Selling on Amazon can be complex at times, and certainly challenging with the ever-growing levels of competition. There are however a number of misconceptions about the nature of the platform that range from patently false through to slightly misinformed. Here’s my best effort to debunk some of the ones we hear most commonly from ecommerce brands thinking about entering the Amazon marketplace.
A common concern we hear from retailers is that Amazon will use their data to find the winning products from third party sellers and then create an Amazon private label version at a cheaper price, thus pushing the merchant out of the market as they can’t compete with Amazon themselves.
While this may be true for some specific categories, Amazon’s own private labels only account for 1% of the total sales on the platform, and of that 1%, the majority come from the AmazonBasics range. So unless you sell batteries or light bulbs, there isn’t as much to worry about as you might have been led to believe.
In his 2019 letter to shareholders, Bezos highlighted that third party sales are growing much faster than first party, which illustrates that there is still a huge opportunity for brands to realise growth in the marketplace. Ultimately, it’s actually more profitable for Amazon to let you do all the selling while they just collect the applicable fees.
If this is still a concern, the solution to this isn’t actually specific to Amazon. In any ecommerce arena it’s possible that a competitor will attempt to copy your products with similar ones of their own. What is far more difficult to copy however is a successful brand. Intelligent positioning and fostering brand loyalty in your customers will go a long way to limiting the impact of any would-be copycats.
It’s true that price is a big factor in determining how well your products rank on Amazon and how often they win the coveted buy box, and offering an extremely wide range of products at competitive prices is one of Amazon’s core tenets. However, this doesn’t mean you have to continually drop your prices to rank well organically or stay in the buy box.
It’s important to understand where your prices fit into the ranking process for both the search results and the buy box.
The A9 algorithm determines what products, and in what order they show, for each search made on Amazon. Your price comparative to competing sellers, although significant, is only one of many factors considered. Other factors include relevance to the search term, sales history, detail page conversion rate, reviews and availability, just to name a few.
For the buy box, offering a competitive price is of high importance, but still not everything. The ranking process also considers seller metrics, delivery options, customer feedback and how consistently you keep the product in stock.
So, if performance is lagging, the solution doesn’t have to simply be dropping your price. There are a huge number of other attributes that you can look to improve in order to achieve better ranking and higher buy box win rates. Much like the concerns about copycat products, the long term solution is to deliver a quality product, a high standard of customer service, and use the available marketing tools effectively.
The realistic answer to this is that, to a small extent, you may see sales shift to Amazon, however in all likelihood this will be very limited. The only way this can happen is if customers are looking for your products on Amazon and subsequently buying, and if you’re not there they’ll only find the products of your competitors.
Over half of all product searches start on Amazon, presenting a significant growth opportunity for retailers to reach new customers. While you may see a small percentage of your revenue shift from your site to Amazon and incur fees you wouldn’t otherwise pay, that’s a fair trade off considering the size of the opportunity in the world’s biggest marketplace.
At the end of the day you have to make an informed business decision about whether or not selling on Amazon is the right move for you. You’ll need to consider whether your products are already being sold on there, whether your competitors sell there and how it will affect your margins. However, you shouldn’t shy away from the platform based on anecdotal evidence alone, as the reality is that hundreds of thousands of brands are making it work for them and seeing success.
Written by Alec Burns, our Lead Amazon Strategist