Why Having Fewer 3rd Party Sellers Will Increase Sales

If your brand relies on 3rd party sellers to sell your products on Amazon, it’s critical to understand how the number of sellers on any given product listing will impact sales, pricing, customer service, and brand equity in general.

Generally speaking, the larger the number of sellers, the less control your brand will have over pricing, content, promotions, advertising, and customer service.

The Negative Impact of Multiple Sellers

Whenever I talk to brands that sell their products on the Amazon marketplace, they are often surprised to learn that having more sellers on each product listing is a bad thing. Many mistakenly assume that having more sellers will somehow increase exposure – and therefore increase sales.

Nothing could be further from the truth.

Consider the following…

Demand is Not a Function of the Number of Sellers

Amazon is nothing more than a consumer product search engine, and as such, the number of sellers of your product has zero impact on the number of times a given search term(s) is typed into Amazon’s search box.

Instead, demand is driven entirely by consumer’s search actions.

number_of_sellers1

So if having more sellers doesn’t increase sales volume, what does it do?

The Race to the Bottom on Price

The more sellers you have competing for the buy box, the faster these sellers are going to start creating a race to the bottom on price, violating MAP pricing policies and pissing off your offline retailer partners in the process.

With just one or two sellers, there is no need to compete for the buy box, and therefore, there is no reason to deviate from MAP pricing – and that means fatter margins for you because they won’t be asking for wholesale discounts in order to compete in the race to the bottom.

Fewer Sellers Leads to Increased Ad Spend

In the image above, you’ll notice that in the pie chart on the left, each slice of the pie is quite small; whereas over on the right, two sellers are splitting the pie 50/50.

In which case do you think sellers have more money available to spend on advertising your product?

Obviously not the one of the left!

If you want to increase your product’s market share, ensure you have as few sellers as possible and ensure that the ones you do have are committed to investing a portion of their profits into advertising your product.

Having too many sellers guarantees that each seller will not have enough profit to justify creating ad campaigns – and your product’s market share will stagnate, or possibly even decrease.

No Listing Ownership / Optimization

How well your Amazon product listings are optimized will influence both how well your products rank in Amazon’s search results as well as how well potential buyers convert once they do find your product pages.

With multiple sellers on any given product listing, no one seller has any ‘ownership’ or incentive to put time and resources into optimizing the product listing to its fullest.

listing-optimization-challenge

To illustrate, consider a very simple example. If each product listing is a pie, and each slice is a seller, why would a seller bother making a larger pie if they are only getting one slice?

Whereas, if the seller’s ‘slice’ is, in fact, the entire pie, the seller has serious incentive to do everything they can to make the biggest pie possible.

listing-optimization-single-seller

In other words, by having just one seller who owns the buy box, that one seller is every bit as motivated as you are to do everything possible to maximize sales.

No Control of Your Promotions

If you have multiple sellers on each product listing, how are you going to control and coordinate all the promotions you’d like to run on Black Friday, Prime day, Valentine’s Day, Mother’s Day, etc…?

With multiple sellers, the reality is that you can’t control what they are all going to do, and in all likelihood they aren’t going to coordinate with each other, thereby resulting in a complete lack of any cohesive promotional strategy.

nascar-wreck

With just one seller on each of your products listings, product promotions can be strategically planned in advance. Then when it comes time to run the promotion, the mutually created plan is executed and results are measured; thereby giving you the much-needed data to make better decisions about future promotions.

Inconsistent Customer Service Levels

When consumers purchase your products on Amazon and they have a problem or a question, they are going to contact the seller via email.

bad_customer_service

They key thing to remember is that these consumers won’t necessarily realize that they aren’t communicating with your brand, so if the customer service they receive is below expectations, they are going to blame your brand!

With multiple sellers on a product listing, it will be nearly impossible for you to ensure a consistently positive customer experience. Instead, your brand reputation will be the result of the collective experience that thousands of customers have with companies. You have very little control over this experience, and will not be able to build the trusted relationship you would expect to have with just one or two authorized sellers.

With a single trusted seller on each product listing, you can rest assured that customer service levels are going to be exactly where they need to be to build the brand equity you need to maximize the growth of your company.

Conclusion

The more sellers you have on your product listings, the less control you are going to have – which, over the long term, can negatively impact your brand, cause a price war, impair customer service, and aggravate your brick & mortar retail partners.

So instead of letting just anyone sell your products on Amazon, you’d be far better off to find a preferred 3rd party seller, grant them exclusivity – once they have proven themselves worthy, of course – and then work with them to systematically remove all the unauthorized sellers that are currently on your product listings.

You, your brick & mortar retail partners, and your end-customers will all be happier as a result.

About TLK Sourcing

TLK Sourcing a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them - thereby ensuring that our interests are 100% aligned with yours.

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