Amazon have recently given notice to upcoming changes in their long-term FBA storage fees and limits. These new changes are quite significant and I wanted to write a piece on how these changes will impact your business, how you need to structure your strategy moving forward, and give you my future predictions on the ramification of these changes in the supply chain.
There are three major changes to FBA fulfilment that directly impact strategic thinking for a business that sells on Amazon:
- Change of Long-Term Storage Fees from semi-annually to monthly.
- Increase in Storage fees.
- Changes to Inventory Storage Limits.
Change to Monthly Inventory Storage Fees:
Starting on the 1st of April, 2018, monthly inventory storage fees increased by 5 cents per cubic foot for standard and oversize items. On top of this, on August 15, 2018, items that have been in a Amazon Fulfilment Centre for more than 365 days will incur a monthly fee of $0.50 per unit and will move from a semi-annual assessment (read: charge), to a monthly assessment.
Change to Storage Limits:
From July 1, 2018, there will be a change to how FBA will assess the inventory health of an account. Inventory performance will now be judged on a points basis, with metrics such as percentage of excess inventory, sell-through rates, percentage of stranded inventory and in-stock rate (keeping your high volume items in stock), all providing key metrics. Through these numerous metrics, Amazon will give your account a cumulative score which they call your ‘Inventory Performance Index’. Should you score above 350 points on this index, you will be allowed unlimited regular and oversized inventory storage in Amazon.
How & Why
The opportunity for companies to utilize Amazon’s consumer based has resulted in a massive influx of new sellers over the past few years, with more and more sellers using the FBA program for automation. A by-product of this growth is companies & sellers using FBA as their own personal storage facility.
These big changes in fee structure is Amazon making a big statement that tells us that it does not want to be used as a storage facility, it is purely a fulfilment centre. The fact that they are rewarding accounts with good metrics by removing inventory limits, is further evidence to this.
This all works in favour of Amazon, they reward high volume accounts and incentivise businesses to use FBA for only their fast moving inventory.
How Does this Impact Your Business?
If you are utilizing FBA at the moment or plan to in the future, this is something that should be examined closely. It means your business needs to transition to using FBA only for faster moving inventory OR your inventory planning and management needs to be meticulous. Systems needs to be created within your business to allow drip feeding of inventory, so as to not have static inventory for longer than 6 months.
Previously, there were limits to oversize inventory. With a satisfactory Inventory Performance Index, you can now send as many as you would like. This means FBA now opens up as an option for fulfilling your oversized inventory. Using FBA for your products gives them better search ranking, and better conversion as Prime members get access to free two-day shipping. Again, your inventory management must be dialled in, as storing oversized units in Amazon can be costly.
Predictions for the Future
These changes will open up a new opportunity for warehouses and freight forwarders to offer storage to Amazon FBA sellers who wish to drip-feed their stock into FBA. We will start seeing this being offered more prominently within the next year or two. There will be increased demands from sellers and businesses that do not have their own warehouse facilities, to be able to use 3rd party storage that offer systems to drip feed stock into Amazon.
These changes are not all negative. They are a step in the right direction for all parties. Amazon’s hand was forced with these changes, however, I see it benefitting all parties. Check-in times will be much faster and FBA will become more efficient. Sellers with good metrics will now be able to offer oversized items more easily, which could increase revenues significantly.
As with any change, it is how you respond to it that will determine whether it is a positive or negative one. The opportunity is there to be taken.Page link
Is Amazon is coming to your territory? What does a company or brand need to do to take advantage of the oncoming entry of Amazon into their market? Or, if Amazon is already a dominant part of the ecommerce landscape in your country, how does a company set themselves up for future success?
It is exciting times that we live in now for the world of eCommerce. Amazon, the world’s leading ecommerce platform is actively entering new territories with the aim of bringing their revolutionary business model to what they see as inefficient markets with big opportunity.
In 2017 and 2018, if you are based in Australia or South East Asia, you are in for a change in the way the online sales game is played, as Amazon enters the fold. It is a very exciting time for brands, retailers and companies that are in a products based business. If you live in any other country where Amazon is already present, then it is hard to ignore the platform’s impact and reach.
