Select Brands forgoes reliable wholesale sales with Amazon in favor of being able to control its pricing as a marketplace seller.
If a brand wants to control its price on Amazon, it might have better luck as a third-party marketplace seller than as a first-party seller. At least that’s what small kitchen appliance company Select Brands finds, said president Eric Endres.
Select Brands is the parent company to the Toastmaster, Tru and Babycakes brands. It also has a portfolio of licensing agreements with Disney, Warner Brothers and Paramount that it uses in conjunction with product development.
After 20 years of selling on Amazon as a first-party seller, Select Brands decided in 2023 to switch to a third-party seller to reestablish its price point.
“Instead of being where we would set the MSRP, Amazon controlled that and 1P allowed that to erode over time,” Endres said. “Even if we said we have a MAP program on this line or this brand, they say, it doesn’t matter to us, we’re going to sell it for where we see fit.”
An Amazon spokesperson declined to comment directly on this experience, but referenced its blog about how it strives to keep its prices low, and how third-party sellers set their own prices.
How low prices on Amazon hurt Select Brands
Amazon selling Select Brands’ appliances for lower than its desired price was a problem for several reasons:
- Anyone could buy the product at the low price then resell it at a higher price.
- Those unauthorized resellers are now representing Select Brands and not delivering the customer experience that Select Brands can control and taking revenue away from Select Brands.
- Select Brands’ wholesalers that are legitimately selling its product at the correct price are undercut.
“Whenever there’s price erosion online, there are a lot of eyes and a lot of analysis and tools that are finding that and saying, ‘Why am I not at this retail? I need you to give me a price break so I can match or at least be competitive,’” Endres said.
The majority of Select Brands’ sales (roughly 78%) is wholesale to retailers. Amazon generates 12% of its annual revenue, and the remaining 10% is on other marketplaces or drop-shipped for other retailers, Endres said.
Select Brands gives up high volume sales and migrates to a third-party seller
Select Brands started using the 3P model with products that had the worst price erosion. Eventually it migrated its whole product line to being under its marketplace purview from selling its products wholesale to Amazon.
Select Brands’ strategy of reestablishing its price point as a marketplace seller has helped it recapture the revenue its products generate on Amazon and increase its profitability. It now sells 150 SKUs on Amazon.
“We ran an analysis and found that of our monthly revenue, somewhere between 11 and 15% was actually being earned by resellers and not us directly. We’ve actually now reduced that number to under 2%,” he said.
Select Brands uses Pattern to succeed as a marketplace seller
The drawback to this strategy is giving up the guaranteed, consistent high volume of sales from Amazon. Now, Select Brands has to generate the same amount of revenue sale by sale at a higher price point to the end consumer, instead of in one bulk sale to Amazon.
After Select Brands raised its prices, for example to $89.99 from $39.99, its Amazon sales decreased more than 25%, he said.
“We knew that in probably Year 1 we weren’t going to measure it on a revenue standpoint because we knew the volumes and attractiveness of 1P. It’s big,” he said. “We knew we might not hit that same topline revenue, but what could we measure was profitability, right sizing our retails, and then looking in Year 2, we build and accelerate that.”
To help Select Brands succeed with this marketplace strategy, it chose ecommerce marketplace platform Pattern.
New AI tool helps increase conversion
Recently, Pattern debuted an artificial intelligence tool that conducts research analysis on 300 million products in 30,000 categories. Pattern analyzes each of Select Brands’ 150 SKUs and gives recommendation on price, image type, ordering of images, conversation rate of different audiences, search terms that drive conversion and product keywords that could increase conversion.
For example, on Tru’s triple slow cooker, it was outperforming for consumers looking for products with food serving, food warming and tailgating. But, the product wasn’t capturing as many shoppers as it could in the heated cooking product category.
The Content Brief suggested Tru highlight its product material, stainless steel, on its product description and images. Stainless Steel is a popular search term for home cooking buyers, according to Pattern’s Content Brief analysis. Tru Brands made the update and when comparing 30 days before the update to 30 days after in August 2024, the slow cooker’s conversion rate increased 21 basis points. This led to a 21% month-over-month increase in revenue for that product. Endres said these results are “significant.”
“What’s exciting for us is that this product is already a top performer in our catalog and to be able to utilize some data to move the needle even a little bit more, it’s incredibly exciting for the future,” Endres said.
The brand can also use the information from the Content Brief – which is roughly seven pages — to inform what it highlights in its ad creative or what keywords to bid on.
Endres did not disclose cost of using Pattern. He said the return on investment is the increase in conversion and the time savings of not having to conduct this analysis manually.
“I’m 100% confident that aligning with Pattern is a game changer for our business and the future going forward,” he said.
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