In a post pandemic world, it’s never been more popular to buy products from Amazon. We all know that the pandemic ignited an online sales boom and consumers in their masses were quick to adapt.
Amazon saw explosive growth and although there has been a recent upward curve in consumers returning to the high streets; Amazon reigns supreme. Over 60% of all product searches start on Amazon, more than any other search engine, including Google, and online sales are still a massive area for growth. If you are trying to create or build your consumer brand, it’s valuable to consider an Amazon strategy.
We know how easy it is to purchase something from Amazon but how easy it is to sell your product on Amazon? Let’s navigate our way through the Amazon Jungle!
How does Amazon work?
Amazon is essentially constructed of two parts – Amazon Marketplace and Amazon Retail. Marketplace is where brands list their products and sell them on Amazon; Retail is where the brand sells their product to Amazon who then becomes the seller.
The customer generally doesn’t know the difference between the two but essentially, Marketplace is where you are using the Amazon platform to sell your products and it’s where most of Amazon sales take place. Retail is where, once you have sold your product to Amazon, you have no control over the RRP anymore.
Within Amazon Marketplace there are two options for fulfilment either ‘Fulfilled by Merchant’ (FBM) or ‘Fulfilled by Amazon’ (FBA), FBM is where the seller lists the product and sends the item once an order is placed. FBA is where the products are sent to Amazon fulfilment centres and they send out to the customer when an order is placed.
It’s important to note that only FBA orders can use the ‘Prime’ stamp and as most customers use this filter when searching for products it can make a significant difference to your sales whether you can advertise as ‘Prime’ (Prime membership alone has more than 150 million subscribers!).
So we’ve looked at fulfilment options. Now let's briefly look at other business considerations such as stock, customer services, storage and perhaps most importantly cost.
How to prepare for selling on Amazon.
If you go down the FBM route, you will be sending the stock directly to the customer from either your home or workplace. If you sign up to FBA, you send your stock to one fulfilment centre. Similarly with any customer service issues with FBM you resolve the issue with the customer directly, with FBA you would resolve any product issues but Amazon would be responsible for any delivery issues.
How much does it cost to sell on Amazon?
Bear in mind when considering the pros and cons of FBA/FBM that storage is a factor. With FBM you are responsible for storing your products and all associated costs, whereas with FBA there is a charge per square foot for your product to be stored at a fulfilment centre. There is also a ‘pick, pack and post’ fee that is cheaper than anywhere else. It’s important to note that when a company starts selling through Amazon there is a limit of 1000 units of stock that can be stored if using FBA. This has to be delivered to a fulfilment centre by an approved carrier network.
So what other costs are there to sell on Amazon? There are account fees for both FBM and FBA approximately £30 per month, there is also the advertising cost which we’ll explain a little further along. There is a really useful online calculator on Amazon that can help you calculate all the fees associated with FBA.
What about Amazon’s commission? This ranges from 8% (if your product sells below £10.00 per unit) to approximately 15% on the most popular categories on Amazon.
Amazon tools for startups
Amazon Launchpad is a tool specifically created for small businesses who want to introduce innovative products to the market. Launchpad offers startups tailored support and benefits to help them reach self-sufficiency faster.
The Amazon Launchpad Innovation Awards gives startups the chance to win a six-figure cash prize and have their product showcased to millions of potential buyers.
This new competition gives funding and support to Europe’s brightest and best start-ups – the winner stands to secure a grand prize of €100,000 and industry-wide recognition as a leading innovator, plus streamlined access to Amazon customers.
All of the above fees and costs need to be carefully calculated as it’s a deciding factor when considering selling your product on Amazon; you still need to make a profit!
How to sell on Amazon
We’ve looked at how Amazon is structured so how do you actually sell your product on there? Once you’ve made the decision to sell on Amazon, it’s really important that you apply for a trademark for your product if you don’t already have one. This process takes approximately 2-3 months so it’s worth doing as soon as possible! You’ll also need to apply for your own barcode as Amazon will check the GSI register to ensure you have one.
You’ll then need to set up an account on Amazon; this process takes approximately 2- 4 weeks so this can be done whilst waiting for your trademark. You will need to register any individual who has at least a 25% stake in your company and provide bank account details for your company and all relevant documents.
