Unboxing The Top Three Amazon Challenges And How To Solve Them

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Amazon has seen impressive growth over the last several years, and much of it has been driven by its core commerce business. In 2023, Amazon accounted for 37.6% of the U.S. e-commerce market, making it by far the leading online retailer in the country. Additionally, current forecasts are placing it at 50% of the market share by 2027. ¹

While this growth creates tremendous opportunities for those of us in the e-commerce business, it also creates challenges for sellers on Amazon. As Amazon’s first agency of record starting in 2001, we are well-versed in 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 (Un)like Other Channels

Your strategies from other channels should be easily replicated on Amazon, right? Wrong. Sellers are challenged with the arduous process of learning every facet of the platform, from shipping options, FBA logistics, re-negotiating fees, duplicate listings, MAP issues, tax setup, buy box competition, reviews management, and more, with many of these hurdles unique to the Amazon/RMN (retail media network) landscape. 

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 channel’s sales potential. 

Success on Amazon requires a strong foundation while keeping up with the evolving landscape and leveraging experts, whether in-house or through an agency, to run a healthy and profitable program.

Solution: 

The biggest mistake we see brands make is 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-allocating your resources accordingly. Take advantage of Amazon’s resources, including its Seller Education channel on YouTube and the in-platform Amazon Ads Learning Console.

2. Amazon Reporting is Complex

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 in a timely fashion is a complex and challenging process. Additionally, Amazon’s reporting leaves much to be desired, making many sellers feel uncertain of their profitability. 

If you’re utilizing hybrid programs and bouncing between Seller Central, Vendor Central, Amazon DSP, and the Amazon Ads platform, you will quickly find yourself downloading reports from several different interfaces and stringing together a Frankenstein’s monster of incompatible data sets that will need to be retooled even to begin to analyze performance.  

Not to mention, merging all of that with your fees and margin data for a full picture of your profitability, Amazon can quickly become complex!

Solution:

We recommend using a third-party reporting tool to pull in your data and help you analyze it in a useful way. We understand this issue, which is why we created our proprietary Amazon reporting tools to help our clients pull in product margins at the SKU level, present sales performance from all Amazon touch points (Vendor Central, Seller Central, Amazon Ads, Amazon DSP), and combine this data into a true profitability analysis provided on an ongoing basis.

A solution like this can help you better examine your margins and provide actionable insights, allowing you to make better business decisions. 

3. Amazon Marketing Can Be Daunting (But Worthwhile!)

If you’re just getting started or even a seasoned brand having trouble scaling your advertising on Amazon, finding the right mix of ad placements, targeting types, budget allocations, and creative opportunities can be daunting. 

While campaign types can be similar to those of other more prevalent advertising channels, advertising on Amazon is nuanced and behaves very differently than might be expected. 

Additionally, Amazon Ads is a ruthless environment with a myriad of placement options that can be strategically used in a number of different competitive tactics. 

Solution: 

Establish and understand your primary KPIs. Oftentimes, inexperienced sellers throw too wide a net with their advertising, leading to an unfocused strategy that fails because it is built on a foundation that lacks structure and direction.

Decide up front where in the funnel you’re aiming to reach consumers, and then establish realistic and attainable KPIs around those goals.

To start, we recommend the following initial actions when approaching Amazon Ads:

1. Determine how much budget to devote towards brand protection.
   • When advertising on Amazon, know that if you’re not winning your brand placement, a competitor already is (leading to consumers moving from your Product Detail Page to theirs); a healthy split would be to devote at least 20-30% of your budget to brand protection if you find that you’re losing sales to competitors.
2. Diversify your campaign types as much as possible.
   • We generally recommend a 70/25/5% split for your primary ad types (Sponsored Products/Sponsored Brands/Sponsored Display) if your budget allows for your campaigns to run competitively for the majority of the day.
3. Utilize your strongest creative assets.
   • Does your product need video or lifestyle imagery to really drive engagement with your target audiences? If so, focus on Sponsored Brand or Sponsored Display image and video campaigns (in fact, this year Amazon will be requiring all Sponsored Brands ads to feature lifestyle images to run, so getting ahead of this is crucial!) If you have a well-developed storefront on Amazon, consider running your primary generic-term campaigns to a Sponsored Brand or Sponsored Display storefront-landing page, keeping shoppers engaged and within your product catalog.
4. Decide if Amazon DSP (Demand Side Platform) is a good fit for your brand.
   • In addition to Sponsored Ads, if you have the right creative resources and room in your budget, programmatic advertising via Amazon DSP could be a great opportunity to reach additional audiences across web, streaming, and other platforms. Adlucent’s DSP seat can allow your brand to easily access these services at a lower cost and with managed services!

conclusion

If all of this sounds increasingly complicated, don’t feel discouraged – it is!  Amazon has quickly expanded its Seller/Advertising platform into a well-rounded and complex channel that can require as much time and effort as any of the more traditional e-commerce options. With the continued growth of online shopping, establishing a presence on Amazon and RMN platforms is a must, and finding the right tools can be half the battle.  

Adlucent’s proprietary reporting and account management tools coupled with our RMN experts have helped brands successfully scale their presence on the platform, with clients seeing an average increase of 25% in sales just by implementing a few of these key tactics. Interested in more insights like this? Subscribe to our blog to always stay ahead of the retailer game.  

Ready to take the next step and scale your business on Amazon?

¹  Chevalier, S. (2022, August 26). Largest online retailers in the U.S. 2022. Statista. Retrieved March 13, 2023, from https://www.statista.com/statistics

Sean Flanagan

Sean is a Sr. Account Supervisor at Adlucent with over five years of experience assisting clients to improve their performance and surpass their KPIs in an ever-evolving RMN space. Taking a special interest in B2C marketing, he has worked across numerous RMN, Search, and Social platforms, with a focus on Amazon and RMN channels. He is especially passionate about fostering the professional growth of his team of digital marketing experts.