The Best Strategy for Selling on Amazon – for Wholesalers, Private Labels, Brand Owners and more!
For some time now, advertisements from coaches have been haunting the social media, promising rapid success on Amazon and thus the prospect of wealth and independence. Better still, a strategy for selling on Amazon is unnecessary since it is so easily done.
And indeed: An Amazon Seller account is set up much faster than a shop. Even the first product is online only a little later. But is that enough to make a lot of money on Amazon?
Spoiler alert: NO, of course not!
But the simplicity of the start at Amazon is completely in line with the marketplace. The magic word is choice. By offering the widest possible selection, the Amazon marketplace is able to attract almost everyone with internet access.
As already anticipated, the simplicity of the start is NOT a good reason to start selling at Amazon. Instead, the right strategy must be worked out for success on Amazon. That is why we have looked at the challenges of different business models and developed tips for the right strategy for success.
But before we delve deeper into thinking about the right strategy for selling on Amazon, we would like to create a fundamental understanding of the marketplace.
Things sellers need to consider before starting on Amazon
Almost anyone can offer products for sale on Amazon
The start on Amazon is simple, but it is also a reason not to start. Because EVERYONE can become a seller there. As a result, competition in the marketplace is gigantic.
And Amazon wants it in this way. The marketplace wants to offer the best product at the best price. The high competitive pressure achieves exactly that.
When we talk about competition, we mean it on two levels, which require further explanation before we can seriously consider the right strategy for selling on Amazon.
1. Competition between different products
Products from different suppliers may have different names but serve a comparable purpose. There are many gaming mice with 8 programmable buttons. Here we show two offers. Although these two mice are from different suppliers, they compete for the potential buyer interested in gaming mice. So you have to take a closer look to see where the difference is.
2. Competition on the same product
But even with the same product, sellers compete with each other, which can have a massive impact on the choice of a promising Amazon (pricing) strategy. This is particularly true for branded goods. Let's look at the example of the first gaming mice above:
Most buyers of the product simply click on the button "Add to cart" and then go through the checkout. In this case, most buyers do not notice buying from Amazon. Apart from the group, 36 other sellers (as of August 2019) offer the product. These are shown with a small box on the left side below.
Successful on Amazon Marketplace? The strategy makes a difference.
These sellers have not made it into the Buy Box and sell up to 90% less than Amazon. That's because the probability for these sellers to sell the product is 90% less than if they were behind the "Add to cart" box. This field is called the "Buy Box" in English, and it also has a major impact on the choice of your own strategy for selling on Amazon.
This competition for the Buy Box can quickly become destructive. Especially in the case of brands sold by several sellers. With no exclusive right to sell, the margins are already small anyway. If you then have to compete with many other sellers, selling with a profit margin is already very difficult. If you even compete against Amazon itself, it is almost impossible. But more about that later.
Amazon rules its marketplace
If you want to sell on Amazon, you have to deal with the house rules. These guidelines are quite strict, especially for sellers. In the event of violations, products or even the seller's account can be blocked. This may sound very harsh, but it is important to understand the scope of violations before deciding to submit to these rules. Because on Amazon, a strategy that systematically breaks rules cannot succeed.
Amazon even makes the rules of the game in other areas that cannot be transparently read in a catalogue of guidelines. The e-commerce giant has, and still does, collected and analysed an incredible amount of data on search and buying behaviour. Based on this data, Amazon has developed its search algorithm A10. This algorithm decides which offer is ranked first, second, third, etc.
There is also an algorithm that determines which offer is in the Buy Box. Both algorithms are completely non-transparent, just like the one from Google. There are many guesses and also indications as to which aspects are important for these algorithms. But in the end, only Amazon knows exactly how they work.
But why is this so crucial to know when it comes to the right strategy for selling on Amazon? Because Amazon does not only provide the platform but acts as a participant itself.
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Amazon is a seller with a strategy too
Amazon itself sells many different products, such as the mentioned gaming mouse. And unlike other providers, Amazon knows what customers want based on the collected data. For this reason, many sellers who operate on Amazon are always afraid that their bestsellers will one day be sold by Amazon itself.
