Brands Try To Slip Amazon's Grip

Amazon can pump up the volume for brands, but it can also decimate margins - and maybe even turn what it has learned about your product into the launch of its own line.

Manufacturers and retailers are fighting back, but beating Amazon may ultimately depend on global regulatory intervention. JL  

Ruth Simon reports in the Wall Street Journal:

While many brands sell directly to Amazon, some worry about tying their fortunes too closely to (Amazon) and fear online price wars will damage their image. Some are enforcing minimum advertised prices, while others give local stores first dibs on new products or funnel customers from their websites to local outlets. Minimum advertised pricing restricts the price at which  Ray-Ban and Oakley sunglasses can be advertised. The discount on Ray-Bans on Amazon has shrunk to about 3% from 37%. "It was a race to the bottom that was not sustainable."
As Amazon.com Inc. tightens its grip on retail sales, a growing number of brands are pushing back by championing local retailers.
Some manufacturers are enforcing minimum advertised prices to make it harder for online sellers to undercut local merchants, while others give local stores first dibs on new products or funnel customers from their own websites to local outlets.
"The pendulum has swung," said Rich Tauer, president of Quality Bicycle Products, a Bloomington, Minn., bicycle wholesaler that won't sell to Amazon. The company's sales representatives push brands that support local retailers by restricting advertised prices and enforcing restrictions on where products are being sold.
Nearly 90% of U.S. consumers selected Amazon as the online retail site they use most, according to RBC Capital Markets, which estimates the Seattle giant controls roughly 20% of U.S. online retail sales.
Amazon says more than half of the items sold on its site come from small businesses and entrepreneurs. "Amazon helps small businesses increase sales and reach new customers by providing access to more than 300 million customers world-wide," a spokesman said.
While many brands sell directly to Amazon or through third parties, some worry about tying their fortunes too closely to one customer and fear that online price wars will damage their image.
Here are some of the strategies brands are using to help local merchants strengthen their hand:
Luxottica: Restricting advertised prices
Luxottica Group SpA last year launched a minimum advertised pricing program that restricts the price at which its Ray-Ban and Oakley sunglasses can be advertised. Like other MAP programs, Luxottica's policy doesn't set the actual sales price.
"It was a race to the bottom that was not sustainable long-term," said Fabrizio Uguzzoni, president of Luxottica's North American wholesale division.
The average discount on Ray-Ban sunglasses on Amazon has shrunk to about 3% as of this month from 37% in April 2016, according to Luxottica. The sunglass maker has shut down several thousand accounts that didn't agree with or refused to follow the new policy, Mr. Uguzzoni said.
Luxottica employs about 30 staffers who focus on MAP enforcement and crack down on the gray market. An outside company monitors thousands of websites and several thousand product listings daily.
Online sales to third parties in North America fell by 60% after the MAP program took effect, but a company survey conducted in October found that the opticians and optometrists who account for most sales welcomed the new plan. "Our independents tend to discount as little as they can," Mr. Uguzzoni said.
UPPAbaby: Sending out the tuneup team
Free stroller tuneups are one way UPPAbaby, a Hingham, Mass.-based maker of baby strollers and car seats, draws customers back to local retailers carrying its products after they buy one of its strollers, which cost up to $900.
Tadpole, a children's store in Boston, has hosted two tuneup clinics this year, with more than 90 UPPAbaby customers receiving an appointment.
The events are not only a selling point -- they also bring in customers who bought their strollers elsewhere, including some "who may not even have known about us," said Tadpole co-owner David Hauck.
The events also provide the manufacturer with feedback market researchers might miss. When customers complained they didn't know how to change the harness strap, engineers redesigned a piece.
UPPAbaby also gives first dibs to local retailers when it rolls out a new stroller model -- sometimes a six-month head start. "We never launch a new product with Amazon," said UPPAbaby vice president of sales Joanne Apothéloz.
Brooks: Using computers to fight back
Running gear maker Brooks is testing a new app that uses an iPad connected to a treadmill to help local retailers determine which Brooks shoe best suits a runner's biomechanics.
Brooks will help key retailers cover the $960 cost, said Rick Wilhelm, a vice president of sales for Brooks, a unit of Berkshire Hathaway Inc. The setup "allows stores to be the center of communication," he said.
In April, Brooks launched a website that lets stores order products they don't have in stock -- and then drop-ship them directly to customers' homes. The system reduces the likelihood that a retailer will take the time to fit a customer with the perfect shoe, but then lose the sale to an online competitor.
"There's no way local stores can carry all five colors of our best-selling shoes," said Mr. Wilhelm. The new site gives them "the long tail of the web."
Brooks is one of roughly 120 brands that have also teamed up with Locally, a startup that lets shoppers check a brand's website for an item and then find out which stores in their neighborhood have it in stock and reserve for in-store pick up and, in some cases, local delivery.
Thule: Putting an online catalog in retailers' hands
Local retailers typically don't have enough shelf space to carry all the bulky cargo containers, bicycle racks and luggage that Thule Group makes.
So the Sweden-based company has started providing stores with tablets that act as a digital catalog, said Schuyler Horton, a vice president of sales. A dozen U.S. stores are now piloting the $500 tablets, paid for by Thule.
Thule doesn't sell its products directly on its website. Instead, it funnels the orders it gets to about 70 local retailers, with the help of software provider Kibo.
"It's a total meritocracy," said Mr. Horton. Retailers, he said, win the online order "not by being aggressive on price. They win the order by being able to confirm they have exactly what the consumer is looking for" and being closest to the customer's location.
Orb: Letting stores donate unsold inventory
When toy maker Orb unveiled PlushCraft, a line of no-sew fabric craft kits in 2013, the feedback from local retailers was quick and pointed. Customers wanted cats, not birds, they said. And Orb was limiting sales by packaging the kits in pink boxes, rather than in a more gender-neutral color such as purple.
"We get really valuable information from them that you can't get from focus groups," said Stephanie Carver, marketing manager for Orb, which is based in Nova Scotia, Canada.
Orb has a program designed to encourage local retailers to try out new products without worrying they might be saddled with excess inventory. At the end of each quarter, local stores can donate slow-selling items to a favorite charity. Orb then replaces the donated goods with new items selected by the retailer at no extra charge.
Arc'teryx: Using e-commerce data to help local merchants
When Arc'teryx, an outdoor-sports apparel maker, holds promotions at one of 17 company-owned stores in North America, it brings in local retailers. For a November event in New York City, employees from nearby Paragon Sports Co. waxed skis and directed customers to Paragon for other services and for products Arc'teryx, a unit of Amer Sports Corp., doesn't carry.
Arc'teryx salespeople also use e-commerce sales data to help merchants determine which styles of clothing, shoes and backpacks are best sellers in their local market.
Simms Fishing: Creating a store within a store
If Simms Fishing Products had its way, the company's waders and other fishing gear would never show up on Amazon's website. The Bozeman, Mont., company doesn't sell directly to Amazon, and its dealer policy specifically prohibits sales on third-party platforms.
Older items like the Windstopper Transit Jacket sometimes pop up on Amazon, but "we do everything we can to ferret out those leaks," said Mike Moore, Simms's vice president of global sales.
Simms employees visit local independent retailers and use computer-assisted design software to create customized Simms shops within each store.
The updated floor plans include custom fixtures and racks that make it easier to display bulky waders by hanging them accordion-style.
So far, 28 stores have undergone the upgrades, paid for by Simms.