To understand the kind of opportunity that Amazon presents for companies, we can look to the way it has dominated the US market. The platform has not just been able to convert existing consumers to the platform, it also significantly contributes to the increase in growth of the entire USA retail industry. Experiencing double digit growth since its inception, Amazon reached revenues of 135 Billion Dollars in 2016. (Internet Retailer)
Amazon is too big and too important of an opportunity to leave to inexperienced associates. There are roles that need to be filled to get the most out of this part of a business. Whether these roles get filled by one person, two people or a whole team, is up to the company and the strategy they have in place moving forward and the goals they want to achieve.
Let’s start out with the roles and duties that need to be handled for any team to grow on Amazon:
It is important that top priority is placed on content optimization. Remembering that content that looks good is not necessarily what sells. There needs to be strategic thinking involved in knowing the right type of images, sales copy and keyword research to use, then having the right resources in place to execute. Getting this right will give your products waves of free organic traffic and high conversion rates.
Amazon Marketing Service (AMS) Strategy and Promotions
AMS should be a focus of all brands’ Amazon strategy. It is Amazon’s in-house pay-per-click advertising system and it is a great way to get instant momentum, keyword data and consistent sales. It also has the benefit of boosting search rankings for products. Amazon like it when you pay them.
Positioning and Maintenance
Products need to be monitored and maintained. There are many factors that influence a product’s search rank and position in the market and these factors are constantly changing. The algorithm is constantly updated and changed. If you are not on top of this and constantly monitoring changes in your product performance that can be attributed to changes in the system or market, then you can lose market share rapidly.
Someone is needed to make sure that the metrics Amazon use to measure seller/vendor performance are as perfect as possible. Imperfect account metrics can have a significant impact in sales and can be very costly.
It is important to manage customers queries and complaints. Vendors have the added bonus of having Amazon handle their customer service for them, however, it is still important for all brands to respond to reviews and feedback from customers. Amazon can be an important touch point in consumer relationship management.
Fulfilment of Inventory/PO Fulfilment/Shipment Process & Handling
A staff member dedicated to handling purchase orders and inventory. Making sure there is always stock of hot selling items and managing inventory correctly will result in larger revenues and better cash flow.
Expansion into Global Markets
Amazon is global. Entering your local territory can be a stepping stone into other Amazon markets. With over 300 million active accounts, the potential is exciting.
Analytics and Reporting
If you are in an executive position in a corporation, I do not need to remind you the importance of accurate and insightful analytics and reporting. These reports need to go beyond the basics of what Amazon give you from within their platform. The analytics and reports need to be able to tell a story and provide data in a way that allow all decision makers to make insightful and correct strategic decisions.
Whoever is on board should be able to create models and systems to analyse results. Being able to see growth or decline of important metrics over time and across periods is vitally important to making informed and meaningful strategic decisions going forward.
Metrics should measure performance on your account as a whole and individual products. Creating effective systems and models is a costly and timely task to undertake, but one of vital importance.
What would be the ideal scenario in a perfect world, is to have someone in-house who has all the skills to manage the resources and team to optimise every component of their brand’s Amazon strategy. Unfortunately, brands are going run into some problems when they go out into the market to find these superstar players to come on board into the company. Especially if companies have goals of adding 7 or 8-digit yearly growth from Amazon revenues.
What companies will find when they go looking for an ‘Amazon Expert’ is that they are very hard to find. If they do somehow find a person who has the track record to be able to bring 7 to 8 figure growth into the business, they will not come cheap.
There are a few reasons for this issue. Firstly, Amazon experts are not created in schools, they are created in the field. Usually (not always) the people you want in your teams earned their expertise through trial and error with their own capital, their blood, sweat and tears. Building brands and selling products online that they themselves created or managed. Being amazingly successful on Amazon can allow you to live an amazing lifestyle of time and location freedom. Trust me, it’s pretty nice.
Secondly, besides the great lifestyle you can live, you can also be incredibly profitable.
