By Douglas McColloch
It’s a popular nostrum that the COVID-19 pandemic provided the accelerant that enabled the explosion in e-commerce sales that continues unextinguished to this day. Cautious consumers under remain-in-place orders stayed away from brick-and-mortar retail outlets in droves, the story goes, and turned to the convenience of the internet as a shopping and purchasing alternative, turning the conventional point-of-sale business model on its head.
Amazon’s online sales represent some 40% of the e-commerce market—bigger than Wal-Mart, Target, Apple and eBay combined. This presents a potentially lucrative revenue stream to companies that can leverage Amazon’s massive scale to their benefit. Photo credit: Shutterstock.com
There’s much truth to the narrative, but in reality, e-commerce sales were already booming before the outbreak of COVID, and have continued to grow exponentially since then, with global sales of some $5.7 trillion in 2022, according to e-commerce giant Shopify. That figure is forecast to top $7.5 trillion in 2025 and $8 trillion in 2026, so the “new normal” of online retailing presents a vast and potential lucrative revenue stream for manufacturers and retailers.
But there are right and wrong ways of conducting e-commerce, and it’s not as cut-and-dried as simply setting up an Amazon account, paying a seller’s fee, and creating a few product listings—though that can get you started. A recent SEMA Education seminar, “How to Optimize Amazon,” took a deeper dive into the subject, with a review of some of the pitfalls companies face when working with Amazon to build their brands and sell their products. Moderated by Vanessa Ruminski, president of SupplyKick, an Indiana-based Amazon wholesaler and consulting firm with specialty-equipment clients that include Dometic, Mothers, Eagle Lights and Lock ’Er Down, the session reviewed several challenges aspiring Amazon sellers may encounter, along with recommended best practices to best take advantage of Amazon’s massive customer reach.
Ruminski begins by stressing the importance of maintaining a strong presence on Amazon. For starters:
- 75% of online product searches begin on Amazon. It’s sometimes easy to forget the fact that Amazon isn’t only the world’s biggest online marketplace—it’s also one of the internet’s most powerful search engines. “If you’re searching for a product, 75% of the people out there go right to Amazon and they type in the search bar,” Ruminski notes, “so if you want your products to be found and purchased online, you need to be there. You need to understand how you can leverage those consumers in the right way for your business.”
- 76% of shoppers on Amazon are brand loyal. “And they’re not only Amazon-loyal, they love their Prime shipping,” Ruminski adds. “They love that it’s a very easy checkout, and they love that all their product information is already stored on the platform,” which makes purchasing as easy as clicking on “Buy it Again.” “As long as the customer is satisfied with the product quality and they have a convenient shopping experience, they’ll purchase the same product over and over again.”
- Additionally, 40% of U.S. e-commerce sales are spent on Amazon. “Think about that as a number,” Ruminski advises. “Nearly two out of every $5 spent online in the United States is spent on Amazon. Yes, there are other big players out there—there’s Walmart, Target, Apple, eBay, Costco, Kroger, all big names in the industry. But all of those combined only make up 31% of e-commerce sales. So if you’re not on Amazon, you need to be.”
Often, however, companies that sell on Amazon may wonder if they’re not fully optimizing the power and scale of the site to drive greater brand awareness and consumer loyalty in addition to sales.
At this point, Ruminski pauses to review the top five issues that companies may face when addressing these perceived (and often real) shortcomings. These can potentially include:
Selling directly to Amazon via Vendor Central. It sounds simple and straightforward—Amazon sends you regular purchase orders, you ship the product, and Amazon handles the rest. But in truth, it’s not always so simple.
One potential drawback is flexibility in pricing. “You may have a cost increase on your product,” Ruminski notes. “There’s a lot of that going on in the industry right now with supply-chain constraints and raw material shortages, so you may need to increase pricing on a particular product. You may also want to raise your pricing to a point that other retailers are selling at, but Amazon may or may not accept that. You may want to increase pricing from, say, $60 to $100, and your Amazon rep might answer, ‘No, we’re going to price it at $60.’ So sometimes it’s not easy to leverage these types of conversations to your advantage.”
There is also the issue of chargebacks. “There can be a lot of these,” Ruminski continues, “and while the reasonings vary, it really all comes down to lack of ownership and control.” The solution? Ruminski recommends upgrading your Amazon account. “If you have an Amazon first-party Vendor Central relationship and you want to make a change, switching to three-peer [3P] Seller Central is really the way to go. You can still leverage Prime shipping, you can use FBA [Fulfillment by Amazon], and you can still team up with a single-third party seller. This will gain you time and resources and a considerable amount of expertise—and, specifically, gain back control of your Amazon business.”
Unauthorized Amazon sellers or too many sellers. Ruminski cautions against conflating online sales with traditional brick-and-mortar retail, reminding companies that they follow distinctly different business models. “We all know when selling to brick-and-mortar, more sellers in the old-school way of thinking equals more sales. You’re opening new stores and new distribution channels, and you’ll hit new customers—and as long as you’re doing it with the right brand voice and the right channels of distribution, typically it does equal more sales.
