Source: Amazon
Will Amazon’s Brand Referral Bonus divert online traffic?
Amazon.com has introduced a Brand Referral Bonus program that enables third-party sellers to earn a bonus averaging 10 percent of product sales for driving traffic to their Amazon listings from non-Amazon marketing campaigns.
In an announcement on the Amazon Services Sellers Forum, Amazon pointed out three benefits:
- “Help accelerate your growth and improve the efficiency of your non-Amazon marketing and advertising campaigns that drive your referral traffic to Amazon.
- Save money by receiving bonuses that average 10 percent of sales from traffic you have driven to Amazon.
- Improve advertising efficiency by receiving the same bonus for customer purchases of additional products from your brand up to 14 days after they click the ad.”
The bonus is provided as a credit on referral fees, which is the percentage that Amazon takes from sellers on its site. The fees have varied widely by category but currently averages 15 percent.
In the comments section of the announcement, many sellers appeared skeptical of the program with some fearing the bonus rate will eventually be reduced. A few saw benefits as customers already trust making purchases on Amazon.
For Amazon, the move comes as retailers have redoubled their efforts online during the pandemic with Walmart, Google, Target, Kroger and Instacart busy recruiting third-party sellers to their online marketplaces. Facebook, Instagram and TikTok are also promising bigger e-commerce pushes.
Speaking to Advertising Age, James Colon, managing director of integrated media planning at OMD USA, suspects that, in addition to bonuses, brands that reroute external traffic will earn high placement within organic search on Amazon. Mr. Colon said, “Amazon will put more weight behind share of traffic to product pages and sales that are driven from off-site.”
In a blog entry, Katie Capka, inbound marketing manager at Kaspien, which provides software for marketplace sellers, said that, in addition to newer tools such as A+ Content, Amazon Attribution, Amazon Affiliates, Amazon Associates and Amazon Live, the Brand Referral Bonus is part of the company’s efforts to make its platform less transactional. She wrote that Amazon will increase “its value proposition” by enabling shoppers to “engage with brands in a relational as well as transactional manner.”
- Launch of Brand Referral Bonus program – Amazon Services Sellers Forum
- Amazon Offers Brands A ‘Bonus’ When Ads Drive Sales To Its Site – Advertising Age
- Amazon bonus program entices brands to funnel more sales its way – The Drum
- Amazon Sellers Weigh Pros and Cons of New Referral Program – EcommerceBytes
- Amazon Announces Brand Referral Bonus Program for Amazon Sellers – Kaspien
- Amazon Launches Brand Referral Bonus Program – Viral Launch
- Best Buy will be the only top US retailer to see ecommerce sales drop in 2021 – eMarketer
Discussion Questions
DISCUSSION QUESTIONS: What do you think is behind Amazon’s Brand Referral Bonus, and is it a threat to its online competitors? Do you see more upsides or downsides for third-party sellers?
Poll
Loading …BrainTrust
John Orr
SVP of Retail at Ceridian
Liz Adamson
VP of Advertising | Buy Box Experts
As much of a threat as the co-operative competitive relations they have leveraged for years has been. If it helps your business grow, use it. If not — don’t. Overall, Amazon is leveraging its value chain. Competition has always been a good thing.
Amazon is right to be worried about their future with the recent announcement of Alibaba’s plan to deliver products anywhere in the world within three days, for a fraction of the cost of Amazon. And as more and more companies like Walmart and Shopify grow their own marketplaces, the increasing competition has to be keeping Amazon up at night. I don’t think this program will garner the increased business that Amazon hopes because this increase in competitors will give small businesses a lot more options for finding a more profitable platform.
It’s a smart move by Amazon. Many brands are reluctant to divert ad traffic from their own website. If they are going to pay for Google or Facebook ads and they have a website, it often makes the most sense to send traffic to that website for two primary reasons, 1.) their website has higher margins and 2.) they keep the customer and can target them in future marketing. Amazon’s Brand Referral Bonus addresses the concern on margins, and other new programs are beginning to provide the ability to market to Amazon customers who have purchased from your brand. In the past year Amazon has shown that it is listening to the concerns of brands, understanding the barriers that keep them from selling more on their marketplace, and little by little they are addressing them.
This move helps Amazon engage sellers’ social networks to lower acquisition costs and counter rivals. It can keep Amazon competitive against retailers’ e-commerce strategies and tech giants’ retail ambitions.
Amazon is enlisting its stakeholders in their battle against other e-tailers. It’s a smart move. But I do agree with some skeptical vendors – the bonus is likely to be reduced after the shoppers have migrated to Amazon. So in a sense, the vendors are being exploited in these “referrals.”
The competition is growing for Amazon’s marketplace and their success is very much dependent on being the go-to search destination for product search. Anything Amazon can do to drive consumers to their platform at the beginning of their shopping journey is a win for them, so why not incentivize marketplace sellers to drive traffic to the platform via non-Amazon campaigns? This is a smart move for them — and they need to incentivize sellers to do this since it’s driving traffic away from their own websites as a result. That means for some sellers, this won’t make financial sense no matter the incentive, but for smaller sellers it will.
Historically, brands have preferred to spend advertising dollars driving traffic to their own ecommerce sites because of Amazon’s commission structure. This new program effectively lowers the commissions for most products from 15% to just 5%, which makes it far more attractive for brands to drive traffic directly to their Amazon listings.