In almost every conversation we have with household name brands about selling on Amazon, one consistent theme comes up;
Why should we sell on Amazon, and will it cannibalise our sales in other channels?
For mature brands, this is nothing more than prudence and ensuring that anything they do as a brand has a net-positive effect on both sales and profitability.
These brands have mature sales in many other channels and these brands are often working hard to grab just 1% of the market share. Anything that risks cannibalising existing sales, rather than growing them incrementally, could be damaging. At the same time, however, ignoring the revenue and growth opportunities Amazon can offer can be just as harmful.
Why should a major brand sell on Amazon?
Amazon in the UK today has the largest market share of any online retailer across almost every retail category available. Yes, there are exceptions to this (kids’ footwear being one example where Clarks remain dominant), but in the main, they are the biggest online retailer in every product category.
56% of consumers now start their online shopping journeys on Amazon, and of the remainder who start by searching Google, up to 25% of them then go on to shop at Amazon following their search.
These two stats together highlight why household name brands need to have a clear and prominent Amazon strategy. Amazon represents the single largest sales opportunity for any brand, with a pool of customers searching for the very product that their brand is selling, in volume and with clear buying intent.
This latent demand is of course taken up by products already on Amazon, but all too often these products are not from “Brands” as we would recognise them – but instead from made-up “Brands” coming direct from factories, or through private-label UK sellers with Amazon-only businesses.
In our recent analysis of the best-selling products in the Kettles category, over 25% of the sales revenue on Amazon was going to brands that a UK consumer typically would not recognise, whereas a household name like Kenwood only had a 0.5% market share of a £30m a year category.
Venture Forge internal research. September 2021.
In our opinion, the reason a household name brand should shop on Amazon is simple.
There is a significant (and profitable) sales opportunity in the UK’s biggest convenience sales channel, where your competitors and unknown brands are currently taking market share.
Unlike Kenwood, Russell Hobbs and Breville are generating £900k and £500k per month respectively by dominating the kettles category on Amazon in the UK.
Venture Forge internal research. September 2021.
Will Amazon cannibalise my sales in other channels?
The simple answer here is yes; there will be some cannibalisation of other sales channels if you are a major brand, at least at some point in your Amazon trading journey.
What is a more important question to consider is how huge the risk of that cannibalisation versus the opportunity for growth is – especially when you look at the level of latent demand on Amazon (i.e. people searching by product type “kettles” or “toasters”) and your ability to take market share from the brands already selling into that demand.
Whilst it is possible that a customer looking to buy your products may now buy from Amazon over your D2C website, the opportunity for you to take sales away from your competitors on Amazon, and grow your market share is significantly larger and represents a clear way for you to grow your sales incrementally.
Take the example of Kenwood in the Kettles market, above. Their competitor Russell Hobbs has 36% market share of the kettles category on Amazon, worth £10.8m/year to them.
The opportunity for Kenwood to take even a small slice of this through selling into Amazon’s latent demand far outweighs any risk that cannibalisation would present.
Does a brand have a benefit over other sellers on Amazon?
From our research, brands that have built a strong presence in the mind of the consumer typically outsell non-brands by a factor of 4 to 1 on Amazon.
This is due to many factors, but in the main, it’s down to awareness, trust and quality (which typically manifest themselves in better quality reviews, higher rankings and conversion rates on Amazon) – giving true brands a distinct advantage when it comes to selling on the platform.
What could your brand achieve on Amazon?
Venture Forge offers a no-obligation brand audit, looking at the potential of your brand on Amazon and giving insight into the lay of the land in your categories and the success of your competitor. If you’d like to find out more, please get in touch.
