Improving your Amazon Sales Part 1: Quick Wins

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.

Goals

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:

Price Manage

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.

Conclusion

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.

Should I sell on Amazon?

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.

 

How Does Gmail’s New Promotions Inbox Change Email?

Google is slowing rolling out the new Promotions inbox to those who have requested it; I still haven’t heard of anyone getting the new inbox who did not request it. In case you haven’t seen it, this is what mine looks like.

Gmail Promotions Inbox
My Gmail Promotions Inbox

This is an interesting and drastic change to what we know as email. And I believe it changes the game (again) for email marketers. One stat you need to track: what percentage of my email file uses Gmail. At this point, Gmail is the only email service even attempting to be innovative. And their innovations tend to roll email marketers.

The promotions box that came out last year limited your access to customers. It essentially quarantined promos to a separate box that only gets looked at when customers are shopping. And no one (believe me: *no one*) moved your corporate promotional email to their main inbox no matter how many times you sent that email asking. But I actually think this change is bigger for email marketing.

At the surface you can clearly see that images win again. It becomes much more important to have a captivating key image in your email than to have a good subject line. Subject lines are relegated to the small type at the bottom. And that’s literally the last thing you look at. But it’s more than that. I think there are few key changes here.

First, font sizes have to go up. Way up. One main idea, expressed clearly and quickly to capture attention. Design matters. Note the Scoutmob example here – extremely well done. If you pack a paragraph of copy into your main email image, it will be unreadable.

Second, your Google+ account has to be verified. In this example only American Airlines and Scoutmob have verified their Google+ accounts. That’s why they have a nice logo in the box on the right, rather than a weird grey letter.

Third, those with compelling imagery win. This is a small section of a big inbox. Your image has to capture attention quick and hold it long enough for your key copy idea to get through. Your main image also has to be one solid image, not broken into a hundred slices.

Fourth, metrics have to change. Open rates have been used since the start of spam to measure subject line efficacy. Clearly now this is wrong. Open rates are now determined by the key idea of the email; essentially we used to use click-through rates to tell us if the content works. Now opens and clicks are judgments on the key idea and creative execution of the main image. Your brand name is larger than your subject line.

Note that several of the key spaces are blank in my inbox. Technically you need to define the main image of your email using this spec. If you don’t, Google attempts to guess at which image is the most important. As you can see, they suck at this. It takes very little time to define it; go do that now. Verify your Google+ account now as well.

Finally, if you aren’t doing photography specifically for email, I think it’s time to start testing. The new email is all about images, so the quality of your images is likely to determine open and click-through rates.  And this will help all your emails, not just Gmail accounts.

This is a way for Google to monetize the promotions page within email. Now the promos are almost unrecognizable in your inbox. Definitely a win for the big G. And maybe an opportunity in terms of marketing to current non-subscribers. Time to test; the new ad is much, much better than the old yellow faux email ad they used to serve up.

Anything I’m missing?

 

** Side note: Animated gifs don’t work. Really too bad from a marketing perspective ….

Marketing Proprietary Product Online

Proprietary brands and products have become the end-all and be-all for retailers in recent years. Brand aggregators have been struggling with margin squeeze since Amazon polluted their pool. And so more and more retailers are working on proprietary goods that seemingly don’t have any price pressure problems (say that three times fast).

But proprietary goods have their own set of marketing issues that tend to squeeze margin; namely, how do you drive demand for your own brands? The margins are great, but 70% of $0 is still $0. And if you create a proprietary brand there is one thing you need to remember upfront: *no one is searching for your brand*.

The nice thing about branded goods is that they already have built in demand. Paid search works great, SEO works great, social works … well, it is social. Remember, these sales are just collecting demand for the product that already exists. In other words, it’s easy (relatively).

Building demand for a product is a very different endeavor than collecting demand. And it requires different marketing than most ecommerce retailers. It requires brand marketing that creates demand. The creative is different, the channels are different and the execution is different. Once demand is created, you can turn on paid search and collect the demand as you see fit.

To start you need to have proprietary merchandise that is better in some way, shape or form for your target market. Creatively you need a campaign with a big, simple idea. And you’ll have to invest far more in the marketing, but hopefully far less in the promotional game to get the sales.

