As Amazon increases its focus on profitability, Asha Bhalsod talks to Toy World about how brands can adapt their strategies in response.
This month’s Viewpoint columnist Asha Bhalsod of Etopia Consultancy begins by asking if companies know (accurately) how profitable Amazon is for their business?
“Over the past few years, we’ve seen most consumer brands experience fantastic growth with Amazon but lately, increasing commercial demands and volatile market conditions have created challenges with profit margins,” she says. “If rising supply chain costs are having an impact on your margins, then they will be doing the same to Amazon’s.” Asha suggests that, as well as monitoring their own profit margins, companies also keep a close eye on what Amazon’s margins are.
Asha talks in more detail about the platform’s dynamic pricing model, its promise to always offer the best prices to its customers. and how it is a price matcher and not a follower. Asha explains further that until recent years, Amazon almost never discussed margins and profitability with Vendors. However now Vendors are under far greater scrutiny and expected to meet a guaranteed net margin – and if this is not met, trading terms negotiations can get very tough.
“I wouldn’t even be surprised if Amazon stopped ordering from a business altogether if the margins don’t match expectations”, Asha says.
Asha suggests creating a channel strategy and says that selective distributor agreements can help, as well as considering the supply chain and operation programmes Amazon offers.
“It’s simple – Amazon will grow your account as long as your brand is profitable, so creating a financially viable commercial proposition for both parties will lead to a win-win situation,” she says. “Market conditions are tough at the moment, and the pressure on brands will continue to mount. Amazon will intensify its focus on growth and profit, and brands will be forced to tweak their business playbook.”
To read more of Asha’s comments and to access the full article, which appeared in the September edition of Toy World, click here
