If you’ve sold directly to Amazon for at least a year then you know that Amazon loves to make continuous upgrades to their systems and processes. They continuously challenge themselves, and you to improve. Their recent changes to expected lead time and ship/delivery windows could have you scrambling to keep up, and frustrated with chargebacks for missing those windows. Here are 10 PRO-TIPS to avoid those chargebacks and improve your own processes.
1. Know the difference between PO Ship Windows and Delivery Windows. If Amazon pays for the freight (called by the term “Freight Collect”, which is actually 3rd party freight billing), then your Purchase Order dates are Ship Windows. You have an earliest ship date and latest ship date that creates the window. There isn’t a cancel date on the PO, as found with other retailers. When you confirm a PO within the Ship Window, you must pick, pack, and submit a Routing Request at least by 10am Pacific time the day before the last day of the Ship Window. If you, the vendor, pay for shipping to Amazon fulfillment centers (FC), then your terms are “Freight Prepaid” and your PO has a window for delivery to the Amazon FC. This is defined as the date the carrier asks Amazon to deliver to the FC. You have to pick, pack, and ship while accounting for the transit times of your carrier between your warehouse and Amazon’s FC’s. Your carrier must make an appointment with Amazon to deliver the shipment on or before the latest delivery date on the PO.
2. Determine transit times between your warehouse and Amazon FC’s. Prepaid vendors have to closely monitor when items are shipped. If shipped too early or late, they run the risk of a chargeback. Review how you prioritize picking shipments and consider prioritizing Amazon’s POs. If your terms are Prepaid, and you can’t meet the Delivery Windows, you should consider other process changes or switch to Freight Collect to simply meet a ship date with an Amazon selected carrier.
3. Eliminate hand-entered data. Every time you have to enter data by hand you introduce the opportunity for a mistake, wait time, and worker movement that may be excessive. Look at your information flows and the walking that your workers have to put in to input data. Using a map of the facility, track and draw footsteps to create a “spaghetti chart” of movement around hand-data entry. Count the steps, cut out the steps, cut out the need to take steps to enter data.
4. Improve pick accuracy and speed and invest in Pick-by-Gun Systems. Do you know what your pick accuracy is? Amazon does. “Fast, Cheap, or Accurate, which do you want?” has been a common reply from the picking floor. This statement is patently false. You can have it all by picking with an inexpensive scanning gun and the appropriate warehouse management software.
5. Release smaller groups of picking requirements in “waves” multiple times per day. Shorten your pick cycle and release smaller batches of pick orders to the warehouse. These changes can result in much shorter overall cycle time and a much shorter overall lead time. Mature your pick system using a LEAN work leveling (Heijunka) system as the next step.
6. Use EDI if it is connected to an order processing system. The more POs you get, the longer it can take to process shipments. EDI feeds connected to order management systems and shipment and warehouse systems avoid hand and manual entry, or downloading and uploading spreadsheets. They streamline the PO management process, significantly reducing the time it takes to confirm POs, create a ship notification, create carrier routing requests, and create invoices. EDI feeds that are disconnected from your other systems don’t help much, and may create additional points of error and hand entry. Take a bigger picture view of your information flow within your organization to truly shorten lead times and the wasted time of information waiting around to be hand-entered into a system. The hidden waste of “batch processing” of orders can significantly lengthen your order processing lead time.
7. Eliminate secondary “Amazon Only” preparation whenever possible. It’s inefficient to have Amazon-specific processes for prep. Amazon’s lead time and ship/delivery window changes require a higher level of warehouse efficiency. Most Amazon prep requirements are best-in-class requirements: UPCs must be easily readable, products must be able to meet safe shipment guidelines, products shouldn’t get damaged in transit; liquids can’t leak in transit when sent to the consumer. All of these requirements can benefit all of your eRetail channels. Consider making Amazon’s requirements a standard.
8. Be prepared to efficiently break master packs. Master case packs are irrelevant to Amazon since they usually end up shipping only one unit to a customer. Amazon wants to stock as many units as they need–and no more–rather than stocking specific vendor-required minimums. Pre-package individual items to Amazon specifications so that you can pick and pack in non-standard quantities.
