The Amazon Paradox: Why DTC Brands Can't Afford to Ignore It

Amazon's grip on North American e-commerce continues to tighten.

Over 70% of Americans hold an Amazon Prime membership. Many shoppers start their product searches directly on Amazon, bypassing Google completely. 

It has essentially become the continent's largest virtual mall.

But for many DTC brands, Amazon remains a challenging channel to crack. Rising fees, increasing complexity, and resource-intensive management requirements mean that DTC founders either can't make the margins work or lack the capacity to manage the channel effectively.

So how do successful brands navigate this paradox?

We spoke with Marty Borotsik, CEO of the Amazon agency SwiftStart to better understand the key challenges – and opportunities – facing e-commerce brands on the platform in 2024. 

By the way, make sure to check out the upcoming Webinar Cracking the Amazon Code: What Actually Drives Sales on January 29th featuring Marty where he’ll take you through the anatomy of a 5-star listing and answer your Amazon questions live.

The Amazon Challenge

For e-commerce brands, especially those built on direct-to-consumer foundations, Amazon presents a complex set of challenges that reach far beyond simple marketplace dynamics. While the opportunity is clear – access to hundreds of millions of Amazon shoppers  – the path to success has become increasingly difficult to navigate.

At the core of this challenge is Amazon's relentless focus on leveraging their scale, at the expense of Brands and sellers. Jeff Bezos infamous motto "your margin is my opportunity" has never been more apparent. 

Costs like storage, fulfillment, and platform fees have steadily climbed over the years. This cost pressure forces brands to navigate an increasingly expensive ecosystem where profitability requires careful optimization of every dollar spent.

The complexity extends beyond just managing costs. Amazon's advertising platform has evolved into its own ecosystem, complete with unique mechanics that don't translate from other digital marketing channels. 

"People think their Google AdWords strategy will just translate over to Amazon," says Marty. "It's a giant beast with its own pulleys and levers that are totally different from any other ad platform out there." Many brands waste thousands in ad spend simply because they don't understand the platform's nuances.

Even seemingly straightforward aspects of selling on Amazon can become major hurdles. Two-thirds of Amazon customers make purchase decisions based solely on product images, yet many brands simply reuse their DTC website content. 

This oversight can severely impact conversion rates, as Amazon shoppers have distinct buying behaviors and expectations. When issues arise – from suppressed listings to image updates not going live – brands often find themselves navigating a labyrinthine support system that can turn simple problems into time-consuming ordeals.

The result is a paradox: Amazon is too big to ignore, but increasingly difficult to master. 

Brands must either invest significantly in building internal expertise or partner with specialists who understand the platform's complexities. The alternative – treating Amazon as just another sales channel – often leads to disappointing results and wasted resources.

Building a Successful Amazon Strategy

The complexity of Amazon doesn't mean brands can't succeed, but it does require a strategic approach that differs from conventional e-commerce. Marty has worked with a wide range of Amazon sellers and has seen both the successes and failures firsthand.

"Most brands make the mistake of treating Amazon like it's separate from their business," Borotsik explains. "They'll look at their .com media efficiency declining and pull back spending, not realizing that their Meta and YouTube campaigns are actually driving significant Amazon sales."

This siloed thinking creates artificial inefficiencies. Recent research from Haus.io shows just how significant the cross-channel impact can be: 97% of their incrementality experiments showed a positive lift in Amazon sales from DTC-focused advertising, with social and video channels driving nearly 8x more Amazon sales compared to search campaigns. 

Smart brands are starting to view their digital presence holistically, allocating media costs proportionally across channels based on revenue contribution.

Another common pitfall is overly relying on branded search terms. While capturing existing demand is important, sustainable growth comes from expanding your audience through non-branded keywords and strategic advertising. 

One of SwiftStart's recent clients was wasting $7,000 monthly on inefficient ad spend by focusing solely on branded terms. After restructuring their strategy to include broader audience targeting, they saw a 175% revenue increase in just three months.

For brands worried about Amazon cannibalizing their DTC business, the data tells a different story. 

According to Haus.io's research, 83% of experiments showed at least a 10% halo effect on Amazon sales without impacting DTC performance. 

Borotsik has seen this firsthand: "We recently worked with a brand that saw a 30% revenue increase with minimal cannibalization of their Shopify sales. Amazon customers are often a completely different audience – they're looking for convenience, fast shipping, and easy returns. If you're not there, they'll buy from someone else."

Looking Ahead: The Evolution of Amazon

Amazon isn't standing still. The platform is actively experimenting with AI-driven search features like Rufus, which is already changing how products are discovered and marketed. "We've had to adjust how we write ad copy," Borotsik explains. "The way products are found and surfaced is evolving with these AI tools."

For sellers, Amazon is also rolling out AI-powered tools aimed at simplifying operations. However, Borotsik cautions against over-reliance on automation: "Most AI tools get you about 60% of the way there. The copy they develop might have good SEO, but it still doesn't read naturally. The images they produce are better than smartphone photos, but they're not at the level professional product photography delivers."

As fees continue to rise and competition intensifies, brands need to be more strategic than ever about their Amazon presence. 

Here are the key takeaways for brands looking to succeed on the platform:

1. View Amazon as an integral part of your digital strategy, not a separate channel. Include Amazon revenue when measuring the impact of your digital marketing efforts.

2. Invest in Amazon-specific content. Don't simply repurpose your website assets – create images and copy that align with how Amazon customers shop.

3. Look beyond branded search. Build comprehensive advertising strategies that help new customers discover your products.

4. Consider working with specialists who understand the platform's complexities. The cost of expertise often pays for itself through improved efficiency and avoided mistakes.

"Like I said, Amazon is a beast," Borotsik concludes, "but it's a beast worth taming. The brands that succeed are the ones who treat it with the respect and attention it demands."

Reminder: Join Marty and his cofounder Geoff Bekavac plus special guest Steve O’Dell of Tenzo Tea for a free webinar on January 29th to learn the tactics that Swiftstart used to drive $100M+ in sales for Amazon sellers last year.