Only a few months into 2023 and already Amazon finds itself dominating the business news, but Asha Bhalsod of Etopia Consultancy is here to help.
With Amazon’s relentless focus on driving its bottom line, toy brands selling on the platform are bound to be affected, writes Asha in her Viewpoint column this month. Toys & Games is in the top five categories on Amazon (some even say it’s in the top three), so profitability scrutiny was inevitable.
“Amazon has experienced a downturn in sales and ad revenue from merchants in 2022, compared to the pandemic years of 2020 and 2021,” explains Asha. “Its gameplan to increase profitability was clear when it announced it was cutting 18,000 jobs, as well as closing three warehouses in the UK. From bizarre requests through AVN (Annual Vendor Negotiations) to the new distribution rules – trading with Amazon in 2023 is going to require a unique and tailored approach.”
It used to be the consensus that Amazon was a brand’s most profitable account. Whether vendor or seller, Amazon was first and foremost interested in maximising selection. This allowed brands to list their entire catalogue, invest in small levels of terms and see great returns. Fast forward to 2023, and Vendor Managers are now tasked with maximising profitability as a priority.
Asha details how trading conditions have been affected, alongside requests from Amazon on matters such as investing into marketing programmes without any clarity on what the vendor receives in return.
“These requests appear somewhat generic in nature, with no apparent evidence of the vendor manager tailoring the requested investment support around the brand and its catalogue,” says Asha. “Whilst I agree that businesses should be investing in Amazon to help drive sell through as well as providing a win-win margin for both, I do think some of these latest requests are absurd.”
Seller Central has turned out not to be as profitable as may had originally anticipated, and Amazon has recently attempted to increase profitability by cutting out distributors.
“Historically, brands have not always allocated time for analysing the cost of doing business with Amazon for the simple reason that it wasn’t considered an issue,” adds Asha. “Now this cost component and cost setting has increased so much that businesses need to ask themselves if these costs are acceptable and recognise that this cost centre needs strategical navigation.”
To read her full article on how to operate strategically with Amazaon, see the April edition of Toy World, here.