These two factors, will make it incredibly unattractive for someone who has the skill to dominate the Amazon game for a brand, to make the decision to go back into a day job that has regular business hours for a standard pay check (even if there are commissions involved). This situation also presents another issue in that talent that have achieved these kinds of results for themselves may not be ready or suitable to work with corporate clients as a service.
Being able to find Amazon Marketplace A-Players is a big issue for companies, even in the USA, where Amazon has been present for over 20 years. It will be doubly difficult for a company in a country where Amazon has never existed before.
This might not be an issue forever. I predict in the next 3-5 years, that this skill set will be more commonly taught in schools to be used in the corporate world for large brands. The thing that companies need to think about is, can you wait that long? That’s a lot of money potentially left on the table with Amazon showing double digit growth every year since it’s inception.
So, what are the options for hiring a team or leader to handle an Amazon strategy?
(For the sake of transparency, I should inform you that I do represent a consultancy agency. However, I have tried to be unbiased in this review as both sides have legitimate advantages and disadvantages)
- Investing in the knowledge in-house for the future.
- Once trained, they will be there to instantly handle growth strategies, as well as issues and problems that arise.
- Full time employee dedicated to a company’s needs and only their needs.
- In-house intellectual capital.
- Physically present at headquarters.
- Ease of Communication. They work for the company, they answer directly as soon as possible.
- Extremely Hard to find A-Players.
- Money and Time cost of training and learning.
- Normal peripheral costs of employees (healthcare, 401k/Superannuation/CPF, paid leave, etc)
- Paid for their time. After the end of the day, they clock off.
- Risk of turnover. Once they are trained or have that track record of success, they will have a very valuable skillset. Competitive offers will come in for effective leaders with rare skills.
Hiring a Consultancy Firm
- Paid to perform. Client success is the agency’s success.
- Systems, knowledge, structures, reports and strategies have already been designed and tested. It just needs to be customized for a client’s specific niche.
- Can instantly mobilise ready assets for client growth. Zero time wasting, take advantage of the opportunity the market presents quickly.
- Will never leave, as long as invoices are paid and relationships are strong.
- Can let them go easily if they are not performing to expectations.
- Consultants are in the business of trusted advisory. There is a certain leap of faith, from both parties, that needs to be made for profitable partnerships.
- Setting aside future goals of the company for instant results. However, a good agency should work with corporate goals and be able to provide solutions that plan for success in short, medium and long term goals.
- Consultants could have multiple clients, meaning communication could be on their time. Set the expectations at the outset.
- Remuneration can be costly. Though if an agency delivers on the value that they promise, it is a worthwhile investment.
Some Final Thoughts Going Forward:
- Amazon is so important! You need to have a strategy moving forward. A company without an Amazon marketing plan, is a company without a plan.
- Now is the time to prepare. Especially if Amazon is about to enter your market. You need to get your team ready, BEFORE the marketplace launches. Get the right knowledge from the right people, so that you can execute your strategy to dominate Amazon.
- If Amazon is already a massive player in your market (USA, Europe, etc), the best time to start was 5 years ago. The next best time is now.
- Some key decisions for Brands moving forward:
- Hire in-house or through a consulting agency?
- How important is this sales channel for the company going forward?
- How to fill the roles needed to successfully implement an Amazon strategy?
- How much flexibility is needed when it comes to filling this important position?
- How soon do they need to get started?
You have to be living under a rock to not know that Amazon has become the largest player in the eCommerce market in the western world. With 300 million active accounts, if your company is not offering their products on Amazon, they are ignoring a large chunk of the market.*
Even if you are using Amazon to put your products in front of more buyers, what are the chances your marketing team actually knows what they are doing when it comes to selling on the online eCommerce giant? If your listings are converting at less than 20% (this means for every 100 people that visit the page, less than 20 actually buy), chances are there is something missing from your offer and it could be improved on. Each percent higher results in exponentially more sales, and not doing anything means many thousands of dollars left on the table everyday.
