Avoid the Distraction – Price Wars on Amazon

A good plan violently executed now is better than a perfect plan executed next week.

– General George S. Patton

No one really wants to take part in a pricing war on Amazon.

No one wants their prices to be driven so low that they cannot make a profit or even worse, lose money. However, if you are already selling on Amazon, you know that pricing has a lot to do with winning the Buy Box. The issue is that most merchants place too much focus on the price of the product, and spend most of their time during the day adjusting prices.  It’s addictive to fight a price war on Amazon.

What happens during a price war? During a price war, you, the competitors and your buyers are all affected. It is obvious how you and your competitors are affected, your profit margin becomes lower and lower each time the price is reduced. But what about the buyers?

You might think that the buyer would be the one person that was not suffering from the pricing war, however, if we dig a little bit, we can see that the buyer is indeed affected.

The first way that a buyer is affected is that they will start to expect those rock bottom prices all of the time. This means that if you are not able to provide them with these rock bottom prices, they know that all they have to do is continue looking on Amazon, and they will find someone who will. A lot of consumers see Amazon as the best place for this type of product pricing – they think Amazon is always the lowest price.

This gets the buyer not only used to cheap prices, but cheap products as well. The buyer might end up walking away from a merchant who would actually provide them with quality products and a better buying experience than those offering these cheap products.

We also have to remember that when a person sees a price that is very cheap, they are going to associate this with a cheap product. There have been many times that I have been looking for a specific product on Amazon and found it for very low prices, but have instead gone to another seller and paid more for a product because I wanted quality. I wanted a product that would last, not one that would break the first time I used it.

So what do you do?

Most merchant use re-pricing software.  This can be a great, logical great strategy if you are 1) just starting out and wanting to get as many sales/reviews as possible, or 2) Trying to move a product quickly.

You see, using pricing software is like eating ice cream. We all love to have a bit of ice cream on occasion because it is a treat or a reward for something that we have accomplished. However, if have ice cream every day, it will no longer provide us with the satisfaction that it once did.  Or at least that’s what they tell me.

AAEAAQAAAAAAAA1yAAAAJGY0OWRlNzU5LWVlNDAtNGIyNy1iMDBmLWZmNWI2NWY0NWU4NQ

Slashing your prices is the same. Amazon buyers get excited when they see low prices, and you get excited when you win the Buy Box. Customers start purchasing your product. However, if they see that your prices are very low all of the time, they are going to get used to it.   And worse, Amazon gets used to it. That low price becomes the new normal when related to the Amazon algorithms.

A price war almost never works out for the merchant.

It is understandable that you want to grow your business, but you do not want to do so by selling your products for as cheaply as possible. You have to remember that not only to you have to earn a living; you have to make a profit. No amount of sales at a loss is worth the energy when selling on Amazon. At best, its a short-lived victory.

Excepted from my soon to be released eBook, Selling on Amazon – Strategy and Tactics that Help You Succeed.

Need help making more profits on Amazon? As always, if you have any questions you can contact me at tim@southpoledigital.com or visit my Blog at timothyscottburns.wordpress.com

Advertisements

Ride the Bull – Winning the Buy Box on Amazon

In his April 2017 letter to shareholders, Amazon Founder and CEO Jeff Bezos said the following:

“There are many advantages to a customer-centric approach, but here’s the big one: customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf. No customer ever asked Amazon to create the Prime membership program, but it sure turns out they wanted it…” – Jeff Bezos

If you are considering starting an Amazon based business, or you simply want to take advantage of this huge marketplace to grow the business that you already have, I have some good news for you. The Amazon Marketplace is a great platform that allows you to not only establish a brand, but to sell your products and to earn a lot of money – if you know how to Win the Buy Box.

The buy box is not simply awarded to one seller, but instead, several sellers often share the buy box. In order to determine who will be listed in the buy box, Amazon uses an advanced algorithm, honed and tuned via trillions of clicks and customer interactions. And while some people may claim that you can beat the system and get listed in the buy box by doing specific things, the best way to win the buy box is to be a good seller, with highly rated products and not charge unreasonable prices (gouging).

When no one is listed in the buy box, or you simply do not see on a product page, it’s often because none of the sellers have met the requirements of the buy box. This is an example of an item with no Buy Box.