9. Get an Amazon B2B 3PL warehouse. Third-party logistics warehouses are a lower-cost alternative to setting up your own fulfillment solution. Some are very effective at shipping to multiple retailers but others struggle with Amazon’s evolving requirements. Amazon should be one of your top 5 retailers, so it’s important to have the right warehouse partner. Many 3PLs advertise they “work with Amazon,” when in fact they only work with Sellers/Merchants, not Vendors. Amazon Vendor requirements for labelling, routing, ship notification, and invoicing (Amazon B2B) are different than Seller requirements. If your 3PL fails to comply with Amazon, incurring chargebacks week after week, either hold them responsible for the chargebacks or find a new 3PL.
10. Temporarily backorder until you can improve your processes to hit the PO windows. If you have backorder capabilities you can avoid lead-time chargebacks by pushing back ship/delivery dates. Make sure to ship/deliver the last unit on the date(s) you confirm, or else you’ll get a chargeback. We caution you to use this method only when absolutely necessary and temporarily. Amazon can take away backordering if it’s used too often. If you’re able implement many of the changes we’ve outlined, you shouldn’t need to backorder as often or at all.
BONUS TIP: Implement LEAN Process improvement for continuous improvement. LEAN process improvement, combined with Six Sigma and a healthy dose of Goldratt Evaporative Cloud thinking, can significantly alter the performance of any process and any organization. LEAN can also fall flat on its face and just be another “improvement plan of the current (on the way out) administration.” LEAN requires a firm, long-term management commitment, and the idea of continuous improvement and employee empowerment need to become core values of the organization. Toyota, GE, Lockheed Martin, and yes – AMAZON all have surpassed themselves by leveraging LEAN Sigma. You can find LEAN SIGMA trained personnel as well as implementation expertise almost anywhere in the world. LEAN isn’t about supply chain or manufacturing improvement either, LEAN applies to any process you have in your company. We can’t emphasize enough the transformational value of LEAN (we drank the Koolaid when we were at Amazon).
Your company may produce fantastic consumer products and want to get into North America’s largest online retailer, but unless you clearly know what you’re getting yourself into, you should properly prepare yourself for the process. It will be unlike working with any other retailer you have ever worked with, and there is potential risk if you aren’t ready and capable. Here are 10 PRO Tips to get you ready to be an Amazon vendor.
- Prepare to ship one unit. Like all great journeys, you don’t start at your destination. Your goal for Amazon may be to ship containers, but unless you’re prepared to pick, pack, and ship one unit, you may never get to container level sales. If you’re a well-known brand with huge demand, Amazon may be able to place staged POs but that’s quickly becoming the exception.
- Develop and optimize content. Product content is king with Amazon. The more you have, the better. Customers use Amazon to research products more than Google. Content needs to be optimized for the channel so that customers can find your products among Amazon’s millions of offerings. If you have no content or just a few bullet points you won’t even be able to fill out Amazon’s item setup forms. Time and effort devoted to top-notch content will more than pay for itself in the end.
- Make your product the brand. Care about what people think about your Brand? Care about what people think about your product? Be prepared to read reviews, respond to negative ones, and take feedback with an open mind. Be ready with content that accurately represents your product. There is a place on Amazon for a basic no-frills product as well as the top-of-the-line killer product. Just don’t convey the no-frills product as the top one and you’ll be OK.
- Staff up thoughtfully. If you’re the owner or a VP of the company, you shouldn’t attempt do everything yourself. Amazon takes up a lot of time and resources. There are two key roles you need to fill. One is for order processing, forecasting, and warehouse coordination. This person need to know what’s in stock and when it can ship before a PO comes through. The other is for content, merchandising, and metrics. A business analyst with strong spreadsheet skills is typically the best. Amazon is going to provide you with a lot of data you will need to drive your decisions. Note that these roles don’t have to be devoted full time to Amazon.
