Study: Amazon shifts to preferential treatment for brands

By Tom Ryan

AUGUST 21, 2014

According to a new study, Amazon.com has set up a pay-to-play system for certain brands seeking more exclusivity and better positioning on the site.

The study, entitled Great White Shark, by L2, a subscription-based business intelligence service, examined 27,517 Amazon listings of 315 brands in six verticals: Beauty, Fashion, Hair Care & Color, Home Care, Personal Care and Watches & Jewelry.

It identified Levi's as one of the brands that benefited from a partnership with Amazon. Apparently due to better terms and greater access to its product range, Levi's gained improved visual merchandising and search performance on Amazon.com vs. its competitors.

Indicating perhaps a bigger benefit, a product search on Amazon.com found that no Levi's products were available from third-party re-sellers. Brands have complained that unauthorized sellers on the site are low-balling goods and devaluing their brands in the process. Gray-market sales are also an issue.

By comparison, Ralph Lauren, a brand, which reportedly doesn't have a partnership with Amazon, has over 9,000 items for sale on the site through third-party sellers.

According to Bloomberg, this marks a shift in Amazon's strategy of generally allowing third-party sales. Bloomberg wrote that CEO Jeff Bezos "has long nurtured the open-bazaar environment, yet there are now signs he's willing to sacrifice the increased selection for a more direct relationship with companies in categories like fashion and cosmetics where Amazon wants to increase its offerings."

A chart included in the report shows that brands that do not officially distribute on Amazon.com have a significantly greater number of listings being sold by third-party merchants.

In a video on L2's website, Scott Galloway, a marketing professor at NYU's Stern School of Business and co-founder of L2, said, "Amazon's worldwide network of third-party merchants all but ensures that brands have a presence on the platform, whether they want to or not."

In another example, the report noted that in the luxury space, few prestige brands officially distribute on Amazon. But Burberry's has "strategically traded the official distribution of a limited number of its SKUs in exchange for Amazon cleaning up third-party distribution of other Burberry products," the study states.

In the CPG space, L2 pointed to Procter & Gamble's agreement to let Amazon ship directly from its warehouses. L2's analysis further found that in addition to cross-bundling deals across P&G's portfolio listings, "more P&G products are eligible for Amazon's Prime Pantry and Subscribe & Save programs than any other CPG firm."

The study concluded that the shift is forcing brands to make concessions for preferential treatment. But also being affected are third-party sellers, including many retailers, which can no longer sell brands that strike deals to sell more exclusively through Amazon.