Brands Strike Back on Amazon

Power Retail By Power Retail | 09 Aug 2017

A growing number of US brands are pushing back on Amazon by championing local retailers, as the e-commerce giant continues to tighten its grip on retail sales.

Some manufacturers are imposing minimum advertised prices to make it more difficult for Amazon to undercut local retailers, while others are giving local merchants first dibs on new products or are even funnelling customers from their own websites to local outlets.

“The pendulum has swung,” according to Rich Tauer, president of Quality Bicycle Products, a bicycle wholesaler that says it won’t sell to Amazon. The company’s sales representatives push forward brands that support local retailers by restricting advertised prices and it enforces restrictions on where products are being sold.

According to data from RBC Capital Markets, nearly 90% of US consumers selected Amazon as the online retail site they use most, which estimates the e-commerce giant controls roughly 20% of US online retail sales – that’s a bloody big chunk of the pie.

Amazon says more than half of the items sold on its website come from small businesses and entrepreneurs. “Amazon helps small businesses increase sales and reach new customers by providing access to more than 300 million customers world-wide,” a company spokesman said.

While many brands sell directly to Amazon or via third parties, some are concerned about tying their fortunes too closely to one customer and fear that online price wars will damage their brand and image.

Here are three strategies brands are using to help local merchants strengthen their hand:

Luxottica: Restricting Advertised Prices

Luxottica Group last year launched a minimum advertised pricing program that restricts the price at which its Ray Ban and Oakley sunglasses can be advertised. Like other MAP programs, Luxottica’s policy doesn’t set the actual sales price. “It was a race to the bottom that was not sustainable long-term,” said Fabrizio Uguzzoni, president of Luxottica’s North American wholesale division.

The average discount on Ray-Ban sunglasses on Amazon has shrunk to about 3% as of this month from 37% in April 2016, according to Luxottica. The sunglass maker has shut down several thousand accounts that didn’t agree with or refused to follow the new policy,” said Uguzzoni.

Luxottica employs about 30 staffers who focus on MAP enforcement and crack down on the grey market. An outside company monitors thousands of websites and several thousand product listings daily.

Online sales to third parties in North America fell by 60% after the MAP program took effect, but a company survey conducted in October found that the opticians and optometrists who account for most sales welcomed the new plan. “Our independents tend to discount as little as they can,” explained Uguzzoni.

Thule: Putting an Online Catalogue in Retailers’ Hands

Local retailers typically don’t have enough shelf space to carry all the bulky cargo containers, bicycle racks and luggage that Thule Group makes.

So the Sweden-based company has started providing stores with tablets that act as a digital catalogue, said Schuyler Horton, a vice president of sales. A dozen US stores are now piloting the $500 tablets, paid for by Thule.

Thule doesn’t sell its products directly on its website. Instead, it funnels the orders it gets to about 70 local retailers, with the help of software provider Kibo.

Thule wins the online order not by being aggressive on price – they win the order by being able to confirm they have exactly what the consumer is looking for, and being closest to the customer’s location.

Brooks: Using Computers to Fight Back

Running gear maker Brooks is testing a new app that uses an iPad connected to a treadmill to help local retailers determine which Brooks shoe best suits a runner’s biomechanics.

Brooks will help key retailers cover the US $960 cost, said Rick Wilhelm, vice president of sales for Brooks. The setup “allows stores to be the centre of communication,” he said.

In April, Brooks launched a website that lets stores order products they don’t have in stock, and then drop-ship them directly to customers’ homes. The system reduces the likelihood that a retailer will take the time to fit a customer with the perfect shoe, but then lose the sale to an online competitor.

“There’s no way local stores can carry all five colours of our best-selling shoes,” said Wilhelm. The new site gives them “the long tail of the web.”

Brooks is one of roughly 120 brands that have also teamed up with Locally, a startup that lets shoppers check a brand’s website for an item and then find out which stores in their neighbourhood have it in stock and reserve for in-store pickup and, in some cases, local delivery.

Source: Dow Jones Newswires

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4 thoughts on “Brands Strike Back on Amazon”

  1. Mel says:

    Re: the Restrictions on Advertising price tactic – isn’t it illegal for a wholesaler to try and put restrictions on what price the reseller sells the product at? In Australia anyway. As the reseller actually has bought the product and has the legal right to sell it at whatever they wish and that can’t be contracted out of on the basis of competition laws. You can also get in trouble for cancelling wholesale accounts for those who don’t follow your “policy”. I could be wrong or have misunderstood the tactic, but I am guessing that would be something the ACCC would be onto in a flash here.

    Of course, if the model is that the reseller is provided “commission” on a sale on an agency basis, that’s a different story.

    Would be good to get some clarity on this if anyone knows? Especially before everyone starts trying to use this as a tactic to combat Amazon!

    1. Matt Manton says:

      Hi Mel
      In my industry which is the skateboard industry you are 100% right. This was tried before a few years ago in Australia and the wholesaler ran into problems with the ACCC.

    2. Hi Mel, there is also a difference between setting a minimum sale price and setting a price. There are independent sale agent models that work that way; they can charge as high as they want but can’t go below a certain threshold so they don’t undercut each other.

  2. Richard Thai says:

    You are both corrrect. According to the ACCC website “A supplier may recommend that resellers charge an appropriate price for particular goods or services but may not stop resellers charging or advertising below that price.”

    So they can ‘recommend’ but not force.

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