A few weeks ago at the IMedia Commerce Summit, I did a fast, down-and-dirty presentation of ideas for improving your Amazon sales. Unfortunately I only had 15 minutes to talk, so I really had to run through the ideas. I thought I would take some time now to go more indepth about the opportunity with Amazon and the “why” behind those ideas. For background, I’ve been working with companies selling on Amazon since they launched Z-Shops. I’m betting most people don’t even remember Z-Shops! The clearest thing I remember about Z-Shops was how crazy the secrecy agreements we had to sign with Amazon were.
These ideas assume you are already selling on Amazon. To read my thoughts on Should I Sell on Amazon, click that link. This will be the first of a three part series of ideas.
First, a hat tip to Marketplace Ignition and Mercent. We use Mercent as our tool to sell on Amazon. It reprices almost 100k skus on a constant basis and does a great job handling our feed. We engage with Marketplace Ignition for consulting services as well as hands on management of the feed. They are an invaluable partner to us.
First, it’s key to understand the point of selling on Amazon. Amazon is a source of additional margin dollars. Typically it’s not a great source of margin percentage, since you’ll have to discount to drive sales on Amazon. And it’s an awful source of customers or marketshare or brand building. Typically a customer won’t even realize they are buying from you on Amazon. And I’ve only seen a handful of situations where Amazon customers have any downstream value to a business.
On Amazon, you need to make a profit on every sale (unless you are liquidating, of course). So it’s key to know your numbers and make sure they are correct. We craft an Amazon P&L for every sku that takes into account return rates, cost of shipping, margin, etc to understand what we need to make on Amazon to hit our goals. Then we are willing to go down to that price, if necessary (Mercent reprices to win the buy box for us, but maximizes the margin we can get while winning it).
So to be clear: the goal is margin dollars. And here are some ideas to increase them:
Amazon is pricing superstore. To win the sale on Amazon, you need to win the buy box. If you’re selling branded, non-MAP products, you should be price managing. Using a tool like Mercent you can continually raise or lower your price to win sales. The key is understanding what price you are willing to sell at before you would rather lose the sale. That’s your floor. Drop your price to win until you hit that floor; tools like Mercent are very good at managing this.
The caveat here is: it’s really difficult to beat Amazon. If Amazon is buying the product directly, you’ll only win when they run out of inventory. You can try to push Amazon’s price down so that they run out faster, but that is a tough game to win.
Use FBA Strategically
Fulfillment by Amazon is where you ship your goods to Amazon’s warehouse and they fulfill the order. You, however, own the goods the entire time. FBA improves Amazon sales in two ways: it allows you to show up on Amazon Prime searches (when Prime customers refine by “Prime Eligible” on the left) and it allows you to win the buy box without being the lowest price; you still have to be close, but can charge slightly more and win.
The cost of FBA is cheap. It’s often cheaper than you can deliver an order from your warehouse. And, if a product is selling on Amazon, it will absolutely increase your velocity of sales. It will not increase sales of a product that isn’t selling. It’s gasoline, not a match. So pick your products carefully and test well.
The risk you take here is in inventory. Don’t send too much. On Amazon a strong selling item can go to zero for any number of reasons: Amazon started sourcing the product; a competitor decided to liquidate; someone added bad reviews; etc. If sales drop to zero, you have to pull the inventory back from Amazon to your warehouse, which is painful. You can sell direct from Amazon’s inventory, but it’s not an easy thing to pull off.
Ask for Customer Reviews
Your reviews matter on Amazon. If your reviews aren’t good enough, Amazon has no issue kicking you off the site. But, if your reviews are better than the competition, you can win the buy box more often than you would otherwise. So reviews do translate into sales albeit in a black box way.
So you should ask your customers for reviews. However, if you ask all your customers, you’ll increase the bad reviews right along with the good and not help your overall score. So be careful about when and how you ask for reviews. I recommend starting by asking for reviews on orders that ship same day and complete. They are most likely to give you a good rating. Then work your way into the rest of your orders only increasing when you see limited bad reviews. Don’t ask if you’ve screwed up the order.
We use Feedback Five to help us by sending review emails and they do a great job.
Build Your Content
Finally, and perhaps most importantly, build up the content you send to Amazon. Amazon utilizes the content you send to merchandise your products both on the site and within search results. This is true of the name, the description, and the bullet points as well as for the categorization. Include as much good information as you can to help their algorithms show your products correctly. This will give you an advantage over anyone not doing a great job. Typically I see this having impact in where you show up within Amazon search results.
A word on categorization: categorize at the lowest level possible for every product and be very vigilant to get this correct. It is a big, big mistake to not take the time to get your categorization correct. Lowest level, correct category. If you take only one thing from this article, do this correctly.
If you’re selling private label or proprietary goods on Amazon, content is a way to help your sales. You can pay for an expanded content page (like this) that gives you a great shot at improving conversion and your placement in search. Be careful, though. These pages rank high in SEO, so on critical products you may end up pulling more search to Amazon than to yourself. It’s something to consider.
This is the first four “quick win” ideas for improving your Amazon sales. Amazon is a massive sales channel and small improvements can drive a surprising amount of additional sales. I think these four are the right place to start and work on improvements. My next article will be about packaging ideas to drive additional sales and the final one is on investing in your Amazon sales channel.
Hope this helps and good luck! Amazon is the world’s largest mall and represents around 25% off all ecommerce. Getting it right is important.
Continue reading with Improving Amazon Sales Part II: Repackage Yourself.