Chart and Arrows

25% of Your Online Sales? 100% Necessary: Your Amazon Playbook

If you are one of those merchants who’s still not selling on Amazon, or you are but haven’t yet checked into all the services they offer sellers, this blog post is for you.

The Case for Selling on Amazon

You might think of Amazon as your competitor, but that isn’t necessarily the case. With the right strategy in place, Amazon can be a vital strategic partner, as my colleague pointed out. Consider that in 2018, Amazon accounted for 49% of all online retail transactions, and an astounding 5% of all retail sales full stop.

Here is where things get interesting: about half of all products sold on Amazon are from third-party sellers. If Amazon is 49% of all online transactions, and half of those transactions are from folks like you, it means that about 25% of online transactions are from third-party merchants selling on Amazon. Put another way, 25% of your market potential online is through Amazon. And as mentioned in a previous blog post, for many consumers, Amazon is the first, and often only, step in their product discovery process, and if you’re not there, you have no hope of ever getting their business.

And key markets just love their Amazon Prime. According to a Business Insider survey, 44% of millennials would rather give up sex than quit Amazon for a year, and 75% would rather give up alcohol.

Step 1: Do Your Research

Amazon offers a ton of services to help third-party merchants sell and thrive on its marketplace. In fact, the breadth of services can be overwhelming, which is why we recommend spending some time reading about the options and making choices about what’s right for your business. Some merchants may benefit from engaging a consultant who has expertise in Amazon to help choose which services will best compliment their business goals.

For instance, what percentage of your business should come from the Amazon marketplace? If you’re getting an abundant amount of sales through the site on a daily basis it may be tempting to focus your efforts there. But what happens if something goes wrong with your Amazon account, or if it is deactivated for some reason? You need to know upfront the level of support you can expect from Amazon (and ensure they’re on the same page).

Step 2: Set Up Your Amazon Account

Generally speaking, merchants are either third-party sellers (Seller Central) or first-party sellers (Vendor Central).

  • Seller Central (3p): Amazon provides a turnkey web interface that allows merchants to market and sell products to Amazon customers (i.e. sell via the marketplace)
  • Vendor Central (1p): Amazon acts as a full-time distributor of your products, buying and storing inventory and taking care of everything from shipping and pricing to customer service and returns.

 

Account Types

You’ll also need to determine an account level. There are fees associated with selling on Amazon, and sometimes they give merchants pause. Don’t forget: there are always costs to do business, and while at times Amazon fees can seem high, consider the cost of selling through other channels. When considering TCO, you may find that it’s actually less expensive to sell through Amazon.

  • Professional: $40/month + fees
  • Individual: $.99/sale + fees

 

Fulfillment Options

Finally, select your fulfillment option. Fulfillment is one of Amazon’s strong points, and the company has built massive infrastructure to get packages into the hands of shoppers in a timely manner. It is a pay-as-you-go model. If you use Fulfillment by Amazon (FBA) your products are available for Amazon Prime.

  • Fulfillment by Amazon (FBA): Your products are in Amazon’s fulfillment centers, and Amazon will “pick, pack, ship, and provide customer service for these products.” Fees are on a per package basis, determined by size, there are also warehouse storage fees. Amazon offers a fee calculator to help determine your costs.
  • FBA Onsite: You store your products in your own facility, and Amazon reps pick, pack and ship it for you. Eligible for Prime and Subscribe & Save. Amazon fulfillment fees but without the storage fees.
  • Fulfillment by Merchant (FBM): You take full responsibility for  storing and packing and shipping orders. There are no fulfillment fees.
  • Seller Fulfilled Prime: Sellers deliver directly to domestic Prime customers from their own warehouse. By displaying the Prime badge, you are committing to fulfill orders with Two-Day Delivery at no additional charge for Prime customers. Amazon gives you access to the right transportation solutions to help you meet the high bar for the Prime customer experience. Note: There is a waitlist to join this option and participation requires sellers to use Amazon Buy Shipping Services for at least 98.5% of orders.

 

Inventory Management Tool

Amazon has built some great tools for managing your inventory, such as an Inventory Dashboard, and Inventory Performance Index, which measures inventory management over time, including how well you balance inventory levels and sales, fix listing problems that make your inventory unavailable for purchase, and keep popular products in stock.

Step 3: Produce Discovery, Promotions and Advertising

Amazon provides a range of options to feature your products and brand to help you win customers and generate sales. For instance, you can create special offers for sale on Amazon, your site, or your stores only (for FBA participants only). These are powerful tools because Amazon goes out of its way to get your offers in front of its customer base, which is why an additional 5% fee is applied across your entire account. So if you sign up for these programs, make sure you take advantage of them.