Did you know that almost 80% of businesses are disappointed with their conversion rates?** This might sound surprising, but definitely not to us. At 4Profit Labs, our experience of being 7-figure sellers of our own products and brands has taught us that most brands are leaving a lot of money on the table by not knowing how to sell successfully on Amazon.com. It did not matter how much money they had in their marketing budget, they often had spent focus, time and money in the wrong place. It definitely showed when we took over their categories and products in sales rank and revenue surprisingly easily.
By changing your team’s focus to what really matters to make sales on Amazon, you could be adding thousands of dollars of sales daily.
I have seen marketing teams struggle to make an impact on Amazon because they try to use traditional marketing theory and practice. Logically one would think this would work, but practically is ineffective. Amazon is it’s own beast and needs its own specific strategies. What works to make sales on Google, Facebook, Email Marketing or any sort of sales funnel is not directly transferable to Amazon.
To get the most out of selling on Amazon, you need your team to focus on what is going to get you the most results.
In the case of an Amazon product listing page, where you need to spend the majority of your time is “before the fold”.
“Before the fold” is tech speak for the first thing that shows up when you load a page. It means everything a person see when a web page loads, before scrolling down.
On an Amazon product page, the elements that appear before the fold include product images, product title, bullet points, customer reviews and price. These are the elements you have a degree of control over. Below is an example of a product page before the fold.
In our professional experience, once a customer scrolls down (after the fold) on an Amazon product page, the chances of losing that sale increase dramatically. In some of our in-house tests, almost as much as 90% of customers who scroll down end up leaving the page and not buying.
Now why is this?
Below is a screenshot of the first thing you see when you scroll down, after the fold. I count 24 product links (this amount changes depending on screen size and category) for a customer to potentially leave your product page to view other sellers variations and options. If you end up scrolling down even further down there is usually another 2 rows of ‘other options’. Amazon wants to be ‘the everything store’, as such they give the customer as many options as possible. Great if you are the customer, not so great if you are the seller. By the time the potential customer gets to your product information and customer reviews at the bottom of the listing, they have already seen many options (read: reasons) to leave your page and check out something else.
With all this bombardment of different options after the fold, it is no surprise that you end up losing people if they scroll. Scrolling really is the death of sales on Amazon.
So how do you get your team to create product pages to convince people to buy before they scroll? By getting them to focus on what they can control before the fold and optimising it for maximum impact and persuasion.
Here is a quick guide on the page elements before the fold, for you maximise your product listing, to increase the chance that the customer will make a buying decision before they scroll down.
- Make sure that your images adhere to all Amazon terms of service.
- Utilise as much image space as possible.
- On Amazon, the Image is your headline, so make sure it grabs attention and brings people in.
- Target your visual people, up to 60% of the population are visual.***
- This seems like the headline, this is a common misunderstanding. The title does not grab attention as effectively as a good image.
- Use this section for branding, sales copy and strategic keyword placement.
- The important text and sales copy go here.
- You have up to 5 (or in some cases more) chances to convince buyers to make the purchase.
- Important to use this space well as logical and practical people need to see on paper what it is they are buying into. Images may not be as effective for buyers like this.
- Are you actively seeking reviews from buyers or are you sitting and waiting for them to come?
- Is your product of good quality?
- This is important social proof that tells potential buyers that your product is the real deal.
- Use this to let people know that your item is at a great price.
- Use strikethroughs, impactful words and price strategy to set up for success.
Optimize these 5 elements before the fold and you will beat 90% of all other sellers on the platform.
Knowing how to use these to your brand’s advantage is where the real magic is on Amazon.
You can start asking the right questions such as:
– What exactly do I put in my images? Isn’t putting my product on there good enough?
– What order do I put them in?
– How many images is best to use?
– How do I find out the best keywords to target? What keywords are getting the most volume?
– Where do I put them in my listing to get my product indexed in the search?
– How do I rank for powerful keywords?
– What do I write in my sales copy to convince viewers to buy?
For leading brands, knowing how to apply and answer these types of questions to each individual product and each situation is how you turn a $2000/day product into a $10,000/day product.
Co-Founder of 4Profit Labs
P.S. If you would like to know more about 4Profit Labs and the fun that we have on Amazon helping leading brands increase their sales, click the link below.
