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According to Jungle Scout’s 2023 The State of the Amazon Seller report — an annual study into how Amazon Marketplace sellers are faring — 89% of sellers say they are profitable on the platform. A total of 37% even reported increased profits during 2022, despite all that economic uncertainty and rising inflation.
Amazon is clearly contributing to many brands’ profitability, and with nearly 40% of U.S. ecommerce market share, according to Statista, it is hard to ignore as a sales and marketing avenue. Today, the question for brands shouldn’t be whether to sell on Amazon Marketplace but how to grow their business on Amazon.
Are there any Amazon Marketplace strategy elements that ensure success?
Deciding whether to use Amazon’s invite-only Vendor Central platform (known as 1P) or Seller Central platform (known as 3P) is one of the first things for brands to consider.
3P offers more control and fine-grained reporting, allowing sellers to see the real-time impact of their promotions and strategies. The 3P marketplace provides a more agile response to ever-evolving consumer behavior but also requires more effort and people power. Companies may find they need to staff up to manage all the platform’s nuances.
There are other considerations, too. As Amazon focuses on profitability, 1P vendors increasingly scrutinize chargebacks and other fees. At the same time, Amazon is severing its 1P relationship with distributors in Europe, encouraging them to sign up for the 3P platform. In 1P, the selling price is controlled by Amazon; 3P vendors control their own pricing (again, more work but more control).
However, once the fundamental decisions are made, you can start to craft your brand presence on the platform.
A buttoned-up supply chain is critical. Simply keeping products in stock can be a significant driver of success on Amazon. If sales velocity slows, the search algorithm will penalize you, and it might take some time to regain that momentum unless you’re a household brand.
Successful sellers also tend to stay mindful of Amazon’s policies and algorithms. Doing business on Amazon Marketplace is a marketer’s game to a certain extent. Amazon’s algorithm prioritizes conversion rate; understanding the nuances of incremental sales is crucial for being able to adapt and reassign resources quickly and do more of the strategies that work.
Great strategists don’t just send their inventory to Amazon and expect the platform’s market dominance to do the rest of the work. They actively prioritize their Amazon Marketplace strategy.
How can brands put these Amazon Marketplace strategies into action?
If brands understand how the platform works, they can start using Amazon Marketplace as a driver of revenue and a way to reach new consumers. Here are a few ways sellers can put strategy elements into action to grow their businesses on Amazon:
1. Plan for additional inventory
Amazon Marketplace requires a ready store of inventory to keep users’ expectations fulfilled. Brands need to thoroughly understand their supply chains and plan for the additional inventory they sell through Amazon while balancing enough inventory for their other retail channels. As an Amazon Marketplace seller, you’ll be responsible for making sure you’re stocked up.
There are many benefits to having good inventory management. Most notably, it’s good for the financial state of your brand. When you have a good handle on your inventory, you’re able to accurately forecast to satisfy consumer demand. You will have sufficient supply, and as a result, your cash flow will improve.
2. Read the reviews and reports
Amazon is an excellent source for unbiased reviews. Reading them can help you understand what resonates with the consumer, while follow-up A/B test messaging can show you what converts best. The better you convert, the more you’ll sell and the more the algorithm will prioritize your products. Amazon Marketplace also offers its sellers deep insights into what customers are searching for and buying; use the data available — it’s right there.
It can be hard to keep up with reviews, but this is when creativity comes in. With the use of AI becoming more normal, businesses must wonder how they can take advantage of it strategically. One way to use it is to have the AI digest your reviews and summarize them into “top five positive and top five negative points.” With this strategy, the content literally writes itself.
3. Write to your customers
Despite the common misconception that Amazon isn’t a place to communicate your brand voice, Amazon is an excellent platform for communicating with customers. Great content is a tool to differentiate your pages. Just remember to “Amazon-ify” your writing. Content that works on your direct-to-consumer or social media accounts might not instantly fly on Amazon, but it can with a few tweaks. Write with conversion and algorithms in mind and make sure you’re using your words to brand-build.
When writing a product description on Amazon, you must optimize it with SEO keywords. Amazon’s goal is to connect the user with the product they need almost immediately, and it accomplishes this with its algorithm. Using the right SEO keywords, you can ensure your product comes up when consumers search.
4. Think of the whole funnel
Amazon is becoming more full-funnel in its approach to advertising, so understanding all the touchpoints throughout the consumer journey becomes more important for brands. In fact, 63% of customers head directly to Amazon when searching for a product, according to Jungle Scout’s 2022 Amazon Advertising Report. However, customers can take multiple weeks between entering a category and making a final decision on their purchase. Successful sellers stay tuned to their customers and use early indicators to fuel data-driven decisions about where to invest their budgets.
If you want to know how to grow your business on Amazon, think first about what has made the Marketplace such an institution. Why does the platform have so much market share? And why are its sellers becoming more profitable despite a tough economic climate? It’s because Amazon Marketplace runs on data and the tenets of digital marketing. By watching closely and using consumer behavior to make choices, Amazon sellers can tweak and hone their strategies without investing mammoth amounts in risky moves.