In April 2017, Sofia Vergara from ABC’s Modern Family posted a video on her Instagram where she interacted playfully, with this product in her pool. That video went viral, receiving a few million views, and the product became a red-hot search on Amazon.

In these situations, it really is simply Economics 101 – supply and demand. What was a $39.95 item on Amazon one day, started to sell very quickly (you often see 1,000’s of units move in a 24-48 hour time frame) and sellers reacted, trying to maximize margin and take advantage of a unique opportunity. Just one day later, the low price was above $100.

Amazon’s reacts to this by often ‘pulling the buy box.’ See example above, there is no Buy box, you have to click to see all the prices.

The item is still for sale, but Amazon forces an extra click so customers can see that there are other options, and while they may not be lower priced, that is what the marketplace dictates.

In order for a seller to be listed in the buy box, the product that they are selling has to be new. It cannot be used because used items will have their own ‘buy used box.’

The product must be in stock in order to win the buy box. If the product is not in stock, then the seller will not win the buy box. In other words, the buy box is not going to show products that are out of stock, instead, they are going to rotate to the next seller in line for the buy box.

The only exception to this rule is when a product is listed as back ordered. If a product is back ordered, it means that the seller is accepting orders for the product, however, the product is not ready to be shipped and it will be mailed out at a later date. Amazon.com (the seller) often employs this tactic; stockpiling orders against stock they believe will arrive shortly into their own warehouses. More on that later…

Excepted from my soon to be released eBook, Selling on Amazon – Strategy and Tactics that Help You Succeed.

Have you seen anything else ‘strange and unusual’ with your Amazon listings? As always, if you have any questions you can contact me at timothyscottburns@gmail.com or visit my Blog at timothyscottburns.wordpress.com

What Manufacturers Need to Know about Selling to Amazon

What Manufacturers Need to Know about Selling to Amazon

Head Buyer X:  “Hey, come take a look at this.  ‘Insert Supplier Name Here’ is selling directly to Amazon.”

Me:  “Oh boy.  What does the pricing look like?”

Lately, this is how a lot of uncomfortable conversations start in my office.  In fact, over the last 12 months I have had this conversation with my Buyer, Product Manager, Sales Team and CEO dozens of times.  And it’s becoming more frequent.

If you are a supplier, distributor, or manufacturer you might think “So what?  I sell to lots of different retailers.

I get that, I really do.  But Amazon is different.

Selling your product line directly to Amazon has a unique and direct impact on your other retail partners/dealers/resellers.  And the impact is unlike anything else going on in your marketplace.

Let me explain.

Amazon sells over 300 Million unique products through its marketplace.  That may sound like a huge number, and it is.  But if you think about just books and cell phone accessories, there are almost 100 Million unique listings in those two categories alone.  But whatever Amazon product category your product line falls into, you can be confident that there are at least a few million product listings.  The point of talking numbers here is that it’s very likely someone, a current retailer/dealer/reseller is already selling you products on Amazon.

So you get the call – in Amazon’s case it’s almost always an email:

Amazon Wants You!

Exciting stuff!  One of the world’s largest retailers is interested in you.  They are chasing you and there could be a six figure purchase order on the other end.  But hold on cowboy, selling directly to Amazon could be a game changer.  A game changer for your other retailers.

I see the supplier/manufacturer point of view.  You make a product.  You sell that product.  You sell it a lot of different places.  You have many different relationships.  Your product is in big box retailers like Target and Home Depot, but you also do well with specialty retailers like catalogs and with a few regional niche resellers.  You may even sell that item in grocery stores like Wegmans or Trader Joes.  But I think selling to Amazon is different.  They are not just another retailer.

It’s not about size.  It’s not about reach.  It’s not about price.  It’s not about service.  It’s not about convenience.  All those different markets you sell product through already compete on those pieces of the value chain.  What is different about Amazon is – control.  Amazon has all those things – size, reach, price, service, convenience.  They offer the widest selection of products, to the entire world (well almost) at the lowest prices all delivered for free (almost) in two days.  The bar is really high from a competitive standpoint.  And because of that – Amazon has control.

Seeing your products sold on Amazon is often followed by a loss of control.  Maybe that is not all that important to you?  I don’t know.  But understand that Amazon now exerts influence over all the other “traditional” channels you sell through.  Consumers showroom your products.  They shop prices on their mobile devices, and that starts with Amazon.  Customers read review – reviews from Amazon customers – about your products when in the store or on other websites or flipping through catalogs.  Amazon controls all that media related to your product.

