Amazon has seen pretty impressive growth over the last several years, and much of it has been driven by their core commerce business. In fact, they captured an estimated 44% of ecommerce sales in 2017, and around 4% of all retail sales in the US.1
While this growth creates tremendous opportunity for those of us in the ecommerce business, it also creates challenges for sellers on Amazon. As Amazon’s first agency of record starting in 2001, we are well-versed on the ins and outs of the marketplace, focusing on helping clients boost their sales on Amazon. So let’s dive right into the top three challenges we hear from brands selling on Amazon.
1. Amazon is Complex
Sellers are challenged with learning in detail about shipping options, FBA logistics, re-negotiating fees, duplicate listings, MAP issues, tax set up, buy box competition, reviews management, and more. We’ve seen our clients go from having one part-time employee managing their Amazon programs, to dedicating experienced teams and bringing in agencies once they start to see the sales potential in the channel. Success on Amazon requires keeping up with the evolving landscape and leveraging experts, whether in house or through an agency like Adlucent, to run a healthy and profitable program.
Solution: The biggest mistake we see is brands approaching Amazon as an afterthought and not capitalizing on its true potential, usually because they simply don’t know where to start. You can start by comparing your performance potential on Amazon to your other channels, and re-allocate your resources accordingly. Take advantage of resources that Amazon offers, including Amazon’s Boost with FBA event, and their Seller Education channel on YouTube. If you’re still how to do this, contact us and we can help you analyze and forecast the opportunity for your products.
2. Profitability Isn’t Guaranteed.
Depending on your sales structure, margins, shipping costs, and competition in your category, your profit on Amazon can vary greatly. Analyzing marketplace performance and profitability accurately and in a timely fashion is challenging. Adding to this, Amazon’s reporting leaves a lot to be desired, so may sellers don’t really know if they are truly profitable or not. If you’re running a hybrid program between 1P and 3P and also running advertising campaigns, you have to download reports from several different interfaces, then figure out a way to merge the data in a useful way and factor in your fee and margin data to really understand profitability.
Solution: We recommend using an agency or a third party reporting tool to pull in your data and help you analyze it in a useful way. Here at Adlucent, we developed a proprietary Amazon reporting tool to pull in product margins at the SKU level, show sales performance across both 1P and 3P and from advertising campaigns to provide a true profitability analysis for you on an ongoing basis. A solution like this can help you examine your margins across channels with all components factored in, allowing you to make better business decisions. This can also be helpful in understanding sales forecasting and pricing recommendations for your products based on category research.
3. There’s A Lot of Competition
Certain industries on Amazon — nutrition supplements and electronics, for example — are very saturated, making it difficult to enter the marketplace and secure market share. Increasing competition from new sellers in their categories is a challenge we often hear from brands. So, whether you are re-selling and competing for the buy box or you manufacture your own products, it’s crucial to perform competitive analysis and constantly evolve your strategy. We also often hear from brands that competitors are bidding on their brand terms, showing headline search ads to cannibalize their traffic, like this example for Bose Headphones:
Solution: While there are many nuances in competing on Amazon based on the type of products you are manufacturing or selling and your industry, our top three recommendations to secure market share are:
- Focus on building reviews. The quality of your product reviews not only factors into your organic ranking in Amazon search results, but it can increase your conversion rate significantly. Our general rule of thumb is to have at least 100 reviews per product, with a 4.0 rating or more. We recommend using a service like Feedback Genius to engage your customers for feedback.
- Evaluate your product mix. Do you manufacture your own products? If you’re a retailer, do you have a private label brand? How do your prices on Amazon compare to your D2C site? Do you offer exclusive items only available on Amazon? What is your strategy with resellers — do they have access to your entire catalog, and are you enforcing MAP? If you have a registered trademark, are you using Amazon Brand Registry? The last thing you want to do is start racing to the bottom and competing only on price, especially against your own resellers.
- Build a paid advertising strategy. By placing sponsored product ads for your products and having a strategic keyword and bidding process, you can capture relevant queries and drive traffic to your detail pages, as well as secure valuable real estate toward the top of the search results on Amazon. We also recommend running headline search ads on your own brand terms to defend your brand from competitors who are likely already targeting your terms.
There are a lot of nuances to selling on Amazon and crafting a solid sales and operational marketing strategy is important. We’ve seen an average of a 25% increase in our clients’ product sales just by implementing a few of these key tactics. If you’d like to learn more about how Adlucent can help your brand shine on Amazon, click here.
1 Amazon Dominated Ecommerce Sales in 2017. The Motley Fool, 2018