- Know how to be self-sufficient. Unless you’re doing millions of dollars per year on Amazon, you many never speak with a buyer (vendor manager). Most of your problems can be solved through Amazon’s vendor portal (Vendor Central). Have a small team of people ready to read through Help sections and manuals. You’ll be filing many tickets with Amazon in the future and you’ll need to know what to ask for and how to ask for it.
- Package for survival. Your product will be sent to the far reaches of the US, and perhaps may go out internationally. It will be dropped, stacked, conveyed, picked up, and dropped again. Your packaging should pass small parcel and UPS drop testing requirements. Amazon tracks every damaged product and return and will increase charges to you accordingly to the cost of handling those returns.
- Label everything. Every single product you make should have an individual UPC or EAN code. This code should be a scannable barcode on the outside of the consumer-level packaging. This doesn’t mean the same barcode for each color of a product, it means a barcode unique to each color of product. You can obtain barcodes from GS-1, or purchase them from some resellers.
- Find peer mentors. Join user groups on Linkedin such as the Amazon Marketing Services and Amazon Vendor Central Users. You’ll get a wealth of information from more experienced folks who are ready and willing to answer your questions.
- Set aside enough time. If you are too busy with your current business, you won’t be able to add on Amazon business. Amazon will demand performance from you that is “best in class” and that takes time. Be ready to invest time in your product setup, your images, your marketing plan, your cost analysis, and learning the systems and processes to ship an order to Amazon. Chargebacks can occur for even slight mistakes.
- Hire an Amazon specialist to train your team. Amazon boils down to content, data, and operational effectiveness. You don’t need or want a rep group that offers simply “a connection” or a “relationship” with Amazon. Even the slickest rep will struggle to get a buyer to return an email. If a rep group has a focus on Costco, Fred Meyer, Wal-Mart, etc., consider finding an Amazon-specific consulting group/navigator that can teach you the ropes quickly. Your Costco rep doesn’t fully understand Amazon because Amazon isn’t anything like big box stores or Costco. They’re completely different animals. Amazon is all pull-based demand, starting with one unit on the shelf. Big box stores are about relationships with the buyers, transferring risk of inventory, and allocation of limited floor space. Amazon’s “infinite aisle” and data-driven, highly scaled-out self-service corporate culture change everything about the skill sets needed to make you successful.
Check your product listings on Amazon. If the selling price of your products is significantly lower than your MSRPs there’s a good chance Amazon won’t be profitable on your products. This will cause a lot of churn with the buyer and Amazon will ask for lower costs.
The best way to improve on your 2014 Amazon.com sales in 2015 is to closely analyze your 2014 data. Identify deficiencies, seasonal growth patterns, marketing ROI, big forecasting changes, and much, much more. Amazon provides a plethora of sales metrics in Vendor Central–there’s no time like the present to use it.
1) Look Back and pull all your important data from Vendor Central. This includes your 2014 scorecard, monthly sales data, forecast, and trailing 12-month item sales. Compare it to 2013 data. Calculate your return percentage. Keep this data for next year so you have a longer-term view of your sales.
2) Look Back at chargebacks, analyze their root cause, and fix them! Amazon chargebacks are numerous but they are avoidable. Chargebacks are usually a symptom of inefficient or insufficient, or inaccurate processes. If you have broken processes for PO management, shipment management, or item management, it will cost you.
3) Look Back at your out-of-stock performance over all products and on an item level. Out of stock products create a cycle of lower sales. Your top products should be in stock at all times. We advise our clients to have a <10% out of stock rate. Do your products have the correct availability code? Are you shipping within the ship windows? Are you backordering constantly? Are you getting PO cancellations each week? Are you short-shipping? Are you using the Amazon-provided forecast? Is the forecast accurate? Find out and adjust accordingly!
4) Look Now at your processes for supply chain and plan small improvements throughout the year. Adopt LEAN practices – that’s how Amazon has done it! We recommend you read The Goal: A Process of Ongoing Improvement and grab a copy of The LEAN Pocket Guide.
5) Look Now and review constraints in personnel, resources, cash flow, capabilities. Plan on how to eliminate these constraints, through augmenting and elevating them.
