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.

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.