James Thomson spent six years as head of Amazon Services, which recruits sellers to Amazon’s marketplace. He is now co-founder and partner of Buy Box Experts, a consultancy, and co-founder of Prosper Show, an annual conference for Amazon sellers. His book, “Amazon Marketplace Dilemma, A Brand Executive’s Challenge Growing Sales and Maintaining Control,” which he co-authored, was published last year.
I recently spoke with Thomson about Amazon, his book, and the realities of selling on the marketplace. What follows is a transcript of our conversation, edited for length and clarity.
Armando Roggio: Tell us about your background and your company.
James Thomson: I worked for Amazon for six years on third-party seller issues. I now run a company called Buy Box Experts, which is a consulting agency that helps brand executives think through their strategy for selling on Amazon. We also do a lot of implementation work helping brands run their first-party and third-party businesses.
What we’ve experienced is that lots of brands would like to sell on Amazon but don’t necessarily have the talent in-house. They’re trying to figure out how to manage this channel without hiring employees.
Roggio: Your book addresses those challenges.
Thomson: There’s a number of options available for brands on Amazon. We use the book as an opportunity to present six different options and the trade-offs across those options. I have a bias towards companies having more control over what happens to their brands. But I recognize that some brands are quite happy just to sell the product and get whatever revenue they can.
We want brands to know exactly what they’re getting themselves into so that when they make a distribution choice, they understand the ramifications.
And whether they like the ramifications or not, at least they understand what they are. That’s the critical part of the book, helping brands understand two major problems. First, your brand will be sold on Amazon whether you want to or not. So what are you going to do to manage the choice of how it gets distributed?
Then once you make good decisions around the branding, the book gets to the meat of the matter, which is how do you make sure that your pricing isn’t always cheaper on Amazon than every other channel. We address these distribution choices — looking at what it means to control your brand.
Roggio: What, exactly, is a “brand”? Is it a manufacturer of a product or is it a private label?
Thomson: Both of those are brands. Amazon looks at a brand as being a company that has a U.S. registered trademark for whatever that brand name is. I would go even further and say that if you’re really a brand, you can charge more than you would for a similar generic product.
For example, when I buy a can of Coca-Cola I buy into all of the feelings and expectations of Coca-Cola. All that comes with the taste in the bottle is called brand equity. And for that brand equity, Coca-Cola gets to charge a premium.
Some private label sellers on Amazon are nothing more than a U.S. registered trademark. They say they are a brand. But that’s not necessarily true in the hearts and minds of consumers.
Roggio: There are some brands who do not sell on Amazon but still perform well in their niche. Does a company create two brands: one for its own website (to sell through a retail network) and one for Amazon?
Thomson: If a company is at all popular among consumers, somebody’s going to put your product on Amazon whether the company likes it or not.
Any of those resellers that buy the product and place it on Amazon will create a listing if there isn’t one. They’re going to upload an image, write a title, and add some core points. That product listing on Amazon represents your brand.
Here’s where things get crazy. That low-quality listing is now in the Amazon catalog. As long as it’s on there, with inventory, Google is going to index that listing.
And since it’s from Amazon, it will likely show up number one or number two in the search results for both organic listings and pay-per-click ads. That is scary. And it’s common for brands to show up higher from the Amazon listing than from their own website.
That’s why brands need to control their content on Amazon. Unfortunately, many brands don’t do anything. They eventually discover a bunch of people selling their products.
Roggio: Can a brand go back and repair, if you will, those third-party product listings?
Thomson: Amazon, a little over a year ago, created Brand Registry, which is a free program for legitimate brands — with U.S. registered trademarks — to stake their claim to product listings for their brands.
Roggio: Should a brand always sell on Amazon’s marketplace directly instead of through authorized marketplace resellers?
Thomson: Even if the brand is going through an authorized third-party seller, at the end of the day, it has to be involved to make sure that the branding is being done properly, the advertising is done properly, and that the catalog selection and inventory levels are managed appropriately.
It’s hard for me to give a straight answer. A brand needs to have a backup plan. Most brands end up using a hybrid model, wherein they sell some products through first-party and some products through third-party, whether that’s their own third-party account or authorized third-party sellers.
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Roggio: Say a brand sells through retail channels and then decides to sell directly on Amazon. Doesn’t that alienate those retailers?
Thomson: Absolutely. We’ve worked with companies who have lost distributors. We’ve also worked with retailers who have basically said, “Why am I going to bother buying any of your inventory when there are people selling the product on Amazon at prices that are 2 percent higher than what I buy at wholesale from you.”
Amazon is really efficient at encouraging anybody to show up and sell your product, whether you authorize them or not. So the way you think about controlling what happens on Amazon is very different from how you get products into a sports store or a drugstore or a grocery store.