In a previous post, we talked about how little choice brands had in deciding if and how widely they would be distributed on Amazon. Third-party sellers, who contributed to 39% of Amazon’s product sales in 2013, keep Amazon’s inventory all encompassing and cheap with variety and competition. Amazon has a hands-off approach to the gray market, except in certain instances where brand distribution is exchanged for distribution control. Chanel, Lancôme, Giorgio Armani, em by Michelle Phan, and Urban Decay have cut the number of SKUs available on the platform to less than a third.
As shown in this graph from the L2 Intelligence Report: Amazon, Chanel has managed to cut its SKUs on Amazon without cutting a distribution deal with Amazon. A search for Amazon Beauty yields just two products. The L’Oréal portfolio has dramatically decreased SKUs for em Cosmetics and Lancôme. Amazon’s pay to play attitude has encouraged luxury brands to experiment with opening up their distribution. Burberry, who had just ended a fragrance liscensing relationship at a $222.6 million cost, started distributing 48 of its 72 fragrance SKUs on Amazon in July 2012. As a results, Amazon has restricted third-party listings of the product.