It’s not necessarily a bad thing.  It’s just something to consider when you are chasing that six-figure purchase order dangling in the wind.

Oh – and your current retailers probably hate the idea of selling direct to Amazon.  We can talk more about that later.

As always, if you have any questions you can contact me at timothyscottburns@gmail.com

Think Your Ops Team Has Game? Amazon Seller Fulfilled Prime

Over the last year, the team at Amazon has been working hard on recruiting capable merchants into its Seller Fulfilled Prime program. I say capable because that while the promise of increased orders is tempting for merchants, you have to be able to deliver on some very aggressive shipping metrics.

What does aggressive mean? How about 99% on time shipment (which is often within 24 hours)? And your order cancellation rates cannot exceed 1.5%. If you’re doing seller fulfilled business on Amazon now, and any volume in the Premium Shipping segment of that business, you already know how you stack-up.  If you haven’t executed your operations to metrics like this before–they can be challenging

How does a 20%-30% increase in sales from items with the prime badge attached to it sound? Sounds like a project worth pursuing right? But a venture like this could lead to problems for sellers who sign-up, but don’t truly have the operational discipline to guarantee 2-day shipping.

There is a lot to gain on the revenue side if you can deliver, but there is a lot to lose if you fall down.

The Promise of Prime, Now in the Hands of Merchants

Amazon’s Seller Fulfilled Prime (SFP) is a radical new approach to selling on Amazon as a merchant, launched in May 2015, when Amazon selected a few of its highly capable merchants to beta the program.

As the seller, you flag your products in Seller Central as eligible for Prime, 2-day delivery. You do this by creating any number of shipping templates that reflect what you want, and can deliver on, in terms of shipping time. For example, you may only choose to offer Prime on orders shipping to states where you can deliver via ground methods in 2 days. Or you may open the program up to the entire United States. Amazon gives you that decision making flexibility.

More specifically, in order for Amazon to safeguard that packages ship with a minimum of two-day shipping service, they require sellers to purchase shipping from Amazon’s shipping platform also called Buy Shipping Services. As of now, Amazon does not allow you to buy shipping outside their platform, and confirm manually.

This can be challenging. Do you really want to add a new shipping process into the mix of your operations?

There are about a dozen shipping software providers that do integrate with Seller Fulfilled Prime. They tend to be the cloud-based, monthly subscription type services that work well when shipping dozens to a few hundred packages a day. Ship Station and Teapplix are two examples.

Maintaining the required metrics can be rough when things happen beyond your control–and believe me, Amazon will yank that prime badge the second your shipping history does not reflect what they picture the prime service to be. Are you ready to maintain such rigorous, operational metrics?

In review, strict, on-time delivery in 2 days, and restricted processes for buying shipping and printing labels are just two of the challenges of Seller Fulfilled Prime. But you do gain access to 60 million Prime subscribers and their wallets.

Next I will talk about more of the specifics around SFP and the opportunity open to merchants if their operations team has the game to deliver on the Prime promise.

As always, if you have any questions you can contact me at timothyscottburns@gmail.com or visit my Blog at timothyscottburns.wordpress.com

Three Fundamentals for Winning the Buy Box on Amazon

Three Fundamentals for Winning the Buy Box on Amazon

According to recent research, almost half of all product searches online now start on Amazon.  When your customers and prospects are looking for your products, many of them simply start their buying process on Amazon (wsj.com, Dec 2014).  With all that buying activity going on in one place, it’s more important than ever to win the Buy Box.

Although Amazon does not publish a list of rules or its strategy on the exact calculation used to determine which sellers earn the Buy Box, there are a few fundamentals that will help you compete for this key piece of ecommerce real estate.

TheBuyBox

Fundamental # 1: It Takes Time

Unfortunately, you probably won’t win the Buy Box immediately after opening up an Amazon seller account (I was just reminded of this after setting up a new account last month).  Amazon wants to make sure sellers know their way around the marketplace, before sending too much business their way.  Figure on 60-90 days of selling history with some successful order fulfillment, before you start to win the Buy Box consistently.  Of course, if you have a unique item, that only you sell, then you will own the Buy Box.  But it will take time to build up any traffic to your listing.

