Roadmap to Amazon Profitability's Pitfall

There's been a significant shift in brands' ecommerce objectives lately. Not so long ago, most brands prioritized revenue as their chief aim on Amazon and other online marketplaces. However, nowadays, brands recognize that the ultimate key to success lies in profitability. Without consistent profits on Amazon, you will soon be overshadowed by competitors who can.

So, what drives profitability? And why are countless brands witnessing a steep decline in their Amazon success? Drawing upon our combined decade-long ecommerce experience and a team of experts who have mastered the Amazon platform, Pathway Products has the solutions.

Why Do Brands Lose Profitability on Amazon?

Let's explore how, without the appropriate protective measures, each phase propels the next, gradually devaluing your products online.

Phase 1: Product Revenue Takes Flight

If your product is commendable, launching on Amazon will likely generate substantial initial revenue. But beware, these early sales could lead to uncontrolled distribution and set you up for the subsequent phase in the Profitability Pitfall without the correct protective measures.

Phase 2: 3P Sellers Take Interest

Without a robust, effective distribution strategy, third-party sellers may exploit your product's success on Amazon. They start by purchasing large quantities of your product at a discounted rate, often unbeknownst to you.

Phase 3: Sellers Rivalry Leads to Price Reduction

With your products in their hands, these 3P sellers begin to list them. The increasing sellers competing on your listings aim to seize the Buy Box, typically by lowering your product price. As the fight for the Buy Box continues, your price progressively decreases.

Phase 4: You Forfeit the Buy Box

Losing the Buy Box to other sellers makes it impossible for you to sell your own product on Amazon. This is when the Profitability Pitfall becomes a harsh reality for most brands, an issue that affects brands selling through both 1P and 3P.

Phase 5: Physical Retail Outlets Align With Online Prices

When you lose control of your pricing on Amazon, it begins to affect your in-store sales and profits. Consumers often compare online prices before making in-store purchases. Discovering lower prices online reduces their likelihood of buying your products in person. Brick-and-mortar retailers are forced to match your lower prices or offer price matching to remain competitive.

Phase 6: Retail Profits Diminish

Price reduction in brick-and-mortar stores leads to shrinking retail profits as they demand price-matching guarantees, buybacks, and other concessions. Retail partners may even threaten to remove your products from their shelves if prices continue to fall.

Phase 7: Amazon Profits Drop

Reduced retail profits inevitably lead to decreased Amazon profits—sellers continue to slash prices to stay competitive and win sales over other channels. And when brick-and-mortar prices drop, Amazon demands even lower prices from you, which may not be sustainable for your brand.

Phase 8: All Channels Become Less Profitable

In no time, you find yourself at the lowest point of the Profitability Pitfall—Your products risk CRaP-ing out (can’t realize a profit on Amazon), all channels are less profitable than when you started, and regaining momentum seems impossible.

Evade the Profitability Pitfall with Pathway Products

Did you identify with the Profitability Pitfall? If this scenario mirrors your Amazon strategy, don't lose hope. At Pathway Products, we've assisted numerous brands in overcoming the Profitability Pitfall. By establishing the right brand control safeguards and a foolproof selling and distribution strategy, you can attain genuine, profitable success with your products, both online and offline.

Click the button below to get in touch and evade the Profitability Pitfall today.