Why CPG brands should use Amazon to sell direct to consumers

As an eCommerce and branding agency that works with many CPG and grocery brands to sell on Amazon, we understand the benefits, and the challenges of using Amazon to sell direct to consumers. Here’s a quick summary.

Massive Audience Reach

Amazon has a vast, global customer base. Selling on Amazon exposes CPG brands to millions of potential buyers who are already searching for their products or similar items.

Convenience and Fast Fulfillment

Amazon’s logistics and fulfillment infrastructure (Fulfillment by Amazon, or FBA) ensures fast, reliable delivery, often within one or two days. This can enhance customer satisfaction and build trust.

Brand Visibility

Amazon offers prominent placement in search results, reviews, and recommendations. Leveraging Amazon’s advertising tools can help drive traffic to products and boost visibility.

Protecting Your Brand

If you’re not yet selling directly to customers on Amazon, third-party sellers may already be. When third-party sellers have the privilege of creating merchandising for your products, they’re liable to create poor-quality content, with incorrect information.

Adding your brand to Amazon Brand Registry and setting up your own SKUs on Amazon means that you get to control your brand presence. Third parties may also be selling your product, but you can make sure that customers get accurate information and appealing, high quality photos, infographics, and other merchandising.

Data Insights

Access to Amazon’s analytics tools provides insights into customer behavior, purchase trends, and competitive pricing strategies.

Lower Barriers to Entry

Compared to building a standalone e-commerce platform, listing on Amazon requires less time and technical know-how. It’s a relatively low-cost way to enter the DTC space.

The Trust Factor

Many consumers trust Amazon for reliable purchases and returns, which can reduce hesitation when buying products from less familiar brands.

International Expansion Opportunities

Amazon’s global marketplaces make it easier for CPG brands to expand into international markets without establishing a local presence.

The Challenges With Selling DTC on Amazon

Selling on Amazon is not easy, and CPG brands should be aware of the challenges.

Fees and Costs

Amazon takes a significant cut from sales through referral fees and fulfillment costs, and in most cases, it’s essential to invest in advertising and programs like Amazon Vine to gain traction. Margins can shrink, especially for low-cost CPG items.

Loss of Brand Control

Amazon owns the customer relationship, not the seller. Brands miss out on direct communication, loyalty programs, and opportunities to nurture long-term customer relationships.

Intense Competition

Amazon is highly competitive, with multiple sellers offering similar products, often at lower prices. Competing against private-label products (including Amazon’s own) can be especially challenging.

Limited Branding Opportunities

Customizing product detail pages and creating a strong brand presence is restricted by Amazon’s platform structure. You just don’t get anywhere near the flexibility that you do with an owned DTC property like a Shopify store.

Price Pressure, and Competing Against Your Own Channel

Except in limited exceptions for gated brands, Amazon offers no protection against unauthorized sellers, and you may find that these sellers are offering your products at significantly below list price. And, selling for below list price yourself can cause friction between you and your retail partners.

Dependence on Amazon

Relying heavily on Amazon as a sales channel can create dependency. If Amazon changes its policies, raises fees, or suspends a seller’s account, the brand’s revenue stream may be at risk.

Customer Data Limitations

Unlike selling through a brand’s website, Amazon provides limited access to customer data. This hampers a brand’s ability to understand their audience and develop targeted marketing strategies.

Why We Recommend a Hybrid DTC Strategy

Many CPG brands take a hybrid approach to DTC: they operate their own store, as well as sell via platforms like Amazon and Walmart Marketplace. This “best of both worlds” strategy allows brands to leverage the reach and trust factor provided by the major eCommerce platforms, and enjoy better margins and direct customer relationships through sales on their own store, typically powered by Shopify or a similar solution.

Most CPG brands that come to Parker-Lambert for health already have a DTC site. They look for our help because they either want to launch an Amazon presence for the first time, or allow us to help them grow their Amazon business.

Does that sound like you? If so… let’s talk!