To 3P or not to 3P? Three Industry Challenges for Amazon Marketplaces

As we head into 2022, and as I have recently moved into a new role as SVP here at Molzi by Brainlabs, I wanted to reflect on three industry challenges that seem to be evergreen. I could have, of course, picked supply chain (or whatever health challenge we are collectively facing as you read this) but instead I thought I would focus on what is in our control and yet still a challenge.

Amazon Marketeers need to be the Spider-Man in an Iron Man suit.

To start off on the right foot, I’m going with a Marvel analogy. For those who have not watched Avengers Endgame, I’m in awe that you managed to avoid it. For those who have, you will remember that Spider-Man was given an enhanced suit for taking on the most challenging conditions. In digital marketing we are constantly seeking the next superhero to hire. Someone that gets our industry and the complex interplay of many channels; someone that can be ahead of the curve to stay competitive, that understands Creative and the intent of the customer. In short, a superhero, a Spider-Man if you will.

When we look at what’s needed from an Amazon marketeer, we certainly need that Spiderman, because they simultaneously need to understand the balance of winning the buy box, supply chain issues, inventory, forecasting, PO ordering, and a whole new lexicon of Amazon terminology. Thus the Spider-Man in an Iron Man suit.

However, a Spider-Man in an Iron Man suit would be hard to come by and hire. This is why here at Brainlabs we have a hive mentality. We find specialists with superhero-level knowledge of their sector and we bring them together to create… the Avengers assembling (ok I’ll stop with the Marvel analogies).

It is near impossible to master Amazon with one person, you need a team that understands retail, people who understand that Amazon is not just a selling platform, but also a publisher, a place to inspire purchase at another point.

In other words, specialists who understand the complexity of content, bids, and retail. Overall, those that do the same thing year in, year out will lose. It’s why Amazon became successful and why, like it or not, we recognize that you have to follow your customer wherever they prefer to shop.

The rising cost of advertising on Amazon

“CPCs and CPMs are increasing” is an overused defense and lamentation in our industry. Yes, it’s true, year over year and quarter over quarter we do see increases on the same keywords and audiences, but that should not be affecting your return on ad spend. If it is, you might not be pushing forward into the rise of inventory. Inventory of where your ads are served is increasing all the time. For instance, sponsored brand is often thought of as keyword bought. But did you know you can target ASINS (aka SKUs) for the same spot? Staying on the keyword track, did you know that you can harvest keywords using auto targeting, rather than the expense of broad match? On the programmatic side of things, technology has advanced on things like audience A/B testing, creative A/B testing, and the auto pausing of ads when you lose the buybox means that you can become smarter with your investments and not just concentrate on the same audiences.

Speaking of underutilised, there is so much that can be gained by conquesting on other brands’ product detail pages. The rise of inventory there is huge.

To 3p or not to 3p? That is the question

Lastly, the million dollar question: In the world of Amazon retail, does a brand sell and ship to Amazon (1p) or sell and ship directly to the customer (3p)? Or maybe do a combination of both? There are advantages and disadvantages to both. It is important to note that this is not an “either-or” choice. For 3p selling, controlling the pricing and the aftercare of a customer may seem an attractive idea to brands who believe in lifetime value and staying away from the lowest price possible. However, maintaining the logistics of shipping to individual customers may not. Secondly, what was an advantage or disadvantage even a year ago has subtly but importantly changed.

Things like brand registry and enhanced advertising options have made clients re-evaluate, and the cost of doing business means that this is a discussion that is healthy to have on a regular basis.

While the possible advantages and disadvantages of 1p (where Amazon is the customer) versus 3p are too long to cover here, we will be addressing them in a webinar shortly. I’ll be joined on January 13th by Laura Freeman, our Head of Retail and a former Amazonian, and we’ll be diving deep into the 1p versus 3p debate. Make sure to join us!