Once your account has been set up and your trademark issued you can at last put your product up for sale! So before you create your product listing and as you’ve no doubt done several times before but it’s worth thinking about again - what does your customer want? Why would they buy your product over a competitor?
It’s a really good idea before you list your product to really get to know who your competition is on Amazon. Have a good search around and read all their listings, read their reviews, compare the pricing of the product, ensure your product wouldn’t attract the same negative comments.
How to market products on Amazon
Think about keywords and USPs that the customer would use when searching for your product. These keywords need to be in the product title of your listing as these words are what the Amazon algorithm will look for when bringing up the search results. Relevant keywords are so important as if the consumer can see them in your product title they will click through to your product.
Next you need to think about your product descriptions. You have 200 characters with which to describe your product, through bullet points, in the most effective way possible. Again those keywords are so important to place throughout all the descriptions so that when the customer is searching, your product ranking is optimised. Further down the page on your product listing you’ve got another opportunity to expand on your bullet points and explain in some detail about your brand and your USPs.
It’s not just the words that sell your product. Relevant, targeted images are just as important. Most customers flick through the images of a product before reading the detail, especially if they are on their mobile devices, so make sure the images you use demonstrate all of your USPs and back them up with a short sentence. You have seconds to sell!
Another really important factor to think about when you are listing your product is customer reviews. Customers are given the option to either leave a quick star review or a longer written review. A seller can use the “Request a Review” feature inside of Amazon’s order detail screen. Amazon will send an email to your customer, asking them to leave a review within 30 days of purchase.
This is an incredibly valuable and effective method of getting more reviews because customers (who would often opt out of emails from individual sellers) trust the Amazon brand and are more likely to leave reviews after receiving an email from Amazon.
It’s estimated that only 1% of all customers leave a review! Amazon also offers a way to generate reviews quickly. If you are new to Amazon you can sign up to Amazon Vine programme. The programme was created to increase the availability of customer reviews on newly launched products. It’s a successful tool in enabling you to create reviews quickly so your customer can read.
An equally important factor is the delivery information that is displayed on your product listing, if the delivery lead time is too long for the customer they will leave your listing and look elsewhere. This is where FBA (fulfilled by Amazon) is recommended as they can expedite delivery. With a relatively captive audience during lockdowns some customers cared less about the user experience and more about getting the goods they needed, this is no longer the case, hence fulfilment is a key factor in a consumer’s purchase decision.
How to advertise products on Amazon
So now your listing is up you need to reach as many customers as possible through Amazon. The most effective way to do this is to use Amazon Advertising. The product listings that say ‘sponsored’ on their page have placed a bid on keywords relevant to their product and whoever places the highest bid gets the most prominent position. On average an Amazon page has 40 results and 25% of these are paid spots.
You can also buy a banner advert or video adverts that can be played on a loop. In fact more sellers are now removing static product photos in favour of multi layered visuals for a more powerful viewing experience.
Initially your advertising budget will seem huge, however what should happen over time, as you start selling your product through certain keywords, is that Amazon’s algorithm will pick up on this and your product should appear organically at the top of the search page. Ultimately your paid search sales will be replaced by organic sales and your Amazon advertising budget should decrease.
How to optimise sales on Amazon
So what are the main obstacles facing a startup selling on Amazon? As we’ve mentioned before, FBA is expensive, with all the various services Amazon offer biting into your profit margin. Plus if your product is large, costly to produce or seasonal for example, these can present issues. However over 85% of Amazon sellers are profitable!
Poor management of PPC is another hurdle that often tests the seller. Managing PPC is challenging and often a seller will waste money on marketing that doesn’t generate conversions.
Growing and managing a FBA business can be time consuming, 18% of sellers spend up to 40 hours a week on their Amazon business, however over 55% spend less than 20 hours.
It takes time to make a profit. Over 40% of sellers see a profit within six months of starting on Amazon. Remember competition is fierce; there are over 2.4 million active sellers on the platform.
We know there are obstacles and Amazon is a complex sales platform, so it’s a really good idea to research and sign up for the best Amazon FBA information course you can find. It will give you lots of valuable information and help you navigate Amazon’s tricky waters. Really know your competition and really understand what your customer wants and remember – selling on Amazon is like any other marketing strategy - it requires patience, commitment, on-going analysis and adjustments before you start to see results!
Book for a free 1 hour consultancy to find out more about developing your startup sales and marketing strategy.