Geometry UK's Amazon Channel Lead Umair Khan on how manufacturers can navigate the Amazon platform to drive sales.
COVID-19 has in recent weeks and months caused a massive change in consumer behaviour which has resulted in increased traffic online and the demand for services such as Amazon has skyrocketed. Manufacturers are interested in finding out how they can maintain the performance of their businesses in these testing times and whether eCommerce is the solution.
Looking at this from a retail readiness perspective; very few manufacturers have had the setup and knowledge to execute an Amazon eCommerce strategy that can ensure their businesses can avail this opportunity.
Typically, products are first developed for retail shelves and then transferred to online PDP (product detail pages). However, when it comes to Amazon sales, this approach is inherently flawed. This is because the assortments that sell best online are a combination of price, quantity, quality and (most importantly) last mile logistics. This last part logistics is something that is not a concern when assortment planning is taking place. For most FMCG manufacturers this makes their products very difficult to sell online and maintain good profitability. For example, on Amazon it cost £2.63 to deliver a 300g item vs £3.20 to deliver a 2kg item and the same economies of scale apply to product size which can have an influence on product design and assortments available online.
Having said that there is no secret recipe for success during times like these. In fact manufacturers have the opportunity here to prepare for not only our current situation with COVID-19 but also any future high traffic event or a surge in demand.
Step 1: Content that Converts
Ensuring you have great content on Amazon is step 1 to success on the platform. Content on Amazon is one of the key factors that influences search and eventually the sales ranking of your products on Amazon. Manufacturers must take ownership of not only the SKUs that they are interested in selling on the platform but also all SKUs that are currently being sold, even by third party sellers. This approach ensures that your brand experience for consumers on the platform is in line with your expectation.
Addressing the six P’s (Page, Price, Product, Placement, Performance and Promotions) becomes the foundation for what you sell and how you sell on the platform and ultimately determines your success on Amazon.
The 6P’s are heavily influenced by the Shopper Missions and in our current circumstances Amazon shoppers are doing their weekly/monthly shopping online. Therefore, it will be very important to address them in light of the change in those Missions.
Creating content that not only reflects the product but also how your products can help customers in these times can be a critical differentiator. Self-isolation is something that most people will not be used to and possibly a part of our lives potentially for the next three to four months. How your brand positions itself will be a key factor in how people react with your products.
Step 2: Assortment Planning & Inventory Management
What to sell on Amazon is most often driven by what can be sold on the platform whilst maintaining the desired profitability but having the right assortment can make all the difference. Fortunately, on Amazon you can create virtual bundles that can support the new emerging Shopper Missions. By creating a bundle (virtual or otherwise) that can more precisely address the Shopper Mission, you will experience a better performance on the platform.
Inventory Management is essential to success on Amazon. As a rule of thumb you must always have four to six weeks’ worth of stock when working with Amazon. However, where you expect an increase in sales or an uplift you aim should be to replenish the stock in week one. Therefore, tracking and actively managing your inventory and stock levels is very important.
Step 3: Platform Management
Amazon is a marketplace and as such offers a solution where you can work directly with Amazon retail (1P) to sell or sell via marketplace sellers (3P). The approach most manufacturers would prefer is to sell to Amazon directly and build a relationship that is mutually beneficial but in most instances that is not the case.
Amazon has an ambition to establish themselves as a leader across all retail channels and has an aggressive price matching policy. Traditional assortment planning does not impact this as Amazon can price match by the unit (even with related SKUs). The one problem is that the type of retailers Amazon matches against e.g. grocers.com do not have the same operational structure as Amazon, especially in relation to last mile logistics. Grocers.com rely on customers building a basket and then delivering within pre-agreed timeslots (often paid for or subscribed), whereas Amazon will delivery your product individually and within 24 hours. This is built into the price of the product.
The Prime membership benefit does not pass onto the manufacturer as Amazon requires manufacturers to build the delivery into their cost prices reducing your margins further.
The 2P Approach: Working with Amazon Retail is a necessary requirement to fully benefit from the platform features but working exclusively with Amazon Retail means you are at their mercy. In a normal marketplace operation you would sell with multiple partners and have deals with all to ensure that your business does not depend upon a single retailer.
Since Amazon is a marketplace you need to set up shop with:
- Amazon Retail
- Selected 3rd party sellers
- DTC (have your own shop in Amazon Marketplace)
Contingency Planning: Customer experience on Amazon is dependent upon availability of your products online. This is perhaps more challenging in our current situation which is why developing contingencies is critical. Having plans in place to address situations such as Amazon unable/unwilling to accept stock, or unable to deliver stock, or Amazon Retail price matching to Sellers off platform can pay dividends in the long term and can influence your platform strategy when it comes to event planning.
Step 4: B2B Sales/Setup
Amazon B2B is a fast-growing business within the Amazon ecosystem and is an alternative to wholesalers and distributors. By having the right assortment and offers setup on Amazon for their B2B customers, manufactures can ensure supply continuity for all their channels.
Currently it is becoming more challenging for small business owners to ensure that stock is always available. Driving them towards Amazon can be a good way to ensure that you have control over the supply chain and also enables you to fulfil those orders directly where needed.
Amazon B2B setup:
- Quantity discounts (on existing Amazon range)
- Customer specific discounts (for business subscribing to regular deliveries)
- Business only SKUs (As part of a gated range only available to B2B customers)
In conclusion, manufactures looking to improve/maintain their performance over the next few months need to act now. To ensure that their online shop is setup correctly to maximise the potential Amazon Marketplace has to offer.
To help you do the things above now Geometry can:
- Help you with your content and address the 6P’s of selling online. Starting with the Shopper Missions that are currently driving sales on Amazon
- Develop an assortment plan addressing the current shopping needs and what inventory management measurements you need implement in order to maximise the opportunity high traffic instances / sales events presents.
- Help you manage your business on Amazon with Amazon Retail, third party sellers, B2B sales and establish your DTC presence on the platform.
Geometry has developed tools that enable you to successfully monitor all the activity above and free up your channel managers to focus on key decisions and strategy.
We can help maximise your investment into marketing campaigns on the platform with actively monitoring your performance and the performance of the category that you operate in, ensuring we actively manage your cost and success when it comes to selling on the platform (The 2P Approach).
The recipe for success on Amazon has always been the same and manufacturers now have a greater incentive to work better on Amazon, to see the platform as a marketplace and not a retailer and be ready for all events now and in the future.
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