Building a Strong Reseller Network
Many brands sell their products themselves on Amazon and other marketplaces, running their own seller accounts and managing all the business tasks that come along with this: fulfillment, returns, customer service, inventory planning, merchandising, advertising, and so forth.
Other brands find that their core competencies are elsewhere, and that they’re best served by outsourcing this work to resellers. These might feel they’re at their best focusing on manufacturing, or selling within a direct-to-consumer or traditional wholesale model. Or they might feel that the complexities of marketing and winning in marketplace ecommerce are best tackled by professionals with demonstrated success there.
Still others are interested in having new selling partners for purely strategic reasons—for instance, to ensure a live backup supply of merchandise in case the main selling account goes out of stock, or to hedge against the vicissitudes of a vendor (1P) relationship with Amazon or Walmart.
What are the best qualifications for those professionals, though? If you don’t sell your own brand on a marketplace, then who should do it for you?
To answer those questions, think first about what you really need. What would you like your reseller to do, and what would you like them not to do? What will you want to control about your retail marketplace business, and what do you want your reseller to control?
For instance, if you have consumer-facing marketing assets that you like, then you may want to control your product pages and brand stores. If you’re not happy with that aspect of your brand presentation, you might want to outsource it to your prospective reseller partner. If digital advertising is a strength of your organization, then you might want to do it for your offers on Amazon; if it isn’t, then you can find a reseller to take over that function.
As part of this reckoning of needs, you should consider whether you’re going to put your reseller partner in charge of growing your business on a marketplace channel, or just maintaining it. These involve different skillsets. Maintenance requires mostly operational expertise, whereas growth will require that plus significant marketing chops.
It can also be helpful to look critically at how your competition is doing business on the marketplace that the reseller would work on. How do their product pages look? What kind of fulfillment times are offered to their shoppers? If it’s Amazon, what kind of feedback scores do their sellers have? Whatever the scope of tasks that you outsource to your reseller partner, you’ll want to make sure they’re capable of representing your products with at least the level of sophistication that your competition has arrived at.
Regardless of the detail of your business situation, we recommend you start with two minimum requirements for any reseller partner.
First, they should commit to retail pricing practices that don’t mess up any understandings about pricing you have in place, and that don’t cause unwanted pricing conflict between their managed channels and others. This is especially true if your brand is a MAP brand; making sure that the reseller adheres to your minimum advertised prices is critical to the health of every one of your retail business relationships, as well as to any idea of brand value that is built into the retail price points you’ve arrived at.
Second, they should commit to meeting the going standard of customer experience for their managed channels. This means appropriate communications with customers and sensitivity to their concerns, but also fast fulfillment. These days on Amazon, a product that isn’t available for Prime fulfillment through the FBA program generally can’t be competitive in its category. Therefore, a reseller that can’t or won’t use FBA can’t be an adequate sales representative for your goods. And the same expectation for fast fulfillment is rapidly becoming the norm among shoppers on other large sites as well.
A changing landscape
In a typical arrangement, a reseller will buy your products from you at a wholesale cost, sell them at retail—minus expenses such as marketplace commission and fulfillment—and keep the difference as profit.
In the past, the reselling business was generally done by entrepreneurs and small firms who would work on Amazon either with or without the cooperation of brands.
In recent years, the reselling business has become professionalized away from simply “flipping,” and is now dominated by businesses that are structured more like marketing agencies. They advertise their ability to completely run and scale business on Amazon and similar channels. Their solution is a full-service one: hand them the keys, and they promise to drive your products to success. Some agencies of this type are Pattern, Kaspien, and Tall Ridge.
The good news for a brand in search of a reselling partnership is that the reselling industry has become more sensitive to brands’ needs—less shady, less “Wild West.” But if your needs are more narrow—say you don’t need marketers, just people to serve as the operational link between you and the consumer—then some of the of the bigger agencies may see you as less-than-ideal customer.
Managing the network
A reseller agency might advertise its ability to run business for you across every online outlet you’d want to be on. But it’s quite possible that you’ll need different reseller partners for different channels, and it’s possible that you’d want this as well—in order to hedge against the centrality of any one partner for your business, say. You may even want to use different resellers for a single channel.
There’s risk in managing a network of resellers, though. It’s primarily in the possibility that they feel the need to start competing against one another on price, and so shorten their own margins, which can darken the tone of their relationships with you.
We recommend being wary of any agreements or sales practices that could lead to disharmony in your retail space. The solution is to realize that good fences make good neighbors.
For example, if you want to have two reseller partners on Amazon, you could let one of them have exclusive ownership of a certain set of SKUs, and another own another set. Intramural competition is reduced that way.
And to limit price erosion across sales channels, we recommend instituting a MAP (minimum advertised price) policy. Under a MAP policy, you the brand unilaterally decide that a given product can’t be advertised—that is, shown as available for purchase—at a price lower than the one you set. The central purpose of MAP is to prevent “races to the bottom”, so that everyone involved in selling your product can count on a certain retail price and so a certain margin.
Having a MAP policy in place should also help you in any negotiations with prospective resellers, who can then have greater confidence in calculating the profitability of their trade in your products.
Beyond managing the network
A prospective reseller may also want to know something about how your company’s sales and distribution practices lead to your products’ presence in ecommerce marketplaces. You want the reseller to become an authorized dealer of your products. Their question will be: do you have unauthorized sellers?
An authorized partnership on products that are resold by scores of shadowy seller accounts on Amazon may mean an unacceptable level of risk for the authorized reseller. Beyond MAP, it may be necessary to make a larger adjustment in how and to whom your organization sells.
For instance, do you rely on a two-step distribution model, selling wholesale to distributors who then sell to dealers? These arrangements can net you new sales outlets for your products, but they often “leak”—the dealer who buys the product from the distributor lists it on Amazon, where it competes with your privileged reseller’s offer.
The solution is to revisit the terms of any sales relationship that ends up putting one of your customers in competition with another customer, or with you yourself. At the end of this process, you’ll have product pages that are reasonably “cleared” for a particular privileged offer. This will make you and your reseller partner happy and set the stage for profit on both sides.
Essentially, having resellers who are good partners depends on not having resellers who aren’t partners. On top of reimagining your ways of distribution, unauthorized seller enforcement can be helpful. This practice involves finding the identities of unauthorized resellers, communicating that they are not welcome to sell your products where they are selling them, and—if absolutely necessary—following through with legal action to limit the scope of their commerce with your goods.
The right reseller partnerships and networks can simplify, grow, and protect your business. But as we’ve detailed here, the success of your partnerships with resellers will also depend on how well your business is organized to support their business.
Luckily though, the necessities of good reseller relationships—centrally price and distribution control, and of course acceptable margin for a partner’s profit—really are a matter of ecommerce best practices for any careful and ambitious brand, and so the opportunity of working with a reseller should dovetail with the opportunity of running an even-better digital consumer-goods business.