Another reason why new sellers often struggle to win the Buy Box is because your Amazon customer metrics are still building. Also note that only sellers with Professional seller status are eligible for the Buy Box.

Fundamental #2: Use Fulfillment by Amazon (FBA)

The real power of the Buy Box is how easy it is for buyers. Amazon engineers continuously test its product page and the on-site experience, and through billions of clicks, have developed a conversion-crushing Buy Box.  I have read estimates that a merchant with the Boy Box wins 8-9X the sales of the merchant in 2nd place.  A shopper simply clicks that ‘Buy-Now’ button and knows that they’ll receive that product quickly, in good condition and for a great price. Amazon wants to make sure that the retailer who wins the Buy Box is capable of delivering on that order. Which brings us to FBA.

Using Fulfillment by Amazon (FBA) — puts Amazon in control, and that is a position that the online giant relishes.  Amazon’s top-notch fulfillment infrastructure ensures that the customer gets what they ordered, on-time and with all the tracking and communication tools that Amazon has developed to enhance the experience.  Using FBA as equates to better feedback and better delivery, which leads to winning the Buy Box.  It’s a virtual closed loop system.

Oh, and FBA is your golden ticket into Amazon’s Prime customer base, estimated at more than 40 million subscribers in the US, which puts them on par with Netflix for subscriber numbers.  Since its launch in 2005, Prime customer customers have enjoyed a host of benefits, king of which is free two-day shipping.  But there’s also the popular video streaming service Prime Instant Video, and the ability to share Prime subscriptions with friends and family.  And Prime customers spend a ton of money on Amazon – analysts estimate Prime customers spend 2X what the average shopper does on Amazon (source, fastcompany.com).

Fundamental #3: Price is King…Usually

When selecting who wins the Buy Box, the Amazon algorithm considers a number of factors, but the total price including shipping, is most often the determining factor.   I strongly recommend you build shipping into the price, and offer free shipping.  This is NOT eBay 10 years ago, when it was cool to sell something with a MSRP of $29.95 for $5.95 with $20 in shipping, and claim it’s a great deal.  Amazon wants its sellers to be upfront and transparent with their pricing (eBay too these days).  And while price is king, it’s not the only aspect that Amazon takes into consideration.  If you sell on Amazon for any length of time, you will find examples of items where the lowest price does not get the Buy Box.

As always, if you have any questions you can contact me at timothyscottburns@gmail.com or visit my Blog at timothyscottburns.wordpress.com

My Experience with the Apple Watch – Part One

My Experience with the Apple Watch – Part One

I am something of an Apple nerd.

I know that doesn’t make me unique.  There are a lot of us out there, but to qualify that statement I will tell you that I have owned every version of the iPhone since the 3GS, and pre-ordered both the original iPad and Apple Watch, as well as the iPhone 6 Plus, receiving all three of those items on their respective launch days.  Alternatively, I have almost zero interest in Macs, not having owned one since 1987, when I convinced my father to buy an Apple IIGS for the house (and a copy of Leisure Suit Larry in the Land of the Lounge Lizards).  I was 17 years old and a video game about a virgin named Larry Laffer, desperately trying to “get lucky” was incredibly interesting.

Box shot of Leisure Suit Parry software game
Box shot of Leisure Suit Larry software game

Maybe that means I have one foot in the water, and one foot out when it comes to Apple products.  And for the last few years now, I have also been closely following Apple from a business standpoint.  I am interested in how great products translate into great profits.  So when I read about the idea of the Apple Watch, I was hooked.  It would be my next Leisure Suit Larry.

When I opened my pre-order email from Apple on April 10, I showed it to a few co-workers.  We marveled at the $12,000 “18K gold edition” and pondered the market for such a device.  I had been schooled in the basic economics of the worldwide watch marketplace by Benedict Evans, a venture capital analyst/futurist I follow.  I always liked watches, and own a few different, low and mid-cost watches.  If you want a quick overview of the watch marketplace, click here.  Otherwise, I think it’s interesting enough to just understand that millions of watches priced over $1,000 are sold each year around the world.  Millions.

The Apple Watch was only $349 – I was all in.

