Amazon: 5 operational challenges for pharma companies

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Since its founding in 1994, Amazon has established itself as a market leader in online commerce, becoming the most successful ecommerce platform in the world. While the international Corona pandemic has significantly driven digitization, Amazon has also seen a renewed surge in its popularity and has been able to maintain its increased stock market value at an elevated level, despite small losses, even after the pandemic.

As a result of the Corona pandemic, the trend towards ecommerce has spread to almost all industries, so the pharmaceutical sector has also been strongly influenced by the digital transformation. Across Europe, the development of the digital pharmacy industry still varies widely, but new players are emerging on the market almost daily. Amazon also has high prospects of success in the digital pharmacy landscape, but is currently still more of a lifestyle platform than a pure mail-order pharmacy. Amazon Pharmacy's market entry in Germany could quickly change that. However, its relevance in online retail is already enormous, as Amazon's reach is already 15 times higher than that of all the top 15 e-pharmacies combined. This is already an important point for the pharmaceutical industry to exploit today.

This progress towards online trade already offers retailers great opportunities to increase their sales and growth through online sales. Amazon's market dominance makes it particularly suitable for this, whether in the pharmaceutical sector or another. Due to the expected developments around the e-prescription with increasing eRx trade and the Amazon Pharmacy, the pharmaceutical industry is especially lucrative for Amazon sales.

However, in addition to the prospects for success and advantages, selling on Amazon also brings with it some challenges and a lot of know-how. In this article, we will go into this in more detail and also give valuable tips on how pharmaceutical companies can successfully enter the Amazon trade.

Content is in german language

Blog post content:

No specialist staff available for Amazon
The logistical options FBA & FBM
High tax obstacles
Choosing the right collaborations
Prepare the administrative systems
Amazon Study 2022 by Smile BI
Full service support for Amazon by the Kaske Group

No specialist staff available for Amazon

Amazon as a sales channel means a lot of success and work at the same time. A new area of expertise is created in the company, which requires a lot of specialized knowledge and time. Working with Amazon or selling on the Amazon marketplace is a challenge for many. One point that is often not considered is employees who are expected to take on these new tasks. Far too often, additional tasks that have arisen are distributed to employees who are already working at full capacity. However, successful work with Amazon requires a lot of expertise and cannot be done "on the side". As a result, the "Amazon" issue is closed with a lot of frustration in the company's history after additional costs have already been incurred.

First, basic knowledge about sales through or with Amazon should be acquired internally. Training courses, webinars and special Amazon consultations promote the acquisition of basic knowledge. This basic knowledge helps with understanding, but is no substitute for the necessary expertise and personnel capacities for the operational handling of Amazon as a sales channel. Experienced experts with the necessary know-how and personnel resources should be called upon for the development of a successful Amazon strategy and its operational implementation. If a company cannot provide in-house specialist personnel for the challenges on Amazon, an accompanying Amazon agency can be a solution.

The new challenges on Amazon must be given the necessary attention. This is best achieved by in-house specialist staff or with an accompanying Amazon agency.

The logistical options FBA & FBM

There are two different options for distribution on Amazon: Fulfilment by Merchant (FBM) and Fulfilment by Amazon (FBA). These differ mainly in whether the areas of warehousing, shipping and service are handled by the merchant or by Amazon. The decision for Fulfilment by Amazon brings the merchant a lot of relief in these areas, but it is also associated with some restrictions:

Amazon FBA

The sellers are subject to Amazon's FBA
Amazon stores the merchants' goods
Sellers use Amazon's logistics network and pay the shipping fees set by Amazon
Amazon takes care of the customer service
Products usually sell quickly
Products are small, light and inexpensive
Products are packaged by Amazon in standard packaging
Lower profit margins due to FBA fees
Automatically eligible for Amazon Prime program
Buy Box is easier to get for products

Amazon FBM

Merchants are not subject to Amazon's FBA regulations.
Sellers must store their own inventory and find their own logistics network (shipping fees are variable)
Sellers take care of customer support themselves
Products do not sell quickly
Products are bulky, heavy and have a high price tag
The products are packed by the sellers in customized packaging.
Higher profit margins, as there are no FBA fees
Application for Seller Fulfilled Prime program is necessary
Buy Box for is products more difficult to obtain

When deciding on one of the options, special consideration should be given to the product turnover rate, the cost and shipping line of logistics, and the various Amazon programs such as Amazon Prime or the PAN-EU program.