You will likely have to go offline to drive the demand. Here’s where old school catalogers missed the boat: catalogs do a great job of creating demand. But only if you’re featuring and highlighting your brands. Direct mail works. TV is the absolute superstar of brand building, but is expensive – start with radio, paying those with your core audience to mention your product. And focus on selling your new branded goods to your current customers and visitors above all else. Don’t half-ass it.

Building demand online for proprietary product is tough. Banner ads are an expensive way to build demand (bots don’t buy things). PLA’s are an opportunity, if you’re willing to investment spend.  Amazon can work, but only if you push it: a Lightning deal, invest in Amazon CPC’s on the few categories where you still can, or sell goods direct to Amazon and let them market it (questionable strategy for brand building). Everything else results in a very slow process of building a brand.

I recommend you commit to a significant investment in branded advertising that includes a strong offline component: TV, Direct Mail, Radio, etc. Advertising is like exercise, it needs to be consistent and sustained over time to be effective. You can’t measure it like a direct response marketer would or you’ll never make the investment necessary to create your own brand.

Long-term, the payoff is huge. Moving a large portion of sales to high margin proprietary brands would transform most companies. Start with the product, but no matter how great it is you can’t market it the same way you do your national branded goods.

The Dirty Little Secret about PLA’s

It’s no secret that PLA’s are rewriting the rules of paid search. For years we had it pretty easy: focus on the keywords, the ad text and the landing page. You had very clear ways to develop your program and kick the crap out of your competitors. PLA’s have changed that drastically.

PLA’s give Google a way to compete with Amazon’s growing dominance in product searches. Amazon claims over 50% of product searches. My guess is that they aren’t that high, but they are growing fast. So Google needed to do something and PLA’s were the answer.

From what I’m seeing, when PLA’s are added to a search term you can expect about 30% drop in your traditional paid search clicks. Typically this is because of a drop in CTR, but it’s also due to a loss of position in search. I haven’t seen the same drop in organic clicks, probably because organic isn’t quite measurable as a click-through rate (clicks keep growing, but so do searches). Consumers can now shop directly from the search results page and save the time spent clicking through and price shop. Speaking as a consumer, I love it.

And Google loves it. CPC’s are significantly higher on PLA’s vs a paid search term on the same ad. And if you talk to Google, you should boost your CPC even more for higher impression share. For obvious reasons Google reps act like the only way to improve PLA performance is to increase impressions, which mays paying a higher CPC to show up more often. And PLA’s are still a black box (paid search is getting there, too, with the changes to keyword information, but that’s another story). PLA’s are also much more effective on mobile than paid search ever was.

What’s not to love?

Well, here’s the dirty little secret about PLA’s that Google dare not mention: they are price-driven. Let me repeat: to get a high CTR on PLA’s you need to have a low price. Amazon built this model and Google’s PLA’s are making the most of Bezos’ idea. Google PLA’s are all about your price. This is even more true for Bing PLA’s, which don’t show the brand, just the price.

Long-term this is a tough play for ecommerce sites. Ad costs are definitely going up and anyone not selling unique product is having to cut their price (unique, proprietary products have their own issues). This margin-killing, just like Amazon was. For Google, it’s great. They found a way to make serious money on mobile and increase the number of paid clicks on the page. A Google search page for a product often doesn’t have one organic term above the fold anymore.

The future of PLA’s will get even more interesting. Google is now pulling in local store data (“available 0.7 miles away”) in mobile, which translates to more advertisers and higher CPC’s. I also believe we’ll see more and more PLA’s on the page. The most I’ve seen so far is eight and I think that will quickly become the standard. PLA’s on very specific product searches now show just a listing of stores and prices where it can be bought (this isn’t completely rolled out yet), which looks extremely Amazon-like. Finally, PLA’s will soon incorporate overlay’s where you can boost your bid 10% for attractive searchers, for example. This isn’t the death of traditional paid search, but definitely a step in that direction.

For most non-proprietary retailers, your PLA sales should be in the 25-35% range of your total non-brand search account. And I would guess by holiday 2014 that will be well over 50% and approaching 75%.

The next phase of traditional ecommerce retailing will be pricing strategy. The big guys are already there, but with new tools and products on the market, I’ll think we’ll all be changing price on a frequent basis within the next year. We’re moving to the airline system of pricing where nothing has a single price. And Google PLA’s are now the driving force behind it.