“The issue is, if you’re doing that to your Amazon business, you’re taking one sale and you’re fragmenting it among many, many sellers. So you’re not doing any more business—you’re doing the same amount. But by spreading it out over a larger group of people, you may incur higher shipping costs on those B2B orders that you’re sending. So you may have too many sellers.”
“You may not even know who some of your Amazon sellers are,” Ruminski warns. “You don’t even know who they are and perhaps they’re not authorized to sell your brands. How do you get control of this?”
Too many sellers can also translate into price inconsistencies, which can inhibit sales and damage your brand. “This is a problem that we see a lot—and if you think about it, all those sellers could have different pricing for your products. They’re all trying to get into the coveted ‘buy box,’ and they’re doing it in a way that hurts your brand.”
How to mitigate this problem? Ruminski suggests “ways such as Amazon Brand Registry, consolidating sellers, consistent monitoring, controlling your distribution and registering your brand. You need to take back that control and leverage your brand in the right way.”
Inaccurate forecasting and inventory flow. This is a subject deserving of greater attention when selling on Amazon, according to Ruminski.
“Say someone wants to purchase your product and it’s not there. It’s money on the table you can’t access, and it drives you crazy,” she says. Conversely, “you have so much product, you don’t know what to do with it. Then you’re incurring fees. Then you’re looking at yourself and asking, ‘Should I drop the price?’”
The key to avoiding these traps, then, is to have “the right inventory at the right time, really making sure that you’re using the data and the seasonality to lead where your inventory should be going and flowing it appropriately.” Analyzing and optimizing Amazon logistics should be done on a daily basis, if possible, and investing in either inventory optimization software and/or dedicated employees to monitor inventory is advisable. Finally, excess inventory stocks should be purged to avoid unnecessary fees. “Either you’re flowing your inventory correctly or you have stock-outs or overstocks—and either way, you’re losing business.
“In general, the concept of ‘set it and forget it’ doesn’t exist on Amazon.”
Overspending on Amazon advertising. “We encounter many people who are overspending on Amazon advertising,” Ruminski asserts, adding that “Amazon is ‘pay-to-play’ and advertising is a must.” Amazon offers numerous channels for advertising, including Amazon Sponsored Products, Amazon Sponsored Brands and Amazon DSP [demand-side platform].
How to navigate these varied platforms to maximize your brand’s Amazon presence? To Ruminski, the key is to identify what your advertising objective is at any given time in the business cycle and let that be the determining factor in your decision-making. “The first thing we say to customers is, ‘What is your goal at the end of the day with your Amazon business? Is it to build brand awareness? Are you launching a new product? Are you focused on margin? Working through budget constraints?”
Once that question has been answered to your satisfaction, Ruminski advises constant monitoring and revising of advertising strategies as your business’s needs evolve throughout the cycle. “Maybe I want to improve my profit efficiency in the fourth quarter, and then I’m looking to improve brand efficiency in the first quarter,” she cites as an example. “Then, what are those KPIs that are important on each side of those decisions? Say if you’re building brand awareness, what’s that KPI that’s driving your decision making? The same goes with efficiencies.
“We look at our KPIs daily, weekly, monthly, quarterly, yearly. They can really change over time, and they’ll obviously help you in future decision-making and future seasonality standpoints.”
One other thing to remember: Organic and paid advertising should be working together with one voice. “You have to use those together to leverage your future strategy.”
Key Performance Indicators (KPIs) should be checked daily, with advertising strategies adjusted accordingly to meet shifts in consumer preferences. As a rule, “set it and forget it” doesn’t work with Amazon. Photo credit: Shutterstock.com
Lack of brand presence and building trust. Many brands don’t succeed on Amazon because they haven’t established a brand presence—one that builds a connection with the consumer and converts them at a higher rate than their competitors. The way to overcome this obstacle, Ruminski advises, is by creating a narrative—an online brand identity that tells a story about your products, which builds interest in your brand, and which facilitates a more convenient shopping experience. Tools to deploy to that end can include keywords, targeted messaging, video and photography, setting up an Amazon Storefront or a combination thereof. Each company will have its own needs and requirements in this area, but one thing that’s crucial across all platforms is that your brand messaging contains “A+ content.”
“It needs to be well designed,” she says in closing, “and it needs to be in your brand voice. A customer is looking for transparency and trust, and you only have seconds to get them to convert. You have a very, very limited amount of time in order to get your message across.
“It’s all about that journey of the customer and making sure that you are consistent and that you’re really focused on success. Just as marketing and branding are important in all your other retail channels, it’s just as important on Amazon. Whenever you launch a product in-store, you want to make sure it was branded appropriately. You want to make sure your Amazon listings look the same way.”
SOURCE
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