Retail Ecommerce Highlights for Back to School 2022
How Kellogg’s Uses Automation to Prevent Revenue Losses to Unauthorized 3P Variants
- Our research has shown that the presence of 3P variants on your PDP pages leeches an average of 1.85% of your revenue from those pages
- This is a recurring problem, so you can’t just fix it once and forget it
- Automation is critical to success
Amazon 3P Sellers: A Love-Hate Relationship
Amazon is reported to love third-party (3P) sellers – 18% of the company’s 2017 revenues came from 3P seller services, after all, and these marketplace sellers were responsible for more than half of all units sold on Amazon worldwide in 2017. Many of Amazon’s first-party (1P) sellers, brands and others that sell wholesale to Amazon, however, have decidedly mixed feelings.
Some of these 1P sellers are also 3P sellers, pursuing a hybrid strategy. But for many brands, unauthorized third party sellers of their products are a key source of revenue leakage and have a significant negative impact on their Amazon revenues. Our research has shown that when 3P sellers attach variants to your Product Detail Pages (PDPs), they leech away 1.85% of your revenue on average.
Keep in mind that we are not talking about 3P sellers hawking your products on their own pages – there is very little you can do about that, as long as they are not infringing on your rights in some way (say, by using your copyrighted product images), or violating your policies (such as MAP guidelines). The issue that faces so many of our brand customers is 3P sellers taking advantage of the brand’s own PDPs to drive sales of the 3P listings.
Essentially, the 3P sellers are drafting off brand manufacturers’ efforts to drive traffic to those PDPs, taking advantage of the brand owner’s marketing spend and Amazon presence. This is a problem for many of our customers, with a large revenue impact. As one of our large CPG customers relates: “Within a day of going live with CommerceIQ, we identified more than 50 3P SKUs on our PDPs, leeching conversions and revenues that were rightly ours. We got the unauthorized sellers removed within a day by downloading the list and sending it to Amazon. This move generated almost $100 thousand dollars in just three months – that’s money we hadn’t even been aware we were losing.”
How Kellogg’s Deals with 3Ps
This is a problem that Kellogg’s has encountered, too: in the image below, we can see how a 3P seller (highlighted with a red box around the name) has created a size variant of a popular Kellogg’s product, one that will leech away revenue from Kellogg’s own listings. Fortunately, Kellogg’s has CommerceIQ, as noted by Andrew Freeman, Kellogg’s Global Director, E-commerce Capability, in our recent webinar.
“One of the strategies that we’ve really found that’s great for us is the 3P strategy,” said Andrew Freeman, Global Director, E-commerce Capability, Kellogg’s. “We recognized that this is an issue even before signing on with Boomerang [though] we didn’t really understand how big an issue it was. Once we had CommerceIQ in place, we quickly realized that we had a very big opportunity around 3P variants.”
You can hear Andrew discuss the issue by clicking on this extract from the webinar.
One of the aspects of the 3P variant issue that makes it particularly difficult to address with legacy analytics and manual processes is its recurrent nature. Some of our customers have compared 3P variant issues to the Whac-A-Mole arcade game – get them taken down and they pop right up again. This is true in Kellogg’s experience, as well: “Quite frankly, 3P variants are found regularly. This is something we check on almost a day-to-day basis.”
The recurrent challenge of finding 3P variants is exacerbated by slow, manual, labor-intensive processes for having them removed. Initially, in Kellogg’s case, requests to Amazon to remove unauthorized 3P variants were made manually, after CommerceIQ had identified the issue. Then Kellogg’s worked with the Boomerang Commerce product team to develop automation for this manual step, saving enormous amounts of time and vastly expanding the volume of 3P variant issues that the small, nimble team could address. “That [automation] now allows our catalog team . . . to quickly find and report 3P variants,” noted Freeman.
“This type of automation, I would tell you, was a huge win for Kellogg’s. I think this is a great example of how automation can be used to scale a specific task and improve team efficiency.”
We have heard from our brand manufacturer customers (especially those in the CPG market) that unauthorized 3P sellers can be a major source of revenue leakage. In fact, our research shows that the presence of a 3P variant on a brand’s PDPs leads to an average revenue loss of 1.85%. Increasing the difficulty of solving this problem is its episodic nature: you can’t get a 3P variant removed and have it stay gone – the process must be repeated regularly. Kellogg’s has experienced these difficulties too, but through the use of CommerceIQ, it has automated the process of identifying and removing unauthorized 3P variants, leading to “a huge win for Kellogg’s.”