Beauty Brands Not On Amazon

The pandemic has accelerated the amount of people shopping online, spurring Amazon’s 2020 sales to surge 38% to hit $386.1 billion. The giant e-tailer’s market capitalization has soared to $1.7 trillion. But there are many brands intentionally avoiding selling their products on Amazon. In our surveys, brands cite four main reasons for staying off of the massive e-tailer.

Most importantly, this subset of survey respondents feels Amazon doesn’t fit their brand image and may even erode their brand equity. These considerations are major or moderate factors for over 80% of respondents across surveys in 2019 and 2020. Brands are particularly concerned about Amazon being ill-suited for luxury products and the proliferation of fake products on the platform.

When asked what it would take for a brand to start selling on Amazon, one respondent with over $1 million in revenues said, “Amazon would need to implement an approval or statement confirming that beauty brands are actuals and not counterfeits/knockoff products.” Another put it simply, “[I have] the impression that Amazon reduces a premium brand’s status.”

The second reason for choosing not to sell on Amazon is the risk that an Amazon partnership might create tension with a brand’s existing or prospective retail partners. Around 70% of brands across both surveys cited possible retail conflicts as the rationale for their Amazon abstention. “As a growing indie brand, [I need] more certainty as to how [partnering with Amazon] would affect relationships with potential retailers, especially specialty retailers,” said a representative from a brand that’s been operating between two and four years. The representative continued, “The lines are blurred and the unwritten rules of distribution channels are changing every day.”

Another 67% and 63% of 2019 and 2020 brands, respectively, worry about the high cost in time and resources required to thrive on Amazon. Several founders specifically call out a lack of affordable marketing options for small brands. One such founder of a brand that launched over five years ago and generates over $100,000 in revenues commented that, for Amazon to be a successful business venture, the brand would need to allocate additional resources toward it as it is a time-consuming and costly process. “Amazon can be a full-time job on its own, so having a person dedicated to managing that channel would be ideal,” the brand founder noted.

Finally, despite prioritizing it last on the list of reasons to stay off Amazon, brands that have opted out are increasingly discouraged by bad peer experiences, which grew in reported occurrence from 36% of brands in 2019 to 55% of brands in 2020. Small brands in particular have concerns about Amazon’s unsustainable or perceived unethical business practices, especially as they relate to small- and medium-sized businesses. When asked what it would take to change their minds about working with Amazon, brands answered the following:

• “I don’t think Amazon is running a sustainable or just business. I do not like the way they treat their workers and they are setting a dangerous precedent for shipping and instant shopping gratification that will only result in more stress on the planet and put small business at risk while lining the pockets of Bezos.”
• “I’m deeply conflicted about Amazon, because I think they diminish the direct relationship and in many cases any relationship to small businesses (brick and mortar or online).”
• “[I need] them to support small business growth and not use it as an opportunity to find out what small shops are doing and then just do it cheaper so we can’t compete.”

For many brands, COVID-19 served as an impetus to boost e-commerce capabilities as amplified online shopping is a behavior that isn’t anticipated to diminish once the pandemic passes. Amazon has provided a well-known and potentially quick digital solution at a moment of extensive brick-and-mortar store closures and an alternative to the challenges of building a direct-to-consumer business from scratch. If COVID-19 didn’t force a switch to the platform, it at least prompted consideration of Amazon. One brand surveyed wrote, “While we currently do not sell on Amazon, we did consider it during the initial 2020 COVID crisis.” In fact, COVID-19 was such a significant catalyst for the embrace of Amazon that brands that didn’t ultimately make the switch during the pandemic are unlikely to do so in the future. They reported a 22% proportionate drop in likeliness to sell on Amazon in the next 12 months.

Brands that terminated their relationships with Amazon chose to do so for three main reasons: lack of customer support, concerns about the resources required to maintain their Amazon business, and relationship risk to existing or prospective retail partners.

Across Beauty Independent’s 2019 and 2020 surveys, roughly 80% of brands cited service issues as a major or moderate factor in their decisions to leave Amazon. A seasoned founder at a brand with $1 million-plus revenues frankly stated, “[I] need to have more control over the user experience and better customer support.”

Another 79% of brands lament the time and money required to execute a fruitful Amazon strategy. This response fell markedly from 2019 levels when 100% of brands agreed Amazon was a resource drag, but still remained relatively top of mind for brands. As representative from a young brand with less than $100,000 in revenues put it, “The process of getting set up as an Amazon seller was confusing, opaque, and seemingly subjective. My products kept being rejected for various (conflicting) reasons, and when I realized how large of a cut they’d take and how much I’d have to mark up my products to even be slightly profitable on their platform, I threw in the towel. The setup hassle and shakedown-esque profit share weren’t worth the potential brand exposure.”

Finally, 74% of surveyed brands identify relationship risks with existing or prospective retail partners as reasons for exiting Amazon. This factor fell slightly from 80% of brands in 2019. An experienced brand with less than $500,000 in revenues explained, “Amazon is not compatible with small, niche beauty brands (i.e., clean beauty) and the retailers that curate niche beauty brands (i.e., Credo, The Detox Market, Follain, etc.).”

Other reasons brands cite for leaving the platform include poor performance, poor brand fit, lack of consumer data and logistical issues. Similar to never-on-Amazon brands, brands that used to sell on Amazon and stopped doing so are unlikely to return to the platform. Some 60% of the brands reported they are unlikely or highly unlikely to sell on Amazon again in the next twelve months despite the global pandemic push to digital.

Read the rest of our Beauty On Amazon series for stories on Amazon’s beauty push in Part 1, the interfaces brands use to sell on Amazon in Part 2, and advertising options on the platform in Part 3.