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About Our guest
Adam Weiler - Amazon Expert, Coach, and Founder at Sunken Stone
Sunken Stone helps companies sell on Amazon...Better. Sunken Stone is a premier, performance-based Amazon channel partner with over 10 years of experience and proven, sustainable success.
Who Should Be Focused on Amazon (03:15)
My short answer is - everyone should be focused on Amazon. If you are a successful company and a company that’s selling into retail, you will probably end up being on Amazon.
The Rules And Guidelines For Getting a Product on Amazon As a Reseller (04:14)
Amazon doesn’t want to shut off its marketplace, especially from new product selection. For example, if you like a certain brand of coffee, and you cannot find it on Amazon, you can basically create a listing on behalf of that brand. This process is more difficult to shut off.
A smart brand should do this in advance and list their product on Amazon with their images, their copy, with their warranty etc. Claim your brand.
How Amazon Protects The Owner Of The Product (07:21)
Amazon actively encourages undercutting of prices and undercutting of retail prices to the detriment of a lot of brands. Amazon versus brands is a narrative that is going to pick up a lot of steam.
Pushback Against Amazon From Brand Owners (11:00)
There is a significant pushback against Amazon, but mostly from high-end brands. You’ll less likely see a Louis Vuitton bag on the platform. However, if you are looking at Porter’s Five Forces or who owns the power in a marketplace - it is the Amazon. They have the power to make or break a brand. Brands accept all this because they get so much revenue from the platform. If you do it the right way, you can manage all the disadvantages of the platform.
Having a Product On Amazon Without Deterring Your Pricing (11:58)
On Amazon, you can only compete on the price. If you are selling the same product, all you can do is undercut each other. As a brand, you want the fewest amount of sellers on there. You want one exclusive seller or yourself to manage that channel because then you can set the price on that. Being able to manage resellers on your brand is super important.
How To Price Appropriately (13:28)
Pricing is a tough issue because you want to balance your website retail pricing, but you also want to be competitive on Amazon. Another thing that brands want to be aware of on Amazon is the margin and the fees. Typically when we're managing a brand, we want them at $25 plus for a product for it to make sense for them because below that there are the FBA fees.
So as you get higher up in average order value, those fees make up a smaller percentage of the sales price. So higher pricing is better on Amazon because you make a higher margin.
Pricing And Operational Levers That Make An Impact On E-commerce Players On Amazon (03:26)
Once we get a product line and we are fully built out - we have great images, great product, we turn to marketing levers and these are broken out into advertising - operations, content, price and ranking initiatives.
We are looking at A/B testing, pricing, temporary price reductions, but also promo deals and coupons.
For operations, we are looking at multipacks and bundling, especially if you have a lower priced item.
The Best Opportunities For Giving a Discount (05:13)
We will usually start with NSRP. What's that product being sold at in other places on the Internet? What's it being sold on the company's website? What's the product being sold in retail? We usually start with these questions.
If we find that the product is not on Walmart or another big marketplace, we will usually bump the price a little bit and use that extra margin to put directly into advertising. If we can get an extra 2 or $3 per product that we can then spend on maybe five or 10 clicks nowadays, we'll end up ahead at the end of the day.
The Operational Levers That We Advise Clients To Use (12:09)
The number one operational lever is keeping stuff in stock at the right levels. Once you go out of stock you don’t exist. If you go out of stock, because you had a sale for example, you can fall in the search results and this can set you back weeks or even months.
You also want to take a look at multipack or bundling, especially if you have a lower priced item. If you are selling a cheap coffee, you are probably going to break even or maybe even lose a little bit after advertising costs, storage fees, and shipping. But if you put three or four different coffees as a pack and sell them for $30, you have increased your average order value, so now it is more profitable.
This can end up being a giftable item as well.
Other Operational Levers And Pricing Tricks (17:11)
I would recommend international expansion and channel expansion. Once you are set up in the US and everything is going well, I would look into UK, Germany and EU market. There is less competition over there and some good potential.
Advertising Products on Amazon (03:28)
Recently, Amazon has shifted from an organic search ranking to advertising, and also their own products on the listings. For example, the other day I typed a keyword “gummy vitamin” and I couldn’t see any organic results. I had to scroll quite a bit to get an unpaid result out of that.
