Why is it important for brands to sell directly on Amazon?

With over 300 million shoppers and 40% of total US ecommerce revenue in 2020, Amazon is the largest US ecommerce platform. Even when customers purchase elsewhere, shoppers report researching products and reviews on Amazon twice as often as on Google. With its steadily increasing market share, analysts expect that Amazon will capture a large portion of future ecommerce growth supported by large investments in fulfillment centers, prime memberships, and extensive product selection. The enormous opportunity on Amazon attracts third party sellers who often use Amazon’s ungated marketplace structure to resell other brands, causing margin pressure and negative brand perception. Brands that take direct ownership of their Amazon marketplace presence create quality brand experiences, protect their omnichannel margins, and capture revenue growth directly.

How does Merkato help brands protect their omnichannel margins?

It’s often easiest for large brands to sell to Amazon (1P) instead of through Amazon (3P). Since Amazon 1P does not honor MAP, brands who sell Amazon 1P lose control of pricing and margins. This structural misalignment of incentives is an existential issue for brands because it erodes margins off Amazon and strains relationships with key retail outlets. Merkato eliminates this structural conflict by owning the transition process from 1P to 3P and using innovative strategies to control price, distribution, and product assortment. Once the 3P selling model has been established, we programmatically monitor and eliminate cross-channel pricing conflicts and remove unauthorized sellers. Ultimately, Merkato guarantees MAP pricing, gives brands strong margins, and protects brands’ multichannel lines of business.

How does Merkato improve brands’ Amazon margins once they’re selling 3P?

To improve margins, Merkato optimizes each point across the selling process. We track buybox win rates and product pricing across all ecommerce marketplaces and deploy unique solutions to prevent cannibalization. Our team creates custom demand-based inventory forecasts to minimize storage fees while maintaining stock levels to meet demand. We create an optimized mix of FBA, FBM, and 1P fulfillment to balance minimal shipping costs with the increased discoverability and revenue benefit of selling FBA. Finally, we build granular advertising reporting, dynamic bidding, and optimization rules that allow us to reduce the cost of driving revenue with paid advertising.

Are creative services available as a part of the agency partnership?

Absolutely. Our team creates product imagery and SEO-optimized product descriptions to enhance brand perception and drive revenue on Amazon. We develop high-quality detail page copy, enhanced brand content, promotional product images, and prevent listing suppression by staying up to date with Amazon’s ever-changing creative requirements. We also offer creative services for brand store pages, including design layout, promotional copy and seasonal page updates.

How does Merkato help brands grow through paid advertising?

Merkato helps brands create a full-funnel advertising strategy by combining on-site ad formats like Sponsored Products and Sponsored Brands ads with our unique access to Amazon DSP. This approach helps us drive more revenue and ROI by moving shoppers through the entire marketing funnel, from awareness to purchase. Our team also incorporates off-Amazon advertising on social media networks like Facebook and Instagram and on other ecommerce marketplaces like Walmart, Lowes, HomeDepot, and eBay.

What is the difference between selling first party (1P) vs third party (3P)?

Brands that sell 1P sell to Amazon while brands that sell 3P sell directly to consumers through Amazon. Historically, many large enterprises initially chose 1P because it was more familiar to the brands experienced with traditional brick and mortar retail. However, selling 1P causes brands to lose control of product pricing, catalog assortment, brand experience, and ultimately revenue growth. Selling 3P allows brands to maintain control of the price, margins, and brand experience because they are selling directly to consumers. However, selling 3P is more complex and labor intensive than 1P, and most in-house teams don’t have the bandwidth to take on this additional workload. Merkato brings brands the price protection and revenue growth benefits of selling 3P while handling all the implementation workload.

I already have an in-house marketing team, why should I work with an agency?

Driving revenue on ecommerce marketplaces requires strong quantitative, analytical, and marketplace-specific skills known as Operational Marketing and Quantitative Advertising. General digital marketing skills are inadequate because Amazon’s marketplace dynamics and walled data gardens render traditional digital marketing tools and tactics ineffective. Merkato specializes in executing operational and analytical ecommerce marketing and is founded and led by former Amazonians and Googlers. Our teammates have profitably invested $550M+ in quantitative advertising for hundreds of brands and have managed dozens of brands' marketplace operations full-service. In our experience, in-house teams are happy for us to handle the Operational Marketing and Quantitative Advertising required to run ecommerce marketplaces. This frees up internal marketers to work on branding, strategy, customer research, owned channels, and synchronizing marketing activities across all touchpoints.

How much does it cost?

We offer a performance-based pricing structure with starting fees roughly equivalent to the fully-burdened cost of a mid-senior level employee. Unlike traditional agencies that charge hourly or markup media spend, we’re confident in our ability to drive revenue growth. We have skin in the game and proactively manage every aspect of brands’ marketplace operations, and our incentive-aligned, multi-year partnership structure means we only win when our clients do.

What is your fulfillment capacity and how quickly can you ship?

