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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.

Sellers on Amazon need a strategy plan.

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:

The conditions on Amazon require a sales strategy.

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.

Amazon: Best seller strategy must include prime.

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

Owners of exclusive Sales Rights

Owners of Private Labels

Owners of known Trademarks

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

Category: Blog
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