Why more DTC brands are selling on Amazon—behind the risks and rewards

Direct-to-consumer brands have a retail problem—and they’re increasingly looking to Amazon to solve it. Not long ago, a lot of DTCs wanted nothing to do with the so-called Everything Store and took pride in running their own e-commerce channels. By cutting out the massive middleman, they had access to data that enabled more direct relationships with buyers. But shrinking venture capital funding and rising customer acquisition costs have forced many DTCs to seek more third-party distribution including at chains such as Target and Walmart, even though securing that shelf space has become increasingly competitive. As a result, DTC brands are looking for retail partners more willing to take a chance on lesser-known brands that will help prove traction with the big guys. (Although it only had 33 storefronts, Foxtrot Market was one such retailer before it abruptly shut down last month.) Amazon in the past year has emerged as a popular option, with sneaker brand Allbirds, skincare company Curology and herbal wellness brand Apothékary among the brands giving it a try. View this post on Instagram A post shared by Curology (@curology) DTC brands that have rolled out products on Amazon say they did so not only to increase brand awareness, but also because Amazon distribution helps with credibility when attempting to enter physical retail chains. Retail distribution became an especially important marketing tool for DTCs in the wake of Apple’s 2021 data privacy crackdown, which made it more difficult to track users and measure campaigns across apps including Facebook and Instagram. Around the same time, many venture capitalists lost interest in DTC brands, causing a sharp decrease in the funding the DTC brand playbook used to rely on. When the venture capital money that once flowed into the DTC well dried up in 2022, “if brands wanted to survive, they needed to pivot into an efficient system—and Amazon is always looking for more products and more brands, they are very efficient if you do it correctly,” said Katharine McKee, principal consultant at Morphology Consulting. McKee, who has helped guide DTC brands through the Amazon entry process, noted that entering Amazon is far cheaper and less competitive than launching in another third-party physical retailer. More: Ad Age’s DTC marketing glossary Rebekah Kondrat, managing partner at Rekon Retail, said that the DTC brands she’s working with are entering Amazon due to rising marketing costs elsewhere—from influencer fees to increased customer acquisition costs on Meta post-Apple privacy crackdown. Check out the latest Ad Age events and award programs A brand awareness bid Since skincare brand Curology rolled out some of its products on Amazon in December 2023, it’s seen increased “brand salience with consumers,” said Steve Siegal, Curology’s chief marketing and innovation officer. The skincare brand decided to launch on Amazon after learning that 25% of facial skincare purchasers buy their skincare exclusively via Amazon. “Expanding to Amazon not only opened up a sales channel, but also a new advertising channel for our brand to reach a large incremental audience of skincare purchasers. Our non-Rx products available on Amazon serve as an accessible introduction to our effective, derm-powered skincare brand,” Siegal added. Theresa Bischof, director of brand marketing for Apothékary, said the herbal wellness company has seen increased brand awareness since debuting on Amazon in October 2023. It’s helped Apothékary “reach customers who might not have found us through social media or other paid and organic channels,” she said, and “has significantly increased our brand’s visibility.” Apothékary uses some of Amazon’s standard marketing tools for sellers—such as its PPC (pay-per-click) offering and its demand-side platform, which allows brands to advertise through sponsored products to improve visibility. DTC beverage brand Recess also uses paid search tools from Amazon. “We invest a significant portion of our marketing budget on Amazon advertising given its value in supporting both our e-commerce and retail business,” Recess Founder and CEO Ben Witte said, although he did not specify exact figures. View this post on Instagram A post shared by Recess (@takearecess) “The rules on Amazon are very similar to the rules on Google search, which is that you are paying for the delta between who you say you are and who you can prove you are,” McKee said. “Amazon has enormous reach. The tool itself is similar to any other digital tool … but Amazon has every human being on Earth on the platform,” she added. Similar to bidding on Google search terms, for instance, typing “acne cleanser” into the Amazon search bar can help small DTC brands get discovered in the same way they could via shelf space in the Target or Walmart skincare aisles if they bid on that term. However, DTC brands say entering Amazon is far less competitive than entering a physical retailer, being that it’s in Amazon’s best interest to have as many brands as possible on the platform. “Many consumers now go to Amazon as their first point of discovery,” Kondrat said, noting that consumers are increasingly likely to search on Amazon for a product rather than Googling it. “Amazon has such a large portion of the attention of the market that … it’s kind of a must,” she added. However, the brand awareness boost comes at a cost. "Being available on Amazon has introduced some challenges,” Bischof said. She listed “the lower repeat purchase rate on Amazon compared to our DTC sales” as one of the problems Apothékary has faced with Amazon. “It’s harder to build a personalized connection with Amazon customers as they’re not included in the typical customer journey flow, which involves educational collateral and post-purchase email and direct mail initiatives,” she said. Plus, Bischof said her brand’s margins are much lower on Amazon than through its DTC channel. “Amazon’s requirements for participating in events like Prime Day and seasonal sales initiatives can be challenging. They often demand steeper discounts than what we typically offer on DTC, impacting our margins,” she said. DTC brands have also historically complained about Amazon’s other flaws, including sustainability issues and so-called copycatting. In 2019, before Allbirds started selling its shoes on the platform, it noticed that Amazon was copying a pair of Allbirds’ $95 wool sneakers and selling them for a third of the price. Plus, the Amazon sneakers didn’t use eco-friendly materials the Allbirds one did. An Amazon spokesperson noted that the platform has a brand registry system, saying sellers can use it to “ensure that a brand’s IP is fully protected.” Although Amazon has taken steps towards becoming more sustainable through its 2019 Climate Pledge (in which it pledged to achieve net-zero carbon emissions by 2040), it is still considered a climate change antagonist in environmentalist circles due to its enormous carbon footprint. Some DTC brands that sell on Amazon despite that reputation are taking steps to ensure consumers on the platform know the brand still values sustainability. “Because Amazon doesn’t have the best reputation for sustainability, and prioritizes speed and efficiency, we have made more of an effort to communicate our brand’s sustainability values clearly in our product listings and storefront,” Bischof said. Those efforts include transparency about the brand’s own sustainability practices, such as its environmentally friendly product packaging. “We are currently testing the waters with Amazon influencers, and we hope to partner with more sustainable influencers to further promote our sustainability practices,” she added. Shelf cred Recess was early to the DTC-to-Amazon migration, rolling out some of its products on Amazon in 2021. Since then, Recess products have entered physical retail locations such as Target, Sprouts and more. “We’ve found that having a strong position on Amazon, in addition to a significant amount of positive consumer reviews on the platform, has been impactful to our retail sell-in progress and has definitely added credibility to account discussions,” Witte said. View this post on Instagram A post shared by Recess (@takearecess) “As a brand offering products with functional relaxation benefits, our Amazon success adds to our credibility when discussing new retail partnerships,” Witte continued. “In order to get into the most desirable marketplaces … these brands have to be able to show that they have sales, that they have customers, that they have a viable product, that they have a product that people want,” Kondrat said. “What selling on Amazon does is similar to what having a store on Fifth Avenue does—it legitimizes these brands,” she added. Having a stamp of approval—like sales data from a major marketplace such as Amazon—opens doors for DTC brands, “whether they tried to go into wholesale further or they tried to open their own stores and they have to prove to the landlords that they're ‘worthy’ of leasing the space in their mall or on their high street,” she continued. “It just lends some credibility.” Check out the latest Ad Age events and award programs

Why more DTC brands are selling on Amazon—behind the risks and rewards

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