Amazon is inventing new ad placements, new ad strategies, new ad platforms, and it's working. It hasn't impacted the buyer experience yet, but you can see that Amazon is becoming more of a pay to play marketplace.
Advertising Options On Amazon (05:46)
Internally we talk about advertising and three platforms - sponsored products, AMS, and AMG. AMS is Amazon Marketing Services, and AMG is Amazon Media Group.
If you type a “gummy vitamin”, the first thing you are going to see is called a headline search ad. It is going to be under the AMS and the sponsored products categories.
All of this has been rebranded to Amazon advertising now.
Advertising Placements (07:04)
Headline search ad is the first thing you are seeing when you type something. Right underneath that you will see a sponsored ad. When you scroll a little bit further you will typically see an Amazon ad with their own private label products. After that, you will come across the first organic ranking for a product.
If you click on a product and then you scroll down a little bit, you will also find sponsored products related to that item. Amazon shows what other people bought or viewed after that item and they turned it into an ad placement which was a very intelligent move.
Other Ways That You Can Use Amazon As An Advertising Channel (09:52)
Amazon Media Group is a department of Amazon that actually has an inventory of other websites around the internet - properties that Amazon owns, but also buying ad inventory on sites like ESPN or Huffington Post. You can also buy the homepage of Amazon or the Kindle Fire lock screen.
The retargeting and brand targeting in the placements are only going to get better as time goes on.
The Effectiveness Of Channels (11:32)
If I had a limited budget, I would spend it on sponsored products, AMS and headline ads. I would put 50 percent on sponsored products and then 50 percent on headline search ads. We usually run campaigns for a couple of weeks, get some data and make adjustments.
Amazon As An Overall e-Commerce Strategy (03:14)
Brands are going to be on Amazon whether they like it or not, so they should manage that correctly. The analogy I’ll use is a bicycle wheel where the brand is the hub of the wheel and every channel or marketing lever is a spoke of the wheel. Brands should look at Amazon as another spoke in the wheel, because if you are doing it well and it’s well optimised, it’s only going to help other channels.
Can You Turn The Situation Around If The Resellers Sell Your Product For a Lower Margin (07:25)
Yes, but it is 100 times harder than going in with the clean slate. First, you have to figure out where your leaks are coming from. For example, if you are selling a coffee for $30, but then you go on Amazon and see a store which sells the same coffee for $20, you need to think of your next business decisions. What you can do from a manufacturing standpoint - you could start labelling and marking your products with an invisible ink and if the stuff matches up on Amazon you’ll be able to figure out where the leak is coming from.
Rationalizing Where To Make An Investment (11:53)
It’s your own website and Amazon. You should be on as many channels as possible because this maximises the number of places from where users can purchase your product. Note that some customers are only Amazon customers and they are never going to visit your website. Personally, even if I see a product on a brand’s website, I will go and check whether it’s on Amazon. If someone has a credit card stored on Amazon along with some reward points, these people are never going to buy from your website.
But also, there are customers who will go on your website to check if the price is the same. Some people prefer to buy from a manufacturer directly because they know they will get a better warranty or a better customer service.
Prioritizing Where To Invest Advertising Money (14:20)
Your margin will be better on your own website because you will be paying just your credit card fees versus Amazon fees and shipping. However, you have to factor in conversion rate on Amazon versus a normal website. The conversion rate on Amazon can be up to 35 percent versus a traditional e-commerce conversion rate.
Instead of an ad spend as a metric, I would urge brands to look at ad spend as a percentage of total sales.
The Future Of Amazon (03:13)
Some of the trends I’ve jotted down include - 6 million plus sellers, more Amazon brands, more ads etc. High margin business are going to see more competition because Amazon is evening the playing field for anybody to list and sell the product.
There will be more ad placements, so you’ll have to spend more money to maintain your ranking.
Also, I think that differentiating with design patents is going to be even more important going forward.
Amazon And Manufacturing Products (06:08)
So far, large brands have been clueless about Amazon. They are starting to wake up and realize that these little guys are able to outsell big multinational brands. Advertising costs are gonna go up, especially for the small and medium brands and my advice for these companies is to narrow down their niche.
At What Point Does Amazon Become Competitive With The Brands (08:51)
Amazon is using your data to find niches and go into them. Their criteria for something they are going to sell and source is bigger than your minimum.