companies?” Here’s what we found after investigating the matter together.

Amazon says goodbye by drinking your SEO juice

Should you decide to leave Amazon, it can turn against you by keeping your products indexed on its pages and ranking against you while sucking all the SEO value from your product. Even if you’re marketing your product elsewhere, you’re going to struggle to overcome Amazon’s dominant SEO value, meaning you’ll lose traffic to Amazon for your own product.
It’s not uncommon to work out deals with other retailers and tell them they’re not allowed to index for your product. Better yet, retain your own separate website and branding for extra layers of credibility, authority and control.
With your own distribution channels and customers, you can achieve a fully independent store presence and market to large audiences outside of Amazon. But if you sell direct-to-consumer yourself and control your online distribution yourself, you have to get your own customer. So where is the cost benefit for you?

Amazon markets against leavers using big brands

Reduced SEO traction may not be the only reason you could regret leaving Amazon: The platform can use your indexed pages to market competitors products.
Say I’m browsing for sneakers and stumble upon your awesome kicks, but you’re no longer a seller. They’re marked out of stock. But they’re not. You just aren’t on Amazon. Then Amazon recommends Nike. I like the brand, so I’m going to buy those sneakers.
Fact is, bigger dogs almost always win, especially if your product is solely for lifestyle purposes and not need-based, like much of what’s offered on Amazon. What’s more is that the environment stokes unhealthy competition: Other sellers can undercut your prices then pose as dissatisfied customers in your reviews. Double whammy.
You might be better off driving organic growth a healthy distance from Amazon rather than risk having inherently unfair competition on a platform that blocks buyers’ views even after you’re gone.

Amazon may put you in competition with its own product

Don’t forget: Amazon is also a trader—a giant one that may engage aggressively.
Other clients of ours can’t even feasibly win the “buy box” for their own product on the platform because Amazon puts its own product up against it or gives the buy box to the wholesaler selling your product at the lowest price.
Again, it’s important to know what you’re selling and to whom. If you sell luxury or lifestyle products, Amazon won’t help craft your unique brand image or magically make you money. In this situation, there’s no cost benefit—you’re just giving away margin. Take your business elsewhere.
These phenomena may or may not be intentional. Maybe Amazon will become more considerate of its sellers as it grows. For now, to avoid being cast out (or undercut), figure out how this tricky platform will work for you. You have options. Decide carefully whether to let a giant play around with your brand or diversify your distribution channels.

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@ErikHuberman Erik Huberman is founder and CEO of Hawke Media.