As of this week, Ikea has officially cut ties with Amazon. Ikea is among other brands such as Nike, Birkenstock and PopSockets, that have decided to no longer sell its products on Amazon. But, why?
Seller Central vs. Vendor Central
To understand a brands relationship with Amazon it's important to know the key difference between Seller Central and Vendor Central:
- Seller Central allows brands to sell directly to consumers within Amazon's ecosystem
- Vendor Central is selling wholesale to Amazon
To note, these big brands were selling their products to Vendor Central. The biggest advantage of Seller Central over Vendor Central is the brand having complete control of the selling price.
So why are these brands jumping ship?
Counterfeit & Third Party
Counterfeit sales and third-party sellers continue to surge on Amazon leaving brands feeling a lack of control. Laura Meyer, Co-founder and CEO of Envision Horizons says, “While counterfeit and third party sellers are a problem on Amazon, ignoring the problem won't make it go away. Brands should still monitor Amazon and report IP issues via Brand Registry whether they are selling or not.”
Meyer also believes other factors came into play when Ikea and Nike ultimately decided to exit Amazon. “High return rate and furniture breaking in transit could be another reason Ikea left. Amazon isn’t as successful with selling large furniture, yet. Nike didn't work out because Amazon didn't hold up their end of the deal which was to block unauthorized sellers,” says Meyer. This is a huge mistake by Amazon and will continue to leave brands wary of the deals Amazon offers to them.
The Marketplace is also another primary reason brands are deciding to exit the major e-commerce site. The Swedish furniture retailer teased the idea of creating its own marketplace, which would include selling its rivals' products, according to a Financial Times report.
Brands can benefit by launching their own marketplaces. Marketplaces allow a brand to curate their own selection of products from other brands and then receive a portion of proceeds from those brands selling on their platform. For Ikea, this could even allow them to venture into other product categories.
Some other marketplaces on the rise are Target, Alibaba, Wish, and Walmart.
According to a CNBC article, unless companies can develop an e-commerce strategy to compete with Amazon’s customer-obsessed mindset, experts say ditching Amazon has the potential to backfire. Amazon’s logistics and shipping operations, site traffic and mountains of shopper data are hard to match.
To combat this, brands should be flipping the power and making Amazon work for them instead of brands working for Amazon. It is still an amazing marketplace to access new and returning customers, but brands should be cautious of being convinced into one way of doing business with the retail giant.
Many sellers and brands on Amazon are desperate to depend less on the tech giant. But when they look for sales elsewhere online, they come up short. Last year, Americans bought more books, T-shirts and other products on Amazon than eBay, Walmart and its next seven largest online competitors combined, according to eMarketer, a research company.
Ultimately, while these large brands have made headlines by leaving Amazon, there are still numerous brands running to their platform every day.