But let us come back to the algorithm and the Buy Box. If Amazon itself acts as the seller of a product, the probability of winning the Buy Box is very low. This gives Amazon an absolute competitive advantage over its rivals.
For this reason, it is essential to check beforehand whether Amazon also offers its own products. If so, this is a very strong hurdle to sell successfully on Amazon regardless of the strategy.
Advantage: Amazon also offers its own fulfilment service "FBA" to sellers
Fulfilment by Amazon (FBA) is an Amazon service where the sellers stores their products in Amazon's own shipping and storage network. If a sale is generated, Amazon takes over the handling completely. The seller does not have to do anything. Amazon also takes care of answering any queries about the order. Thus the shopping experience for the buyer is Amazon-typical.
Of course, this service costs, but shipping through Amazon isn't more expensive than your own shipping. On the contrary, FBA can be part of a successful strategy for selling on Amazon - because the costs are easier to calculate since the financial expenses of having your own warehouse are much more difficult to include in the product price.
Another advantage of the FBA programme is the participation in Amazon Prime. The Prime programme started as a pure preferential mail-order club. This included faster and free shipping. Although the programme now includes much more for Amazon customers, products shipped quickly and free of charge to Prime members are still marked with the light blue "Prime" logo on the marketplace. There is also a search filter that only shows Prime offers.
Disadvantage: Amazon also offers its own fulfilment service "FBA" to sellers
This is honestly also the biggest negative point. When the product has been delivered to the customer and the seller is responsible for shipping, the seller receives the customer address data to send the package. Queries from the customer are handled via an encrypted e-mail address that the customer receives. FBA sellers do not even receive this.
This means that sellers who handle the shipping themselves still have the option of contacting the customer via invoice, delivery note and carton inserts, and to consider this in their strategy for selling on Amazon. However, even here it is important to take into account Amazon's strict guidelines, which prohibit any attempt to divert the customer away from Amazon.
Sellers are obliged to answer customer enquiries within 24 hours
This requirement applies to every day of the year. Amazon requires every seller to meet the highest standards in terms of delivery times, confirmation emails, cancellation rates and a variety of other criteria.
For many companies new to Amazon, these standards can go far beyond what they are able to handle. However, FBA helps again, as Amazon provides customer service itself.
Amazon provides ad-hoc access to millions of customers
We have discussed some of the down-sides of the Amazon business. But the biggest advantage, which makes up for many disadvantages, is the incredible reach of the marketplace. In 2018, 37 million customers together bought 1.3 billion products.
By offering their products on Amazon, sellers can reach 37 million people at a stroke who are actually actively buying. Only in Germany. The cost of achieving a similar reach outside Amazon would be enormous.
This is how Amazon works! The right strategy for your business
With these thoughts in mind, the question of the right strategy for selling on Amazon is crucial.
Choose your business model and we will show you what is important for you to be successful on Amazon.
Owners of non-exclusive Sales Rights
You do not have an exclusive right to sell your products?
Even though the relationship between reseller and manufacturer may be good, there are still other sellers on the market offering the identical product. For the right strategy for selling on Amazon, this means there will be strong competition for the Buy Box. This in turn means that either very little will be sold or the margins will be very low because the price will have to be adjusted downwards.
"With far too many sellers not properly incorporating all of their costs into their pricing decisions, I regularly see sellers overestimating how far they can drop their prices and still be profitable"
former Head of Amazon Services
How to sell successfully at Amazon
Check the competitive situation
There are some issues relevant to the strategy for selling on Amazon: How many sellers already offer an identical product? At what prices? With which shipping costs? The more sellers sell a product, the more pressure lies on the price.
As an indication one can analyze how often the current seller in the Buy Box changes. If this happens frequently, this is a hint for a continuing price war.
Does Amazon also offer the product itself? Amazon delivers the perfect customer experience, so the only way to win the Buy Box against Amazon is through price. Alternatively, the method “hope“ for Amazon going out of stock can be used. Whether this is a legitimate business model should be decided by each individual.
If your product has little competition, it looks good. However, it is worth taking another closer look. In which category is the product? Does the category have the “Bestseller“ label? If not, this is an indication that the products in this category are rarely sold. These are all questions that need to be considered by sellers on Amazon in their competitive strategy.