  • Amazon Exclusives Program: The Amazon Exclusives Program is one way the marketplace can help you acquire new customers. Amazon describes it as, “best destination for innovators to launch and build a brand by providing increased brand discoverability, marketing opportunities, and self-serve brand tools.” Don’t be put off by the name of the program, Amazon defines “exclusivity” as “selling through Amazon, your own website, and your own physical stores.” This can be a on a per product basis, or even unique variations on an existing product.
  • Amazon Deals: Amazon offers many deal options — Today’s Deals, Lightning Deals, Savings and Sales, and Coupons. If you haven’t yet applied to be included in Deal of the Day, do so immediately. Lightning Deals are now a consumer sport, with numerous shopping blogs offering tips on how to snag them. To participate in a Lightning Deal, you and your products must meet specific Amazon criteria.
  • Sponsored Products: Sponsored Products is Amazon’s PPC advertising service that helps sellers promote the products they list on Amazon. You select the products you want to advertise, assign them keywords and enter a cost-per-click bid. Then, when an Amazon shopper searches for one of your keywords, your ad is eligible for display alongside the search results. You’re charged only when an Amazon shopper clicks your ad, at which point the shopper is taken to your product details page.
  • Sponsored Brands: Formerly known as Headline Search Ads, Sponsored Brands are keyword-targeting, cost-per-click ads that allow brand to promote custom headlines, their logos, and images, and drive traffic to their Store or a curated page that showcases their brand and products on Amazon. Why should you invest in Sponsored Brands ads? From 2015 to 2018, Amazon surpassed Google for product searches, with Amazon growing from 46% to 54% and Google declining from 54% to 46%. And it’s still in its early days yet.

 

Step 4: Evaluate Additional Amazon Services

Ever notice how the arrow in the Amazon logo points from A to Z? That’s not an accident. The company has always sought to provide everything a person may need.

The same holds true for its sellers and a host of other business entities. Amazon offers a mind-boggling array of additional services, some for use on Amazon.com and others for anywhere else on the web. Some of these services, like Brand Registry, I consider must haves, others are beneficial for specific types of merchants and sellers.

  • Brand Registry: Amazon Brand Registry helps you protect your intellectual property and create an accurate and trusted experience for customers on Amazon. It’s software proactively removes suspected infringing or inaccurate content. This is one of the services I think all vendors should use.
  • Amazon Business: Amazon Business is a B2B service that allows businesses to sell and purchase supplies from one another. There’s no fee for joining, and members get access to quantity discounts, tax exempt purchasing, business-only prices, among other perks.
  • Amazon Handmade: This is an artisan-only community for selling handmade items to Amazon customers. Participants can take advantage all other Amazon programs, such as FBA, and promotions.
  • Amazon Custom: Amazon Custom is a store on Amazon.com, where shoppers go to customize your products with their text, images/logos or from a list of options that you provide. Custom products are cross-listed in our store as well as in your specified department.
  • Amazon Multi-Channel Fulfillment: Amazon’s Multi-Channel Fulfillment (MCF) offers access to Amazon’s fulfillment network, operational expertise, and trusted shipping options for all of your orders, from wherever they’re placed—both on Amazon.com and on other sales channels.
  • Amazon Web Services: AWS provides on-demand cloud computing platforms to individuals, companies and governments, on a paid subscription basis. The technology allows subscribers to have at their disposal a virtual cluster of computers, available all the time, through the Internet.
  • Amazon Pay: Amazon Pay is an online payments processing service that lets Amazon customers pay for item on external ecommerce sites, using the payment (credit card and address) stored in their Amazon account.

 

Parting Thoughts

Before I leave you in this post, I would like to take the opportunity to address some concerns about selling on Amazon that many sellers have shared with us at Something Digital.

The first concern is data. When a customer purchases your product via Amazon, obviously Amazon has access to their customer’s data, including search history, other products looked at, name, address, credit card information, and so on. What’s to stop Amazon from using that data about your customer for themselves or for your competitors’ benefit?

Consumer data is one of the hottest commodities in commerce, period. Should this stop you from selling via the marketplace? In my opinion no. Amazon already has all the data they need and if they don’t they will soon. It’s one of the perks of having the largest assortment of products online.

And consider this: Let’s say your products fall into a unique category that’s not sold on Amazon currently. You withhold your products from the marketplace, but will your competitors? Likely not. So unless you trust all of your competitors not to sell on Amazon, they’ll get to the 300+ million customers on Amazon before you.

Finally, as huge and as important Amazon is, it isn’t the only marketplace in the world.  Walmart, Jet and Alibaba are huge marketplaces, and you should plan strategies for them as well, lest you miss out on those opportunities.

 

Written by: Brian Lange, Director of Business Development