Understanding the Risk and Reward of Amazon
Amazon is not suitable for every brand. Lots of people out there say how easy it is. So easy in fact you can do it on the side and make millions. They are selling the dream to people with jobs, looking to escape the rat race. The majority of those people (90%+) are being set up to fail – and they do.
Business is all about making good decisions. However, in business you are always proceeding with incomplete data. If you wait for perfect data, nothing will ever happen.
Ultimately you are taking a risk with any new channel you enter. But risk doesn’t have to equal reckless. It’s also not about taking a chance and getting lucky.
Business is about increasing the probability of success. ‘Stacking the odds in your favour’, you could say.
Let’s talk about some stats to see where you’ll need to sit in the Amazon game of probability.
Some recent Stats, show that there are 2.934 million active sellers across all Amazon marketplaces (source: marketplacepulse.com).
Separate to this I have heard there are 6 million sellers signed up.
So, if you actually get in stock and are selling you are in the top 50% already.
You read that right – 50% of the sellers who sign up to sell on Amazon are NOT active. That means they have tried to open an account and haven’t completed it, they never sent in stock, or they tried and have stopped selling.
Of the 2.934 million, 10% sell over $100,000 USD p.a. and only 1% sells over $1million USD per year.
This shows most of the sales are by a smaller number of sellers – the Marketplaces Power Law – A bit like the Pareto 80/20 – except it’s more like 90/10.
How Do You Increase the Probability of Success on Amazon?
How do you be one of the 10%, or ideally 1% on Amazon?
The game has changed from when I started selling on Amazon back in 2013. Back then, few people
knew what they were doing, so doing the basics ‘well enough’ had you in pole position making serious sales – I did $1.2 million in my first full financial year.
It’s not that easy now. In many categories you’ll have sophisticated competitors, so you have to elevate your game to the top level of performance …right from day one.
There’s no room for an average start and figuring it out as you go. Amazon gives a new product a 30 day window to prove itself (not fact – our observation in launching a lot of products). You want to have everything dialed in from day one – listing copy, image stack design, backend keywords and fields, advertising and more.
A BIG question we get asked by Brand owners is….
Will my product succeed on Amazon?
The usual answer is, ‘it depends’.
Given our experience we can establish a high level view that will be mostly accurate, but for companies keen to look more closely, we work through an Assessment stage in our Set Up Get Live Programme.
In the Assessment Stage we look at;
Competition – Can you compete and how do you stand out?
Customer Demand – Are people searching for this type of product/solution? – If not, then you have to educate the market, it’s a tougher game.
Cash – What will be the Amazon fees and other costs to get into the market? What price can you charge and will the margins and returns make sense for you?
Compliance – Do you meet the market regulations and will your product be ready for Amazon’s warehouses and fulfillment?
With this work done companies are then clear on the facts and able to make confident decisions about proceeding on Amazon, or NOT.
Having a clear plan is really step one, but then 3 other factors come into play for increasing the probability of success on Amazon.
Here’s 3 Critical Success Factors to Increase the Probability of Success on Amazon.
1. Have a Quality Product Consumers Need/Want
There are three parts to this point. Firstly you must have a product that works as described. It is quality, won’t break and will turn up in working order undamaged. You don’t want customers unhappy and leaving 1 star reviews as that will bury the product before it can take off. Likewise if you have a product that delights customers and you get 5 Star reviews AND repeat purchases, then you are increasing the probability of success.
Secondly, you could have an amazing product, but if it is an unknown product, then you’ll have a tough job educating the market first. There has to be latent demand for your type of product or solution on
Amazon. If no one is searching then it’s a tough road. I heard Nick Mowbray CEO of ZURU Toys speak. One thing he said is that their products are 80% Known and 20% New. Like their Bunch O
Balloons – Water Balloons – KNOWN, their fast way of filling Balloons NEW.
Thirdly, having a point of difference that is meaningful and preferably defensible (i.e. can’t be easily copied because of patents, ingredients sourcing etc) makes a huge difference. You really need to understand your competition and how you can win. How can you have customers choose you? The work you do here will again increase your probability of success.
2. Have a World-Class – Best Practice – Brand Presence and Promotion Set Up
Amazon leads the way for marketplaces in the Western World. When you decide to sell on Amazon, you are choosing to play in the ‘big leagues’ of marketplaces worldwide. That means there is no room for having your set up on Amazon be average.
Anything less than a top 3% set up will mean you are doing yourself a disservice and severely reducing the probability of success.
Having a world class best practice set up means;
- You have done thorough keyword research for your Titles, Bullets and Backend Search fields.
- You have thought very clearly through your message to market and know the emotional hot buttons to push, as well as the points of difference to highlight. I’m consistently surprised at how few businesses really have this work done for their business as a whole, not just Amazon.
- You represent your brand visually with the best images possible, and in a way that people would confidently buy your product based on the images alone.
- You have your Amazon Sponsored Products (PPC) set up to optimise traffic ideally using top of the line AI software.
There is more to it than that and other articles will go into more details on each of those points.
With your brand being presented in a world-class way your conversion rate will go up (you’ll turn more lookers into buyers). This is a key metric for Amazon and it will boost your organic search ranking for relevant search terms.
Because of the first ‘30 day boost window’, the moment your stock is available your listings have to be at their best. Please do not rush this piece. Ideally get help from experts in this area. Like many things on Amazon, it may appear easy, but there is far more that goes into it than meets the eye.
The initial investment of time and money in getting your listings world-class is like getting your website set up. The only difference for most brands is far more people will see your Amazon listings than your
website. Do this well and it will pay you back for years to come.
This is where Sell Global helps many companies in getting this right first time with our team of specialists in each key area.
3. Commit vs Dabble
Success on Amazon, as in any area of life, comes down to how truly committed you are to making the channel be a success.
When you are committed you persevere, find solutions to problems, you invest in advice, your brand, your team and product innovation.
Being committed massively increases the probability of your success on Amazon.
Our clients who commit and play the long game have 6 and 7 figure channels on Amazon.
Success on Amazon is very rarely instant. Because Amazon rewards the incumbents, you have to work very hard at the start to get momentum, reviews, organic sales and to build your ranking.
It can take 12-18 months to hit the sort of numbers that you ideally want. So you have to continue to be committed and persevere. It’s not unusual to see double or triple in months 12-18.
If you think you’ll come onto Amazon (for the USA) and ‘dip your toe in the water’ to ‘see how it goes’, then do not get your hopes up. You’ll be disappointed. You’ll give up before a year is through and then say “Amazon doesn’t work”.
Dabbling will only get you so far, but it’s never a true representation of the opportunity.
Amazon is making it increasingly difficult to even open an account. Many people who dabble give up here. (See article on 1 Strike and you are out) If they had only sought out some advice at the start (what people who are committed to a channel do) they would be off on the right track and away.
Dabbling on Amazon is for those who are often seeking a short term quick fix versus playing a long game.
Don’t dabble. Commit.
Before You Commit, Get Some Facts and Perspective.
To answer the question “Will my brand and products succeed on Amazon?”, you need some facts and perspective from those who know the marketplace and have a good sense of what will work, what will
be difficult and how to best approach it.
To make good decisions about the Amazon channel and increase your probability of success, I’d strongly encourage you to book in an Amazon Strategy Call with myself or one of the Sell Global team.
You’ll get a unique perspective and some straight up feedback to help you get clear on your next steps.
As online retail sales increase and marketplaces are attracting more and more consumers, having a marketplace strategy for brands is no longer a nice to do. It’s increasingly a must do.
Amazon is a big part of the picture. Understand how your brand can capitalise on the opportunity.