In July, Birkenstock notified its "Valued Partners" that the Company would stop selling on Amazon as of January 1, 2017… due, among other things, to "posting by sellers proven to have counterfeit Birkenstock products" … "plus a constant stream of unidentifiable unauthorized sellers who show a blatant disregard for our pricing policies." (Reported by CNBC).*
There are many reasons a retailer would work with a third-party company like Amazon or eBay, especially in the earlier days when setting up your own online marketplace was daunting. So this recent action by Birkenstock didn't come lightly, but shines a spotlight on the question all retailers must ask themselves: When you sell through a third-party company, is the risk worth the reward? Here are some of the considerations:
1. Knock-offs and imitations lead to loss of brand identity and reputation.
In Birkenstock's case, there was extensive imitation of the original product, with cheap knock-offs and low prices, bringing lots of complaints and returns, tarnishing the brand and its legitimate distribution outlets. Amazon was unwilling or unable to control for this and one egregious practice was commingling quality brand items with cheap knock-offs in their warehouse.
2. MAP (Minimum Advertised Price) violations.
Birkenstock cited violations by unauthorized sellers and Amazon unwilling or unable to make them hold the line on MAP pricing agreements with manufacturers, hurting legitimate retailers who held to the price lines.
3. The marketplace buildeth your traffic and the marketplace taketh your traffic away.
A purported advantage of working with a third-party marketplace is bringing traffic to your door through sales, related sales, service, support, and then, ultimately, having the customer return to you for future sales and service.
However, when a customer buys through a third-party marketplace, they usually remember where they bought the item and how much they paid, but not necessarily the home site of the brand, so it's traffic lost (or never gained).
4. Pricing is everything?
In most cases, lowest price is the goal of the customer who shops on the third party website, so your item is devalued by a low price that overshadows your company's true value proposition.
According to recent surveys, retailers seem to be finally realizing that they can't compete or expect future business if everyone offers rock bottom prices -- which encourage customer expectations for low prices -- so retailers are finally adopting the best practices use of predictive analytics and price optimization to try to achieve their true company value.
5. Your brand is your reputation -- and vice versa.
Third party marketplaces make it a lot easier for consumers to find things, but for many retailers like Birkenstock, the point is having a unique, standout brand and value.
This value gets lost when poor product knock-offs get the attention and complaints, while the brand name is the victim of the negative fallout. And whether consumers criticize or praise your brand on the socials, the customer still probably heads to the third party marketplace first, gets sidetracked into a cheap knockoff, and the vicious cycle continues.
6. Third party marketplaces go to school on you.
They have all the data on your products, your sales, your popularity; and your customers; and, unless your product is truly unique, like Birkenstock, they can quickly acquire or produce a product to compete with (or suffocate) yours.*
7. Don't put all your eggs in one basket.
Third party marketplaces like Amazon and eBay ultimately exist for their own benefit. They can change the rules (or algorithms) at the touch of a button, leaving you holding the bag -- or worse -- putting you out of existence.
Bottom Line For Your Bottom Line:
There are many arguments for selling on a third-party site, but there are also many pitfalls in the name of "making sales." Anyone who sells on Amazon has to have a clear understanding of what's likely going to happen to his or her traffic, pricing, branding, sales and profit.
If controlling service, identity, price, and customer satisfaction is the most important part of your image and brand value, you might wish to follow in Birkenstock's footsteps -- and walk away from third-party marketplaces.
Birkenstock. With more than 230 years of experience in the fine art of shoemaking, choosing Birkenstock means choosing peerless comfort, utmost quality and the best natural materials possible.