Described as a competitive “Pay to Play” in L2’s Amazon Clinic, Amazon has been a difficult platform for brands to navigate. Those who choose a no-engagement policy with the retailer find themselves at the mercy of the gray market, and risk brand dilution as a result. (For example, an Amazon gray market retailer claims to sell a $53 Dior mascara at a discount for $32 while the original price is $28 at Sephora.) The gray market disappears for brands such as Burberry who distribute through the platform.
L2’s Digital IQ Index: Hair Care & Color found Amazon to be even more complicated for Hair Care brands. For one, even Hair Care brands that work with Amazon are susceptible to the site’s gray market. In some cases, those who purchased ads from Amazon Media Group, such as Garnier, had fewer products sold by the site’s third-party merchants. Others such as Aussie and Dove have more than half of their products distributed through third-party distributors on the site. The most egregious example was Nioxin, who appeared as a “featured” brand on Amazon’s Beauty storefront and appears to have a custom page on the site, despite having no official relationship with the platform.
Brands need to find a way to cut through the chaos and use Amazon as a sales channel, especially since it plans to expand Amazon Fresh to 20 U.S. markets this year. 16% of online grocery shoppers purchase health and Beauty products online, and that fraction is likely to grow.