This week I’m speaking at the iMedia Commerce Summit on Advanced Amazon Strategies. I’m running through key ideas that could help push up your Amazon sales. However, I’m skipping the bigger question (I’m assuming most retailers have decided): Should I sell on Amazon?
This question typically isn’t easy. And the answer can be very different based on the company and the brand. But there are some questions that I believe all companies can ask to help determine whether you should be there or not.
1) Are you selling branded goods? Amazon is a demand fulfillment business. People don’t shop on Amazon, they buy. So to drive any type of reasonable sales, you have to be selling something that people search for on Amazon. Typically this means branded goods. If you’re reselling popular products, there’s a way to sell them on Amazon. If you have proprietary items that need to be sold, there’s no point; you won’t get enough volume to make it worthwhile.
2) Is Amazon buying your items directly from the manufacturers? If so, I would skip Amazon. They will own the buy box as long as they have inventory. You can only when when Amazon is out of stock and they are pretty good at not running out. Definitely don’t send inventory to FBA if Amazon is buying direct. It will just sit there.
3) How much does gross margin percent matter to your company? Amazon is about volume. If you’re selling product that gets search volume, you will have competition on Amazon. And you’ll have to price manage. So you’ll lose gross margin percentage in exchange for gross margin dollars. If the percentage matters, it will cause problems.
Selling to Amazon is not brand-building. Amazon customers are not your customers; they are connected to Amazon and have little future value to you. Typically they rarely realize who they are buying from. The only reason to sell on Amazon is to increase profit dollars.
Selling to Costco was always considered a brand-negative move, but with large volume potential. I feel like Amazon is the same. It’s purely a move for sales that long-term is likely to push your prices down. But if Amazon is already carrying your product, it’s worth trying to capture some of the profits. Just be careful with private label goods.