Our preferred fulfillment provider gives us access to several hundred thousand square feet of modern fulfillment warehouse space in multiple dedicated facilities across the USA. We can ship standard-sized parcels to most US consumers in 2 days. Although we can support smaller brands, most of our partners ship more than 20,000 units per month.

Do you ship directly to customers?

Yes! We can ship D2C as well as through most major US ecommerce marketplaces. We enable easy, efficient scaling with a seamless mix of 1P, FBA, and D2C fulfillment customized to brands’ needs. Our clients ship us palletized inventory by the truckload, and our team determines the most efficient fulfillment channel to maximize profitability.

Can you manage multi-channel fulfillment?

Yes, our preferred fulfillment provider can currently ship through dozens of marketplaces and can add most others with relative ease. We currently ship through Amazon, D2C, Home Depot, Lowes, Walmart, and eBay.

Do you have size/weight constraints?

We can ship most anything anywhere, but items that exceed certain size and weight thresholds can impact brands’ margins when shipping D2C. We help brands analyze their options and build a comprehensive fulfillment strategy tailored to their product mix. We fulfill orders using the most efficient channel to help brands meet their margin and revenue growth goals.

Do you dropship?

In most cases, no. This model isn’t efficient for clients who are selling products direct.

How do you handle customer return requests?

We offer replacements, refunds, or returns depending on marketplace-specific policies and SKU unit economics. We follow procedures that we create with clients during onboarding and continuously optimize our processes as we scale.

Why would I use a Retail Partnership?

Creating a Retail Partnership with Merkato is the fastest way for brands to protect their omnichannel margins and capture the revenue opportunity on Amazon. A retail partnership with Merkato requires the least time and energy investment from brands and is inherently cash flow positive from day one. An Agency Partnership allows for the possibility of higher margins than a Retail Partnership, but at the expense of additional inhouse overhead and significant executive time and energy. We help our clients choose between service models and are happy to do what works best for them.

What kind of brands do you work with?

We look for partners who are among the top 10 brands by market share in their segment and drive $50,000,000+ in multi channel revenue per year.

What payment terms do you offer?

We have a standard contract with a few payment options that we discuss with partners directly.

Do you have specific packaging requirements?

No. We accept standard truckload and LTL palletized shipments. Our team handles any repackaging and labeling necessary to sell through ecommerce marketplaces.

What happens if customers want to return a product?

We offer replacements, refunds, or returns depending on marketplace-specific policies and SKU unit economics. We follow procedures that we create with clients during onboarding and continuously optimize our processes as we scale. We will discuss contingencies for reimbursements for exceptional item defects.

What is a DSP and how does it work?

A Demand Side Platform (DSP) is automated software that allows advertisers to reach shoppers across hundreds of millions of websites. Advertisers use DSPs to compete for digital ad inventory using real-time bidding and sophisticated targeting criteria. Amazon DSP gives brands unique access to Amazon’s proprietary consumer shopping data to target shoppers both on and off of Amazon and at any stage in the purchase journey.

Where do Amazon DSP ads reach customers online?

The DSP gives brands access to hundreds of millions of sites including the top news, sports, and entertainment websites in the world through major ad exchanges like Google AdX, OpenX, and Rubicon. Amazon DSP also gives brands exclusive access to Amazon-owned and operated inventory like IMDB, DPReview, Twitch, Zappos, Goodreads, and more.

Why should brands use Amazon DSP?

Amazon DSP is a valuable complement to on-site sponsored ad campaigns, allowing advertisers to run both on and off of Amazon. Amazon’s DSP is the only way to leverage Amazon’s proprietary datasets that are built around hundreds of millions of consumers’ shopping behaviors. Consumers’ real-time browsing and purchase behavior enable niche targeting segments that allow brands to increase advertising effectiveness. This targeting allows brands to drive new-to-brand sales and win market share from competitors.

What are the benefits of running Amazon DSP through Merkato?

Amazon and other agencies require high costs of entry and incremental fees to manage DSP campaigns. At Merkato, we don’t hold brands to monthly DSP spend commitments or incremental service fees. We integrate DSP into the overall media strategy at a budget that makes sense for the brand, while still offering the same unique benefits available through the Amazon DSP.

How can brands measure Amazon DSP effectiveness against my other advertising efforts?

Through our unique Amazon DSP access, Merkato can track multi-channel attribution between DSP ads, sponsored ads, organic search, and social media advertising. We identify performance drivers and increase ROI by optimizing campaigns across all media channels.

Can I work with Merkato for Amazon DSP access only, or do you require marketplace management?

We believe brands win big by combining their Amazon Advertising and marketplace management, but we understand some brands have unique circumstances. Our team has hands-on experience managing DSP campaigns for many brands without having access to their Seller Central or Vendor Central accounts.

See how Merkato gets results

Dewalt tripled their revenue while reversing margin erosion and reducing MAP violations with Merkato.

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