Maximizing Sales Opportunities on Amazon
Few marketers and brand merchants would question the importance of Amazon’s marketplace. Underscoring Amazon’s significance, a study by BloomReach found that 44 percent of consumers go directly to Amazon when searching for products –bypassing Google and everywhere else on the Web. This is a 29% proportional gain since 2012.
It’s inevitable that 44% figure is going to grow. Why? Amazon’s Prime loyalty program continues explosive growth; currently, there are an estimated 50 million US subscribers. Prime offers so many benefits (free shipping, unlimited music and video streaming, free Kindle book rental, free photo storage) – once a $99 membership is paid, making the most of one’s membership becomes a high priority. Prime buyers shop more frequently, place larger orders and represent > 40% of Amazon’s buyers, and a higher percentage of Amazon’s sales.
So how do you turn Amazon’s colossal audience and consumer attention to a benefit for your brand?
The simple answer: Sell products on Amazon in their FBA (fulfillment by Amazon) program. The big key to success on Amazon is winning the Buy Box. That’s the little box around the “Add to Cart” button on Amazon. The buy box winner is the default seller Amazon recommends for a given item. Over 70% of sales on any item go to the holder of the Buy Box. Amazon’s algorithm for whom to assign the Buy Box is not shared, but the most significant factors are price (lower price with shipping beats higher) and fulfillment method (FBA is preferred over merchant-fulfilled).
Amazon Merchant Fulfilled vs. Fulfillment by Amazon (FBA) – Whats the difference?
A little background – there are two main ways for most firms to sell on Amazon:
- Merchant Fulfilled – fulfill from your own (or your 3rd party) warehouse. Merchant Fulfilled items aren’t eligible for free Prime shipping. You may offer your products with FREE shipping from your warehouse, but when a visitor selects to see only products with Prime FREE shipping or FREE shipping by Amazon, your products won’t be visible.
Merchant Fulfilled Tip: Amazon tracks and monitors delivery time so be sure you don’t commit to getting orders into consumer’s hands faster than you can follow through on.
- Fulfillment by Amazon (FBA) – You pay Amazon for carrying out fulfillment, shipping, and customer service functions. Amazon’s rates for these services are fair, and access to their Prime membership and “FREE Shipping by Amazon” audience is well worth it. FBA Tip: You can list some products as FBA and others as merchant-fulfilled, it isn’t “all or nothing.”
What’s the big fuss about Seller-Fulfilled Prime and Amazon Owned & Fulfilled?
There are two other approaches, which are by invite only at present:
- Seller-fulfilled Prime – same benefits as FBA for winning the Buy Box. Cost savings for large and heavy items that can avoid shipping to Amazon’s warehouse can be significant. Sellers who participate also qualify for Amazon’s negotiated shipping rates and service levels.
- Amazon-owned and fulfilled – Amazon buys products and re-sells it like other retailers. Generally, major brand manufacturers are whom Amazon invites to participate. This opens up a more significant marketing support including Amazon’s “Subscribe and Save” program; it also opens you up to having Amazon dictate your selling price. Tip: Consider all the long-term impacts before agreeing to relinquish control of your pricing and marketing to Amazon.
Challenge: Managing pricing and competition
Assuming you are the brand owner (or the brand rights holder in the US or North America) AND sell to other re-sellers, you will find yourself competing with those same resellers on Amazon. Establishing contracts with resellers which identify accepted market channels and MAP (minimum advertised price) at providing you some protection with recourse. There are outsourced software solutions to help you manage MAP violators, but it’s infinitely better to stop this before it happens by establishing limits for resellers.MAP Management Tip: If you are the brand owner, don’t omit to submit your application for Amazon’s brand registry program – this will help you manage the copy and content on listings for your product. Without it, any reseller has as much right as you to post photos or write copy that overrides your intended presentation.
Extra Credit: International Sales
Be its neighboring countries of Canada or Mexico, expansion to Amazon’s 2nd and 3rd largest worldwide markets in the UK or Germany, or newer marketplaces in Japan and China, after gaining experience selling domestically; you can take advantage of Amazon’s reach around the globe. While still having to deal with international regulations on your own, Amazon’s FBA program allows you to bypass finding and hiring fulfillment, telemarketing and customer service operations in foreign lands. You can dip your toe in with an Amazon shop and when ready for a full-blown direct-to-consumer campaign, use the ability to fulfill outside orders from Amazon’s warehouses to take orders on your foreign website and ship product from your inventory at Amazon’s FBA warehouse.
Like any other business function, you can take it one step at a time and learn the ropes of selling on Amazon. Alternately, there are consultants and outsourced technology and resources to assist you in that process. What you can’t do is ignore Amazon’s ever-growing marketplace. To do so is to throw away opportunities to maximize sales. So don’t do it! Take steps to leverage Amazon’s marketplace to your brand’s advantage post haste – profits and sales await.
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About the Author
Shari Altman, President Altman Dedicated Direct, Member ERA and DMA