It’s April 30 2016 today and Amazon.com have just announced another growth spurt and profit hike. That’s great news for Amazon and even better news for merchants with a product to sell.
There are some things you need to know about Amazon before you take the plunge and begin to use their service as a selling outlet.
Before anything, if you decide you want to sell through Amazon you will need to apply for a seller account at Amazon Seller Central. You’ll need to check upfront to see if there are any selling restrictions on the types of products you want to sell. For example, health products, supplements etc, require special authorization.
You’ll also need a bank account and a valid credit card. Disbursement for items sold is made into your bank account via ETF.
Merchant Fulfilled or FBA (fulfilled by Amazon)
This is an important consideration particularly for businesses with multiple products – do you ship the product yourself to the purchaser as and when orders come in, or do you ship a bulk consignment of your products to Amazon and have them fulfill orders for you?
When you ship products yourself then obviously you need to be equipped to do so. You’ll need shipping resources such as packaging materials, scales and a method of printing shipping labels and postage.
You’ll need to be responsive when new orders come through and ensure that they’re shipped in a timely manner. When you create your Selling account with Amazon and begin to add inventory, you’ll be asked to specify a lead time, and generally you’ll want to keep it to within two to three days max. If you fail to ship within the specified time frame you’ll incur negative points on your ‘account health’ score and Amazon may penalize you by reducing the number of impressions your products receive in Amazon product search.
Likewise if your products incur negative feedback or attract a high rate of returns, your exposure in product search may be downgraded.
Clearly if you decide to ship your own orders you’ll also be responsible for handling returns and refunds directly.
The main advantage of merchant fulfilled orders is that you won’t be tying up your inventory at the Amazon warehouse and therefore your initial cost commitments for inventory may be lower.
Your cost to fulfill a product order may also be slightly lower on a per order basis, as Amazon charge a fee for using FBA which isn’t applicable when you ship the product yourself. Of course there are fees, even for Merchant Fulfilled orders, but they are lower.
FBA Fulfilled By Amazon
There numerous advantages to having Amazon fulfill your orders, but the main one is overlooked by many newbies – Amazon Prime. If your products are FBA and qualify for Prime Shipping, then you’re simply going to get more orders. Many Prime account holders will filter their search by Prime only and thus choose to buy only those products which qualify for free two day Prime shipping.
So you’re going to have more eyeballs on your products as an FBA merchant.
Also, with FBA Amazon will handle all customer service including product returns and refunds.
It can get expensive using FBA particularly if your products are physically large and sell slowly, as you pay Amazon for storage space.
You also pay the cost of packaging and shipping plus a handling fee.
You also pay to ship your products to the Amazon warehouse and often they’ll require you to ship products to multiple locations. For example, if you’re selling a widget and you want to use FBA, and you want to place 100 widgets into Amazon inventory, you may have to ship 35 to Amazon location A, 35 to Amazon location B and 30 to Amazon location C. This ensures Amazon can provide guaranteed two day shipping to anywhere in the country, as is a requirement for Prime members.
So you’ll need to acquaint yourself with the various rates, fees, obligations etc, then make a business decision on whether to go Merchant or Amazon fulfilled.
So you have products listed on Amazon, how, exactly, do they get sold?
You can simply choose to list your products (either MF or FBA) then sit back and do nothing, or you can advertise (paid ads).
If you decide to do nothing then Amazon will begin to display your products to people searching at their website, and it won’t cost you anything in advertising. But you may find your products don’t sell very well and you may wonder what the heck is going on.
To improve your exposure in Amazon search you’ll need to ensure that you use a product title which contains your main product keywords, a product description that does the same…and also that you populate the product keywords fields inside of your product listings. You’ll want to ensure that you have good quality scalable images, and ideally that you use multiple images.
Your product description should be informative and entice people to want to buy your product ahead of other similar products. You’ll want to set a price that is competitive and also offer sales incentives such as volume discounts.
Beyond that you’re in the hands of the Amazon algorithm which will determine how often and where your products appear in product search.
What factors influence the algorithm? – well, everything mentioned above along with your account health score. So make sure you ship your orders in a timely fashion and do everything possible to avoid returns and having to issue refunds.
Produt reviews also greatly influence the algorithm- getting positive reviews from your customers is a large factor in how Amazon will show your products in product search.
Also, new merchants and new products tend to receive lower exposure. You’ll start to see more sales as your account matures and you establish your reputation as a merchant.
What about using paid advertising?
You can create product ads from within your Seller Central account. You can opt to have ad costs taken from your account balance or billed directly to the credit card or bank account on file.
Amazon ads work in principle like Google Pay Per Click, in that you bid against specific keywords and search terms. There’s one major difference however – Google could care less if your products actually sell. All Google wants are the fees incurred from your PPC activities. So with Google, if you bid enough against a keyword to occupy the number one spot in Google paid ads, then that’s where you will be. But that’s not the case with Amazon. Amazon wants to promote products with a good rate of sales, as they obviously get a commission on the sale. So you can outbid your competitors in Amazon ads, but if your products don’t convert well into sales then you could find yourself in a situation where even though yours is the highest bid against a keyword or search term, your products are nowhere to be found.
The good thing about Amazon ads is that you can clearly see what the cost of acquisition is for all of your search terms, so you can focus on those with a healthy conversion and avoid spending money on searches that do not convert to sales.
Having an Amazon website
You can build a website with a full product catalog on the Amazon platform, but it isn’t necessary. Many people are under the illusion that they need to build a website but it just isn’t the case.
If you do build a website with Amazon then it’s a fairly involved process and you’ll incur additional monthly fees. The benefits are that you may receive more exposure for your Amazon products as the website may be picked up directly by Google and other search engines.
Have any questions? Need an Amazon account setting up and some help with product listing? Contact us today!