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At Bobsled Marketing, we work with large consumer brands that register millions of dollars (or tens of millions of dollars) in sales each year. Managing such large accounts is definitely not an easy task, but it is an experience we welcome as we get to see first hand just how powerful Amazon can be when using the right tools to reach millions of consumers.
In a recent interview with Chris Guthrie for the SellerCast podcast, I shared some of the most important lessons we learned from working with such large brands on Amazon. For those of you just starting their journey in the marketplace or for those old hats looking to improve their game on Amazon, the following lessons are essential in planning a successful sales strategy that will grow your revenue.
5 Lessons learned from working with larger brands on Amazon
1. Quantity over quality
Big brands know that a considerable selection of products offers a lot more value over time. Just consider the cost/benefit ratio of endlessly refining a single product versus focusing on building an assortment. Look at different ways to diversify your product offer, because it’s risky to have a limited selection. With the rate at which Amazon makes changes to its algorithm and policies, you could lose momentum on some of your most valuable products without much notice. When a small number of products account for a big percentage of your sales, you’re faced with a significant concentration problem.
This doesn’t mean you should launch your brand on Amazon with hundreds of products the first day. Take time to build cash flow and learn what works and what doesn’t and then start building from there.
2. Inventory forecasting and management
It doesn’t sound as interesting as product listing optimization or PPC, but this can be the easiest way to ensure revenue growth. Brands need to be relentless with maintaining inventory, particularly when they’re using FBA. In a previous article, focused on preparing your inventory for the holiday season, I laid out forecasting models which show just how much you could lose if you’re not paying attention to this important aspect of selling on Amazon.
Above: Sales of $1k/ day, with a 4X increase in Q4 = $638k / year
Let’s say your average sales on Amazon are $1,000/day, and increase to $4,000/day over Q4 - October, November and December. To see a 4X volume increase over that period in many industries is fairly conservative. You could expect total annual sales of $638K.
Above: Out of stock for 2 weeks in Q4 = lost sales of $56k or almost 9%!
If you’re out of stock for just 2 weeks during the critical Q4 period,your annual revenue would be down $56,000 or almost 9%. And this is a situation which many brands get into especially if they are not keeping a very close eye on inventory levels in ALL of their sales channels - Amazon included.
3 things that big brands do well when it comes to inventory management
- Big brands always keep stock ahead of key holidays. The advice here is to maintain adequate inventory, but don't over do it. Remember, Amazon will charge you extra money if you keep excessive amounts of inventory in their fulfillment centers - particularly in Q4.
- When using FBA and preparing for a high sales volume season, big brands have a FBM (Fulfilled By Merchant) capability ready to go as a backup. Of course, it’s critical to deliver on your fulfillment promises to customers and ship orders on time when making the switch from FBA to an in-house fulfillment option
- Big brands use forecasting inventory tools. Amazon has its own tool but with limited features, the good news is that there are pretty good 3rd party tools available too, such as Forecastly.
3. Not relying on one platform
Not limiting your sales channels only to Amazon can actually make selling on Amazon easier. Big brands have an established brand and enjoy recognition outside of Amazon. As we’ve seen with all of the changes to Amazon’s terms of service recently, it’s a fool’s game to rely on one channel, and one launch approach. Better to look at being an Amazon seller as just one of the many ways that your brand reaches customers.
Having your own ecommerce platform outside the Amazon marketplace brings benefits that can’t be ignored, from having complete control of your design, marketing and branding of everything from product titles to layout. It’s also a web property that you own and where your consumer will only see your product rather than competitors.
4. PPC is the best long-term investment in generating
sales on Amazon
Everyone is looking for the next “hack” for how to get sales, given a lot of changes that Amazon has made recently to their terms of service. And Amazon is constantly tweaking the SEO algorithm which changes how we optimize the keywords, titles and copy of listings.
So, what’s the one revenue-generating tool that Amazon will never take away from us? PPC - or Pay Per Click Advertising.
Amazon’s native advertising platform, Sponsored Products, is obviously something that Amazon charges for - it’s a huge revenue stream which Amazon is investing in all the time. Sure, it started off as a super basic system - and anyone familiar with AdWords will see that it lacks a lot of the advanced features of more mature platforms. But Amazon is adding new features and better reporting all the time. So if I were a smaller brand looking at where to be investing my time or money, it would be on building effective PPC campaigns on Amazon.
Given the huge potential of PPC on Amazon, at Bobsled Marketing we now have a team of four PPC experts running campaigns for our clients in the marketplace. All of them have extensive AdWords backgrounds and have used it to explain the differences between PPC on Amazon and AdWords in this article.
5. They outsource
Given what Bobsled Marketing does, we only really see the people and companies who are ready to start outsourcing part or all of their Amazon management. And perhaps you feel really comfortable with Amazon, so don’t feel like you need to outsource this particular channel. But what about other things that could grow your brand and exposure? How about hiring an Etsy consultant to set up your Etsy store? How about working with an influencer marketing Agency to start getting more exposure with bloggers?
My advice is to take a good look at what your strengths are as a business, and what the opportunities are, and recognize that your company is not necessarily going to do a great job of executing on all of those opportunities. Having a great team by your side, whether in-house or an agency is a cornerstone for success.
If you want to understand all the roles and activities that make for a successful Amazon strategy, you can read our blog post on who should you hire to handle your Amazon channel.
One more thing to consider: at Bobsled Marketing we have 58 processes, templates, and checklists which are used every week by our team to help our clients launch, optimize, and troubleshoot issues on their Amazon account. Could you afford to invest this much time internally?
At Bobsled Marketing we help brands to launch and grow their revenue on Amazon. Our Amazon Project Managers handle the Amazon marketplace channel for clients that range from crowdfunded hardware startups to a billion-dollar consumer brand. Contact us today whether you’re only looking for help for a specific Amazon tool, like PPC management, a channel audit or a great product launch strategy.
