We are now unquestionably living and shopping in the ‘new normal’, but what does that actually mean when it comes to selling on Amazon? What customer behavior trends are temporary and which ones are here to stay?
Brands are currently in the process of making tough strategic decisions about how to approach Amazon over the next few years.
Bobsled’s Operations Manager Jordan Ripley has shared some insights about what steps brands should be taking right now to sell successfully on Amazon in 2021 and beyond.
Build inventory controls and supply chain redundancies to manage volatility
FBA sellers must remain nimble as Amazon has wild swings in account-level inventory storage limits. This can result in total allowable units getting reduced by 30-50% out of nowhere with no prior warning.
This, coupled with long inventory processing timelines at many FCs since the outbreak of Covid, means brands must respond by slowing the industry-wide trend of lean, just-in-time manufacturing. Instead, brands should be looking to invest into domestic inventory stockpiles that can be sent into Amazon warehouses at a moment’s notice as account limits allow.
Going one step further, brands that have the ability to launch dual strategies of FBA and direct merchant fulfillment (FBM) have a significant advantage over brands that are totally reliant on FBA. Being able to sell SKUs via FBM to patch the 1-2 weeks while you have inventory waiting to unload at an FC can mean the difference between you sustaining sales versus your competitors seizing on your absence from the marketplace.
Amazon’s FC network faces threats around high employee turnover, dangerous work, and unionization. None of these have proved debilitating (or even much of a headwind) to Amazon in the long term, but expect localized FC disruptions as Amazon works to automate as many of these functions as possible.
Operational excellence is now a very real differentiator (as much branding, marketing, product USPs, etc.). This is the great (and relatively untested) promise of ecommerce 2.0. Will the aggregation of large Amazon-native brands reach economies of scale that further enhance Amazon’s flywheel so that they can maintain category leadership and fend off incumbents? Time will tell.
Customer service and systematic account monitoring is key
Amazon was never a set-and-forget marketplace, but with the aforementioned issues around inventory, and the escalation in competition as brands double down on ecommerce at the expense of traditional channels, the margin of error for an unwatched account grows slimmer.
Largely due to the ongoing issues at Amazon FCs, FBA inventory will continue to be delayed or lost at high rates. Having a system to monitor the account, reconcile inventory, and continually update forecasts and stock control is critical.
Also, frequent shifts from FBA to FBM mean customers will experience varying degrees of shipping time. Yet most will expect the standard 2 day Prime promise. Therefore, responsive, proactive customer service for buyers will ensure your brand retains high seller feedback and avoids any account health risk.
In the past, minor blips could be remedied with minimal fuss. But due to the influx of ad spend and competitors, losing ground in SERP due to operational issues becomes that much harder to regain once you’re reinstated or back in stock. So like many other strategic initiatives, prevention is much better than a cure!
Get the Amazon marketplace fundamentals under control first
According to Cowen’s 4th annual eCommerce study, Covid caused US ecommerce sales to increase by a whopping 48% YOY in 2020. Amazingly, despite this unprecedented amount of growth, Cowen is projecting a further 11% YOY increase in 2021.
And with Amazon owning roughly half of all ecommerce sales, it should be the number one platform for most brands selling online. First and foremost, brands new to Amazon should focus on the marketplace fundamentals;
- Own the Buy Box on your product listings
- Stay in stock
- Ensure your most important product listings are optimized for SERP and on-page conversion
If you don’t stay on top of these fundamentals, more sophisticated marketing and advertising strategies are destined to fail.
💡Check out Best Amazon Strategies to Grow Sales in 2021
It’s an omnichannel world, and Amazon is the star of the show
The new ecommerce world has a growing number of customer touchpoints and is a huge departure from the traditional retail landscape. Brands need to identify where their target shoppers like to shop, and the best way to connect with them.
Can customer acquisition and migration across channels be sustained? Tactics that retain customers new to the channel (or entirely new to your brand) will be increasingly important.
Subscribe and save, effective remarketing tactics, and basket-building efforts to cross-sell your assortment will be critical, especially in the CPG industry as the channel future is uncertain for older demographics newer to Amazon.
💡Check out Ecommerce Sales Channels on the Rise in 2021
Amazon PPC has become far more expensive
Competition for eyeballs and clicks is only going to become more cutthroat, meaning Amazon PPC will get more expensive.
CPCs are rising dramatically, up 60% from last year’s low. Brands best suited to manage this increase are:
- Ones with existing brand recognition that can target tangential audiences from their loyalist base, rather than entering the marketplace anew. There’s a strong argument to be made that the tide is turning away from upstart brands towards incumbents as conquesting costs increase
- High ASP/high margin, non-commodity products that can absorb increased advertised costs to maintain or expand volume
- Brands with effective awareness tactics that support lower-funnel activity. This is not a problem unique to Amazon, as brands (especially luxury/prestige brands with more purchase consideration) must be willing to take risks on channels with muddier attribution and less proven track record as lower funnel direct response channels become increasingly saturated and expensive.
New Amazon tools are giving brands more flexibility
According to many commentators, the most serious threat to Amazon’s core retail business and 3P marketplace (which makes up the majority of their retail business) comes not from entrenched big-box players (Walmart, Target, etc.), but from Shopify’s arming of the rebels. This has the potential to swing the stark power imbalance between Amazon and small business slightly back in favor of the latter.
Hence, Amazon’s free products that allow for on-platform branding (Amazon Live, Amazon Posts, and the Manage Your Customer Engagement email tool) all point towards Amazon allowing more branding and direct customer interaction on their platform. This runs counter to their brand-agnostic historical approach that favored assortment, price, and product availability.
Amazon DSP has become a major differentiator
According to Amazon, 10X more high-intent shoppers can be reached with display advertising versus PPC alone. Brands using DSP can harness Amazon’s swathes of customer data to reach more relevant shoppers with branded creative.
DSP can also be used to grow sales on your DTC website and in offline Whole Foods stores. Therefore, If you’re hitting the point of diminishing returns with PPC, it’s likely time to start experimenting with retargeting.
💡 Check out What Is Amazon DSP and How Can It Boost Sales?