Truth is, I stopped wearing a watch a few years ago.  After years of unrequited love for a particularly expensive Tag Heuer edition, I just gave up.  I was tired of my current watch collection, and started using my smart phone as the primary means of tracking time during the day.  I think a lot of the world started doing that.  I have an inexpensive chronograph that my son gave me for Christmas (I assume he noticed that I am into watches), and I wear that for sentimental reasons, but most days my wrist was bare.

Not anymore.

So I placed my pre-order, informed my wife (who clearly through I was wasting money on another pointless gadget), and waited.  Two weeks later I got my shipping notification email from Apple.

Captureiwatch

I received it via UPS on a Friday, the 24th of April.  Launch day.  It was waiting when I got home from the office.  I opened up the beautiful, long Apple-esque box.  It was a cool looking little piece of technology.  I clipped on the white, silicone bands.  It looked a little silly I thought.  The white bands were off-putting for me.  In my rush to pre-order, I didn’t consider the color choice of band.  I think black would have been a better choice.

Either way I had what few others had at that precise moment in time, and it felt good.  I liked it.  I had a work function that night, and was ready to show it off.  There was only one problem.  I had no idea what to do with it.

Coming soon – Part 2  – what I did with it.

As always, if you have any questions you can contact me at timothyscottburns@gmail.com or visit my Blog at timothyscottburns.wordpress.com

What Suppliers Need to Know about Selling to Amazon

What Suppliers Need to Know about Selling to Amazon

Head Buyer X:  “Hey Tim, come take a look at this.  ‘Insert Supplier Name Here’ is selling directly to Amazon.”

Me:  “Oh boy.  What does the pricing look like?”

Lately, this is how a lot of uncomfortable conversations start in my office.  In fact, over the last 18-24 months I have had this conversation with my Buyer, Product Manager, Sales Team and CEO dozens of times.  And it’s becoming more frequent.

If you are a supplier, distributor, or manufacturer you might think “So what?  I sell to lots of different retailers.  I get that, I really do.  But Amazon is different.  Selling your product line directly to Amazon has a unique and direct impact on your other retail partners/dealers/resellers.  And the impact is unlike anything else going on in your marketplace.

Let me explain.

Amazon sells over 300 Million unique products through its marketplace.  That may sound like a huge number, and it is.  But if you think about just books and cell phone accessories, there are almost 100 Million unique listings in those two categories alone.  But whatever Amazon product category your product line falls into, you can be confident that there are at least a few million product listings.  The point of talking numbers here is that it’s very likely someone, a current retailer/dealer/reseller is already selling you products on Amazon.

So you get the call – in Amazon’s case it’s almost always an email:

Amazon Wants You!

Exciting stuff!  One of the world’s largest retailers is interested in you.  They are chasing you and there could be a six figure purchase order on the other end.  But hold on cowboy, selling directly to Amazon could be a game changer.  A game changer for your other retailers.

I see the supplier/manufacturer point of view.  You make a product.  You sell that product.  You sell it a lot of different places.  You have many different relationships.  Your product is in big box retailers like Target and Home Depot, but you also do well with specialty retailers like catalogs and with a few regional niche resellers.  You may even sell that item in grocery stores like Wegmans or Trader Joes.  But I think selling to Amazon is different.  They are not just another retailer.

It’s not about size.  It’s not about reach.  It’s not about price.  It’s not about service.  It’s not about convenience.  All those different markets you sell product through already compete on those pieces of the value chain.  What is different about Amazon is – control.  Amazon has all those things – size, reach, price, service, convenience.  They offer the widest selection of products, to the entire world (well almost) at the lowest prices all delivered for free (almost) in two days.  The bar is really high from a competitive standpoint.  And because of that – Amazon has control.

Seeing your products sold on Amazon is often followed by a loss of control.  Maybe that is not all that important to you?  I don’t know.  But understand that Amazon now exerts influence over all the other “traditional” channels you sell through.  Consumers showroom your products.  They shop prices on their mobile devices, and that starts with Amazon.  Customers read review – reviews from Amazon customers – about your products when in the store or on other websites or flipping through catalogs.  Amazon controls all that media related to your product.

It’s not necessarily a bad thing.  It’s just something to consider when you are chasing that six-figure purchase order dangling in the wind.

Oh – and your current retailers probably hate the idea of selling direct to Amazon.  We can talk more about that later.

As always, if you have any questions you can contact me at timothyscottburns@gmail.com or visit my Blog at timothyscottburns.wordpress.com