Why Having Few Third-Party Sellers Increases Sales
If you rely on multiple third-party sellers to sell you products on Amazon, you may be unwittingly sabotaging your revenues. When cultivating a sales strategy for your product, it is key to understand how the number of sellers for each of your listings will affect revenues, brand image, customer service and pricing power.
While common wisdom might be that more sellers equals more sales, taking that approach could have the opposite effect. Using a larger number of sellers often gives you less control over key aspects of your listing including pricing, promotional activity, advertising and interaction with your customers.
The Multiple Third-Party Seller Myth
One of the most common misconceptions sellers believe is that having more sellers will increase the visibility of their product, and therefore boost sales. But, at its core, Amazon is a search engine that matches shoppers with the items they are searching for.
To be successful on Amazon, one only has to understand supply and demand. The demand for your product, and the number of times customers search for it, determines your ability to capture sales. Having more sellers of your products won’t generate that demand. But, developing thoughtful listings for those products where you control your product’s image, customer service, keywords and pricing will.
Below, we will chronicle the unintended consequences of using multiple third-party sellers.
Pushes Prices Lower
Enlisting several sellers for your product will cause those sellers to compete with one another to get noticed. The first way they will compete is by cutting the price they sell your product for.
The effects of such behavior could be catastrophic. Not only do unsanctioned price cuts eat into your margins, they could also violate minimum advertised price or MAP pricing, anger your vendors and spiral out of control causing your sellers to race to the bottom on pricing.
Advances in so-called “dynamic pricing” and Amazon’s Match Low Price feature mean that your sellers are alerted in real time when someone else lowers the price on your product, and they can then match that price or undercut it within seconds to stay competitive.
Cutthroat pricing typically also has the effect of tarnishing your brand image or making your goods look like that of discounters.
If you work with just one or two sellers, each can market your product and reap the rewards without having to compete on pricing. In return, you’ll have higher margins and won’t have to police multiple listings for MAP violations.
Inability to Coordinate Promotions
In a similar vein to losing pricing power, having too many sellers will prevent you from having a cohesive approach to running sales and promotions for your products.
Having a thoughtful and deliberate strategy to capture sales on Black Friday, Christmas, Amazon Prime Day and other seasonal events that cause shoppers to spend is crucial if you want to be a successful seller on Amazon.
Working with several sellers makes it near impossible to control how each of them rolls out promotions. They won’t coordinate with each other, since they will likely compete on price to direct buyers to their listing.
If you work with one or two trusted sellers, you can implement a cohesive strategy for your sales and promotions. Having each abide by the strategy you put in place will give you valuable data you can apply to future promotions.
Inconsistent Customer Service
Shoppers on Amazon are not always savvy about the backend of the process, and many assume that the person selling them their goods is the maker of those goods. If they have a question or issue with a product, they will most likely email the seller.
If you are using multiple sellers, there is a high probability that some may fall into one of several customer-service pitfalls such as not replying to a customer in a timely manner or providing poor customer service. Bad customer service reflects poorly on your product and brand, and can deter that customer from buying from you in the future or lead to negative reviews.
Dilutes Ad Spend
If you spread your product across too many sellers, it will result in each selling fewer units of your product. In return, sellers are less likely to redeploy the small sums they receive toward advertising that product.
Sellers are more likely to spend on advertising if the product is a big revenue generator for them and drives high volumes. If you have ten sellers selling 50 of your products each, none of them is likely to reinvest in advertising that product. But, if one or two sellers have complete market share for that product and sell 250 each, they have a greater incentive to spend money on ads to keep the sales coming.
Less Optimized Listings
Writing a listing that is both accurate and detailed is vital to match buyers up with your product when they are searching Amazon. This includes special attention to product title, description, identifiers, branding, color, etc. It also requires being savvy about search engine optimization, or SEO, so that your product listing has all of the necessary keywords to direct buyers to your product.
If you are working with multiple sellers, it is unlikely that any one of them will take the time and effort to create an optimized listing. As we mentioned earlier, Amazon is essentially a shopping search engine, so finding the right seller who knows the science behind creating an optimized listing and has the SEO capabilities to drive shoppers to your product can cause sales to soar.
Quality over quantity when choosing third-party sellers is one of the best ways to guarantee your future success. Working with one or two trusted sellers on Amazon ensures that you have end-to-end control of your product, its brand image, pricing and other factors.
This will take some legwork at the front end of the process to properly research and vet your third-party seller’s SEO strategy, approach to customer service and willingness to help create a cohesive plan to sell your products. But, the due diligence at the initial stages will prevent lots of problems down the road and is a vital step to being an effective seller on Amazon.
Rudderr is an eMarketplace solutions provider with extensive experience on Amazon.com and other online marketplaces. We add value to your brand by monitoring MAP pricing violations, optimizing listings with keywords and using data to develop your sales strategy, among other services.