Position yourself broadly
On the preserves: What strategy for selling on Amazon should you pursue in this situation? In many cases, it can make sense to start with a few products. In the case of merchandise, it makes little sense. Due to the high pressure of competition and the narrow margins associated with it, the Amazon business would fail as a business model. With a wide range of products, the narrow margins add up to a reasonable overall profit. Moreover, this also gives the opportunity to find products in less competitive niches.
Therefore, it is better to start a little broader and take the unprofitable ones off the platform later.
Calculate your prices correctly
What does your product really cost until it reaches the customer? All costs that can be directly attributed to the product must be included. That means purchase price, packaging costs, forwarding charges, cartage or transport insurance, if FBA is used also FBA charges, shipping costs via FBA, return charges, Amazon commission in the category. Also, note the correct calculation of the VAT. Only then can an absolute minimum price be calculated.
In addition, bundling can be a useful addition to your own strategy for selling on Amazon. Even if the competition on products is high, you can avoid the fight for the Buy Box by tying suitable products to a bundle and offering them as a single product. For example, a gaming mouse and a gaming keyboard can make a useful bundle. These two products are created with a common new EAN at Amazon. As long as other sellers do not tie this bundle, there is no competition on the Buy Box.
Use FBA in your strategy with Amazon
Securing a highly competitive buy box for yourself is almost impossible without the FBA and the Prime logo. But FBA also has the advantage that customer service is provided by Amazon, resulting in a very good sales performance. Along with price and availability, this is the most important criterion for the Buy Box. Furthermore, as indicated above, FBA offers a better basis for calculation.
Use a repricer
Price is a particularly decisive factor when it comes to winning the Buy Box. With a low price, one can compensate for possible deficits in the seller's performance. Therefore, there is often a lot of changes in prices. It is very time-consuming to understand and react to this as a human being.
Repricers help you with your strategy for selling on Amazon by taking this work off your hands. Some work on a rule-based basis, i.e. the attitude is that you always want to be x cents cheaper than the cheapest, but this only fuels the price war and shrinks the margin. Other repricers are a little more clever.
Owners of exclusive Sales Rights
Do you have exclusive sales rights for your products?
Relations with the manufacturer are so good that sellers have found a lucrative strategy on Amazon: They negotiate an exclusive selling right. Thus, the competition for the Buy Box can be avoided and margins can be kept stable.
However, competition with similar products still remains. If the product is not represented by a strong brand, there is a risk that private label manufacturers with lower prices will attract customers and thus keep sales figures rather low.
This is how you set up your Amazon success strategy
Deal with your Amazon SEO strategy
In order for the products to remain visible to other suppliers, it must be ensured that the A10 search algorithm shows the products as high up as possible. In general, it is important that the most frequently searched words appear in the product description. The title and bullet points are particularly important for this.
However, this requires a sophisticated Amazon keyword strategy. Without a proper enquiry on which words customers type in the search field sellers never know if they are on the right track.
Do not rely on the manufacturer descriptions
Experience shows that many manufacturers do not really bother with product descriptions. These are usually very feature-heavy but do not really address the problem that the product solves.
Besides titles and bullet points, which should not be adopted for SEO reasons alone, the product description is also important. These should be written in an appealing and above all target group-oriented manner.
Use A+ Content
Until not so long ago, all product detail pages at Amazon looked the same. This changed when vendors (i.e. manufacturers and vendors who supply Amazon directly and whose products Amazon then sells in its own name) were given the opportunity to create designed and detailed product descriptions for their products. This possibility was rolled out for registered trademarks in a second step - and should be used accordingly in a good strategy for selling on Amazon for selected products.
With this content, the target group can be addressed more strongly with images and strong texts.
Before A+ content can be used, however, the trademark owner must first grant permission for the seller to register the trademark with Amazon.
Use Amazon Advertising within your strategy – such as Sponsored Products
Similar to Google, where mostly the first 3 search results are paid hits, which are only marked with a small green "Ads", Amazon offers possibilities to display products in the search as an advertisement.
