06: Sales
Amazon.com
Amazon is one of my favorite sales channels as it acts as a great indicator of how well shelf stable products will perform in the market. It’s the largest online marketplace capturing the majority of US shoppers, therefore making your product available to everyone all at once. Succeeding on Amazon requires a well-thought-out strategy, careful setup, and ongoing optimization. In this chapter, we’ll cover everything you need to know to get started, from setting up as a seller to mastering Amazon’s unique ecosystem.
As I mentioned in the “Getting Started with Sales” chapter, Amazon was a key sales channel for TeaSquares, at one point accounting for 40% of our total sales. The platform was a much cheaper way to acquire customers than through ads to our Shopify store, and the analytics were amazing. That said, it requires a large time investment to get everything setup and optimized.
Why Sell on Amazon?
Before diving into the nuts and bolts, let’s address why selling on Amazon is worth your time:
- Massive Audience: Amazon has over 300 million active users, giving your brand exposure to a global customer base.
- Trust Factor: Consumers trust Amazon, and being on the platform can lend credibility to your brand.
- Sales Growth: Many brands see significant sales growth after launching on Amazon, thanks to its vast reach and sophisticated selling tools.
But with great opportunity comes great competition. To stand out and thrive on Amazon, you need a solid strategy.
Amazon Strategy
Amazon is a different beast compared to other e-commerce platforms. Here are key strategic elements to consider:
- Product Selection: Products that do well on Amazon are shelf stable, light weight, have an affordable price point, and existing demand. Beverage products are very expensive to ship and often lead to a low margin. Refrigerated and Frozen products can sell through Amazon’s Fulfilled by Merchant program (basically meaning the brand dropships directly to the customer), but have lower demand.
- Known Demand vs. Unknown Demand: Amazon can be broken down into three types of demand:
- Known Demand: Products with established sales on Amazon. These products are searched frequently and have clear competitors. Your strategy should involve competitive pricing, strong branding, and exceptional customer reviews.
- Unknown Demand: Products that are new or have limited data on Amazon. For these, your focus should be on driving traffic through ads and optimizing listings to generate interest.
- No Demand: Products that might be niche or experimental with little to no search volume. You’ll need to create demand through targeted marketing efforts off-Amazon, such as social media campaigns, to drive traffic to your Amazon listings.
- Pricing: Competitive pricing is crucial on Amazon. Research similar products to ensure your pricing is in line with market expectations. Remember, customers on Amazon often compare prices across sellers.
- Brand Protection: Register your brand with Amazon’s Brand Registry. This gives you more control over your listings and helps protect your brand from counterfeiters.
- Inventory Management: Stockouts can kill your Amazon ranking, so ensure you have a reliable inventory management system in place. Consider using Amazon’s FBA (Fulfilled by Amazon) service to handle logistics.
- Advertising: Amazon’s pay-per-click (PPC) advertising platform can drive significant traffic to your listings, but it requires careful management to be cost-effective.
Setting Up as a Seller
Ready to get started? Here’s how to set up your CPG brand on Amazon:
- Create an Amazon Seller Account
- Go to Amazon Seller Central and click “Register Now.”
- Choose between an Individual or Professional selling plan. The Professional plan costs $39.99 per month and is recommended for most businesses.
- Provide Business Information
- Enter your business name, address, and contact details. You’ll also need to provide a bank account and tax information. Make sure this information is exactly the same as your submitted documentation, otherwise, Amazon may cancel your application locking you out for months.
- Set Up Your Seller Profile
- Customize your profile with your brand logo, description, and store policies. This helps build trust with potential customers.
- List Your Products
- Start by listing one or two products. Upload high-quality images, write detailed descriptions, and include relevant keywords to optimize your listings for search.
- Choose Fulfillment Method
- Decide whether you’ll fulfill orders yourself (FBM – Fulfilled by Merchant) or use Amazon’s FBA service.
Fulfilled by Amazon (FBA)
Fulfilled by Amazon (FBA) is a service where Amazon stores, packs, and ships your products for you. Here’s why FBA is worth considering:
- Prime Eligibility: Products fulfilled by Amazon are eligible for Amazon Prime, which can significantly boost your sales.
- Customer Service: Amazon handles customer service and returns for FBA items, saving you time and hassle.
- Scalability: FBA allows you to scale without worrying about warehousing and shipping logistics.
To get started with FBA:
- Send Inventory to Amazon: Prepare your products according to Amazon’s guidelines and ship them to an Amazon fulfillment center.
- Amazon Stores and Ships Your Products: Once received, Amazon will store your products and handle the shipping when orders come in.
Monitor Inventory Levels: Use Amazon Seller Central to keep track of your inventory levels and replenish stock as needed.
Amazon Ads
Amazon’s advertising platform offers various options to help you drive traffic to your listings:
- Sponsored Products: These are ads for individual product listings that appear in search results and on product pages.
- Sponsored Brands: These ads feature your brand logo and up to three products, helping you build brand awareness.
- Sponsored Display: These ads are shown on and off Amazon, targeting customers who have viewed or are interested in similar products.
To create a successful ad campaign:
- Set Clear Goals: Whether it’s driving traffic, boosting sales, or increasing brand visibility, know what you want to achieve.
- Choose the Right Keywords: Use Amazon’s keyword tools to find relevant and high-traffic keywords.
- Monitor Performance: Regularly review your ad performance and adjust bids, keywords, and targeting as needed.
- You can get started with at least $5/day in ads to start generating awareness.
The Amazon Flywheel Effect
The Amazon Flywheel is a concept where each success on Amazon fuels the next. Here’s how it works:
- More Sales: More sales lead to better rankings.
- Better Rankings: Better rankings lead to more visibility.
- More Visibility: More visibility leads to even more sales.
This cycle can rapidly accelerate your growth on Amazon. To get the flywheel spinning:
- Invest in Advertising: Use Amazon Ads to boost your initial sales.
- Encourage Reviews: Positive reviews can significantly impact your ranking and sales.
- Optimize Listings: Continuously improve your product listings with better images, descriptions, and keywords.
Optimizing Product Listings
Your product listing is your primary sales tool on Amazon. Here’s how to make it work:
- Title: Include relevant keywords and product details, but keep it concise and readable.
- Images: Use high-resolution images that show your product from multiple angles. Include lifestyle images that show your product in use.
- Product Description: Highlight key features and benefits. Make sure they’re easy to scan.
- Backend Keywords: Amazon allows you to include hidden keywords in your product listing’s backend. Use these to include synonyms and related terms that customers might search for.
Final Thoughts
Selling on Amazon is a significant opportunity for CPG brands, but it’s not without challenges. Success requires a well-thought-out strategy, careful setup, and ongoing optimization. By following the steps and strategies outlined in this chapter, you can tap into Amazon’s massive customer base, build your brand, and drive substantial sales growth. Remember, Amazon is a dynamic marketplace, so stay informed, keep experimenting, and continuously refine your approach.