High tax obstacles

In this area, too, special features go hand in hand with Amazon and the choice of the right tax consultancy is crucial!

Not every tax advisor or their own accounting or tax department is trained and experienced in the effective processing of Amazon's tax data. Especially selling abroad brings some challenges, so it is imperative to have in-depth knowledge of how to handle domestic and foreign sales. Challenges that arise from selling abroad with or through Amazon:

Existing experience with tax data processing
Sound knowledge of processing domestic sales and foreign sales
Know-how on OSS reporting (EU's One Stop Shop scheme) or delivery thresholds that may not be exceeded when selling abroad
Procurement of foreign sales taxes for Amazon sales abroad (tool for this is Taxdoo)
Intra-Community shipments: If the company is based in Germany and goods are stored abroad, this must be taken into account for tax purposes. Storage abroad requires a tax number in each country. Shipping abroad without storing the goods there is however possible without a tax number.

In order to avoid making mistakes or overlooking small details, a great deal of specialist knowledge and experience is required.

Choosing the right collaborations

Due to its sheer volume and special features, the many tasks that Amazon brings with it as a sales channel can hardly be managed alone and experienced partners should be brought on board. Some tools, systems and experts in the various areas are suitable cooperation partners. An overview of these should already be obtained before the Amazon strategy planning. The selection of the most suitable partners is important in order to really understand the Amazon system and to be successful.

To benefit from maximum success with minimum effort, companies can make use of specialized Amazon agencies and continue to participate in the process through regular exchange.

Prepare the administrative systems

The administrative systems should also be prepared before the cooperation with Amazon. Experts can check whether internal systems and programs such as enterprise resource planning (Billbee), tax programs (Datev) or analysis tools (Amalyze) are compatible with Amazon and whether a connection already exists. If this already exists, Expert:innen can assist in setting up the systems for Amazon. Otherwise, it becomes more complicated and a connection needs to be set up first.

However, this should definitely be done BEFORE the start of the collaboration, as adapting the systems afterwards can be very expensive and time-consuming!

Amazon Study 2022 by Smile BI

In the Amazon Study 2022, we look at Amazon's overall situation and specifically at its performance in the pharmaceuticals sector. In addition to the strategic approach of Amazon Pharmacy, we analyze sales and growth data of successful pharma brands on Amazon. We also delve deeper into challenges and opportunities for pharma companies and offer specific recommendations for action. Our pharmaceutical company survey reveals how companies are already working with Amazon as an advertising and sales channel. Best practice examples and case studies show how successful an applied Amazon strategy can be.

Click here to go directly to the study!

Full service support for Amazon by the Kaske Group

Including Amazon as an additional channel for online sales is not easy at first, but it is becoming increasingly relevant for every pharmaceutical company and will soon be unavoidable. To ensure that the brand strategy, setup processes and complete brand management are successful, support from experts is required. Smile BI and the entire Kaske Group are the ideal partners for this. Contact us now without obligation!

The Kaske Group is a market-leading pharmaceutical solutions provider with a digital focus. The fast-growing, owner-managed group of companies headquartered in Munich includes the marketing agency Dr. Kaske, the ecommerce specialist Smile BI and the DTC-as-a-Service Provider Dr. Vital. Overall, the group employs around 75 people. Its customers include large and medium-sized healthcare and pharmaceutical manufacturers, including 8 of the top 10 German pharmaceutical companies.

The Kaske Group is your pharma marketing one-stop store. As experts in digital marketing and pharma ecommerce, we also focus heavily on Amazon services. Kaske Group's high-quality expertise also makes us the ideal one-stop shop for your Amazon sales as a pharmaceutical company. We offer full-service Amazon support from initial consultation, to strategy development and operational execution in the following areas:

Google & Social campaigns for Amazon
Sales Promotion & Advertising
Amazon Paid Search
Key Account Management & Consulting
Content, Listing, Packshots

These are the strategic and operational Amazon levers for success:

Amazon in the pharmaceutical industry