For this purpose, the advertising space in the search results is auctioned to the highest bidder on a keyword basis in a real-time bidding process. In addition to the bid, the relevance of the offer with regard to the search query also plays a role. However, for the sake of clarity, this is neglected here. The whole thing is quite similar to the Google procedure and should not be missing in any good strategy for selling on Amazon. Rather, marketplace sellers should have their own Amazon PPC strategy.
In this way, products that are not yet at the top of the search results can be sold more often.
Explore the possibilities of Private Label
Even if the relationship with the manufacturer is currently exclusive, it is always possible that the manufacturer suddenly has the idea of participating in Amazon trading himself. As described above, the entry hurdles for everyone are conceivably low.
For this reason, it can't hurt to use the experience gained for a foreign brand for your own in the future. However, a different strategy for selling on Amazon is then required.
Owners of Private Labels
Do you sell your own brand? (Private Label)
Private labels are becoming increasingly popular on Amazon. Due to the strong competition, many customers are already less brand affine and increasingly dare to buy a previously unknown brand via Amazon. When it comes to strategy development, sellers can take advantage of this.
The conditions for private label sellers are ideal at Amazon. There is no competition for the Buy Box. The presentation of the product detail page is solely in the hands of the seller. And the margins can be kept tidy to good by good sourcing.
Even if the private label protects against the battle for the Buy Box, there is still a lot of competition on the search results page. And so that not the lowest price is decisive, it is important that the brand is trustworthy.
How to be successful
Register your brand
Registered brands are given a certain special status, which helps sellers to find brand infringements more easily. For a trademark to be registered at Amazon, it must first be entered in a trademark protection register.
Once the trademark has been registered at Amazon, one gains access to various tools with which infringements of trademark law can be found and punished. This can also be part of a good strategy for selling on Amazon. More information can be found on Amazon's brand registration page.
However, as a registered trademark, there are other possibilities that are not available to other sellers. For example, brands can get access to the "A+ Content".
Behind this unwieldy term lies the possibility of making the product detail page in the lower area much more attractive by using pictures and more text.
Another special feature of a brand registration is the Sponsored Brand Ads.
With this type of advertising, three matching products of the brand are displayed quite prominently above the actual search results.
Invest in a professional corporate design
The aim of professional corporate design is to build trust, which can be an important piece of the puzzle in your own strategy for selling on Amazon. Especially if the customer does not know the brand, the first impression is often decisive. If it appears cheap and unprofessional, trust is lost for a long time. That is why it is essential to let a professional do the design.
An important part of the corporate design is the packaging design. This should be designed in such a way that it stands out from the competition on the search results page. The background is Amazon's image guidelines, which stipulate that the first image alone may represent the product on a white background. Eye-catching and attractive packaging is also an exclamation mark in compliance with the guidelines.
Get involved with Amazon SEO
In order for the products to remain visible to other suppliers, it must be ensured that the A9 search algorithm shows the products as high up as possible. Otherwise, many other actions within the strategy for selling on Amazon are usually ineffective. We have already compiled a list of interesting links above. In general, it is important that the most frequently searched words appear in the item description. Especially important for this are the title and the bullet points.
A+ Content is the name given to the possibility of designing the product detail page in the lower area in a striking and freeway. Own-brand sellers in particular should make use of these possibilities of confidence-building. Ideally, a professional should also do this.
Look beyond the horizon for your strategy for selling on Amazon
Amazon works as an ecosystem in its own right. But Amazon customers do not exclusively operate there. The intersection of Amazon customers and Facebook users will be very large. Therefore, the possibilities of social media, for example, should be exploited to make your brand known to a broad public.
Influencers, i.e. people who do not primarily have a large but rather a loyal following, are a good way to introduce your own product to a clearly defined target group.
In addition to brand building measures, which work well especially via social media, external traffic ready to buy should also be considered. For example, buyers can be directed directly to their own Amazon product via Facebook ads or Google ads.
The reason for buying external traffic is based on the A9 search algorithm. The most outstanding factor for the evaluation of the offer is the so-called SaleThroughRate, i.e. the ratio of purchase to the view of the product detail page. If traffic ready to buy is supplied from outside, this can have a positive effect on the ranking.