When conducting any sort of business online, to make more sales, you undoubtedly will have asked yourself the question, “should I focus on increasing traffic, or increasing conversions?”. It’s a good question to ask, but a hard one to answer.
So what do you do as a company to go forward and make strategic decisions that end up giving the best returns for all stakeholders? Firstly, if a business is not getting the sales or growth that they want, then they must take a hard look at itself and be humble enough to admit that there might be a problem. Secondly, you must identify the problem. Thirdly, figure out the best way to solve it as efficiently as possible.
There is an interesting statistic that came out that stated that for every $92 a business spends acquiring customers/traffic, only $1 is spent actually converting them*. This is very interesting as this shows a general trend in companies believing that as long as they can get a customer to pay attention, they will make more money. Let me explain to you why this is the wrong way to think about this issue.
Yes it is important to get customers to view your site and products, however it is just as important to focus on what they do once they are there. If you were to have traffic to your product page of 30,000 visits per month and only made 1500 sales, that gives you a conversion rate of 5%, quite a low conversion rate. Increasing this rate to 25% would result in over 73,000 more unit sales per year. View the table & chart below to see the potential impact of when a conversion rate is improved through listing and product page optimization.
These examples are extreme and oversimplified, however not that far from the truth. You must combine lead generating efforts with conversion optimisation to get exponential improvements.
At 4Profit Labs, we only specialise in the Amazon sales channel. For us it is even more important to focus on conversions. When a client is a well known or established brand with momentum, due to large amounts of traffic, small changes in the right direction can have an exponential impact. Getting a product listing page to go from 5% conversion to over 20% can result in millions of dollars in sales per year.
It is especially important to focus on conversions on Amazon, not only because the buyers and traffic already exists there, but because it is an extremely crucial metric in higher search ranking. Amazon’s unique A9 algorithm is heavily influenced by positive sales data and track record, and higher conversion rates are proven to result in higher search ranks**, which then results in more visibility/traffic, which then leads to more conversions and sales. This creates a success loop that drives good product listings to the top, and bad ones to the bottom, no matter how big your marketing budget is.
So how do you increase your conversions on Amazon (or anywhere for that matter) as efficiently as possible? By focusing on the things you can control. Your images, your sales copy, your product information and your entire user experience. Making sure the customer is lead through an experience that facilitates sales and buying mindset. Every single component of your website, sales page or product listing must be optimised to lead and persuade customers that your product’s value proposition is greater than the price that they have to pay for it, and seamlessly lead them towards the buy button.
If you think that your product pages have a conversion problem, then first step is to optimize what you have control over. On Amazon it is your images, your sales copy, your keyword placement and keyword prioritization. If you don’t know where to start when it comes to creating optimized sales pages and listings, you can go to our website for guides and case studies.
Click here to see a case study of the strategies to use to increase your conversions instantly.
Co-Founder of 4Profit Labs
** https://moz.com/blog/amazon-seo-organic-search-ranking-factors#resultspagePage link
Get a detailed look into the insights, strategies and tactics we use at 4Profit Labs to legitimately rank products on Amazon.com for Companies and Brands.
In this presentation we unveil:
- How we Helped an Electronics Company Achieve an Extra $4000/day in Amazon Sales within 3 Months Without Any Tricks, Loopholes, or Gimmicks
- How we Never have to Cheat to Make Sales.
- How Conversion Science Knowledge can Boost Sales Instantly.
- The Massive Changes to the eCommerce Marketplace and how it impacts you.
- How to take Advantage of Marketplace Changes.
- Big problems that Brands and Companies face on Amazon and how to overcome them.
- Understanding Amazon’s A9 Algorithm and how you can use that knowledge to boost your sales.
- How to train your Teams to Dominate on Amazon, when 90% of Brands Have No Idea what they are doing.
- Our Top 3 Tips to Amazon Sales for Companies with Marketing Teams,
- What is Currently Working for Sellers on the Marketplace.
- The Exact Mechanics Behind Our Success to Help you Get up to an 80% Conversion Rate.
- How Implementing These Strategies will Show Instant ROI and Impress All Stakeholders.