Deliver outstanding customer service as part of your strategy for selling on Amazon
It is not necessary to use FBA as a private label, as there is no competition for the Buy Box. To get the Prime logo, you can participate in the "Prime-by-Merchant" programme (see infobox). However, it is still essential to keep your own seller performance close to perfect. If the seller rating falls below a certain value, the seller loses the right to the Buy Box, even as a private label supplier. Then the button "Add to cart" on the product detail page is deactivated and buyers have to click on the list of sellers again before the product can be bought.
Alternatively, the FBA programme can be used.
Owners of known Trademarks
Are you the owner of a nationally known trademark?
Many brand manufacturers have so far stayed away from Amazon and even tried to prevent trade via marketplaces. But due to the market power of Amazon, more and more brand manufacturers are positioning themselves on Amazon. With the right strategy, this does not have to be a problem for sellers, but for the brand manufacturers themselves, it is a huge opportunity in any case.
How to sell successfully on Amazon
Consider your resellers
Before taking the step to the Amazon platform, it is important to be aware of the extent to which you are harming your own resellers. After all, it happens, of course, that manufacturers and retailers have to fight for a place in the Buy Box. The manufacturer has the upper hand, that's clear, but do you really want to jeopardise the relationship with your own resellers?
There is no point in increasing sales through Amazon on the one hand, but on the other hand, accepting serious losses that may go beyond Amazon because you have alienated your resellers.
Use FBA as part of your selling strategies on Amazon
Even if the brand manufacturer has its own logistics, it makes sense to have the products stored at Amazon. For one thing, the company's own logistics usually lack the expertise to ship individual parcels, since only pallets are usually sent to resellers, and for another, with FBA you have both the prime logo and perfect customer service.
Use A+ Content as part of your strategy for selling on Amazon
Many well-known brands believe that they no longer need to present their products in a particular way since one can draw on the reputation of the brand. It should be mentioned here that customers are becoming more and more demanding and Amazon is questioning the basic idea of brand loyalty.
In order not to possibly lose customers to brands that offer a similar product, one should make sure that one's products appear in the best possible light. A+ Content offers the possibility to design the product detail page in the lower area in an eye-catching and freeway, thus making the product stand out.
Switch on displays
Registered trademarks enjoy better protection at Amazon not only in terms of the listing, but also have more options for advertising on Amazon, which should be used.
Even though the question of whether brand bidding on Google makes sense is discussed over and over again, the unanimous opinion is that one should not risk losing a single customer to the competition who bid on one's brand. Moreover, the costs are rather low and can be easily planned within the strategy for selling on Amazon.
Make an effort with titles and bullet points
All too often you see less appealing designed titles and bullet points on well-known brands. Here, too, the focus is once again entirely on brand awareness. But here again, it should be pointed out that strong competition from Amazon is intended. Therefore, it can be assumed that other brands or private labels will present themselves as much more attractively.
In addition, there is also the possibility to enter hidden keywords in the backend. In this way, providers can ensure that their offer appears with other brands, even though the brand name does not even appear on the detail page (which is also prohibited for registered brands).
Don't be too sure - even with a sophisticated strategy for selling on Amazon
Amazon is not running by itself. Not even as a well-known brand. The offers must be optimised continuously. The advertising should be checked and adapted again and again. Without involvement and hard work, nobody will be successful at Amazon. That's why it's a good idea to designate employees only who will only dedicate their work to your Amazon store.
Conclusion: Amazon doesn’t run by itself
Whether you are a private label seller or exclusively represent a well-known international brand, to sell successfully on Amazon, you need to understand the guidelines and market mechanisms of the marketplace. You should not underestimate the time and effort needed to develop a good (marketing) strategy for selling on Amazon. Furthermore, product maintenance is also time-consuming.
For this reason, it makes sense to automate or submit as many services as possible. This means: In most cases, an Amazon selling and branding strategy requires some additional tools. In this blog post we will show you a variety of five tools that can save you time and money.
Credits in the order of the pictures: © Vlad Chorniy – stock.adobe.com / Screenshots © Amazon