6) Look Now at your costs. Are you actually making money? Have your raw material costs increased? Are you giving an Amazon competitor lower costs? Lower cost of goods to Amazon are automatically approved. Higher costs can take >60 days for approval.
7) Look Forward to plan and forecast your inventory. Download the 25-week Amazon item forecast in Vendor Central Amazon Retail Analytics Basic. Keep in mind that the forecast is for Amazon customer sales, not POs–so adjust the timing accordingly. Realize that it is an estimate of the probability of a sale, not a buying plan, and it changes weekly.
8) Look Forward to budget merchandising dollars and plan advertising. Amazon provides ample opportunity for you to spend money. Strongly consider seasonal or year-round Amazon Self Service search ads. And keep plenty of budget reserved for the holiday Lightning Deals and category page placements. You’ll want to take advantage of all the extra traffic flowing into Amazon.com. Extra tip: Try to plan your non-Amazon advertising in line with Amazon campaigns so you get a consistent message across to customers.
9) Look Forward and analyze your freight costs. Amazon may seek a higher freight deduction with the newly revised UPS billing model in place. If you are a collect vendor you may want to switch to prepaid freight.
10) Look Forward to seeing Amazon at trade shows. If you are large enough, plan a Vendor Meeting at a tradeshow or at Amazon’s headquarters in Seattle. If you are smaller, consider retaining an Amazon Navigator who may work with 10+ accounts and can get some time with an Amazon buyer.
Happy New Year and all the best for happy Amazon sales from the LEAN Channel Management Team!
There is an old saying at Amazon; “During Holiday the days are like weeks and the hours are like days…” This saying is far closer to the truth than it sounds. If you are an Amazon Vendor, depending on your category and the “giftability” of your product, you may be able to watch your daily sales rate rise at an incredible rate. Purchase Orders may come in from the blue, or you may be called by an Amazon employee asking you to expedite a shipment. Here are ten Pro Tips to help you take advantage of last minute opportunities with Amazon during this accelerated time of year.
1) Watch your metrics daily. Specifically watch Amazon Shipments. Don’t worry as much about the POs you get–worry about the sell-through on Amazon stock. You can see the report in Amazon Retail Analytics (ARA). Keep an eye on sales spikes for individual items. If an item’s trailing demand and inventory is far below expected demand, then you can expect some of those surprise POs.
2) Save your sales metrics data and consolidate it to get in front of Amazon Forecasting. Basic monthly reporting isn’t granular enough during Holiday. Use the item detail report, download it and start accumulating daily data by ASIN that you can roll up into a weekly or daily report. Look for accelerating sales by ASIN and insure you have stock. POs will be coming! Use Excel or Google Sheets Pivot Tables to consolidate and summarize all of that data. Learn about Excel Pivot Table reporting through this free tutorial here: http://fiveminutelessons.com/learn-microsoft-excel/how-create-pivot-table-excel.
3) Don’t be tempted to sell off inventory…save some for Amazon! Search relevancy ranking management is one of the most important things you can work on with your Brand on Amazon. If you go out of stock, all of your hard work and marketing can be undone during Holiday in a matter of days. Allocate inventory to Amazon against their forecast plus a reasonable pad. Don’t be tempted to sell out–January Amazon sales, while less than Holiday sales, can be amazingly good.
4) Watch your out of stock metric and dive into the details button. This metric is on the Vendor Scorecard. It measures the percentage of time that someone has come to an Amazon Detail Page and can purchase a product from Amazon by pushing the Buy Now button. Other companies use the term “shelf performance” if they have real shelves. Click into the Details Button on the Vendor Scorecard to see the items that are out of stock. If they were out of stock, you need to quickly determine if it was you, or Amazon that caused this. Look at your PO fill rate first. If your sales are ramping quickly or you are a highly seasonal product (think sleds or snowball makers) look to the Amazon forecast and…
5) Don’t be afraid to write a Vendor Initiated Purchase Order (VIPO). See Amazon running out of stock? Not seeing the POs? Know that your product is at the top of the list for views? Just got your product in stock? Use Contact Us and send Amazon a heads up that they should write a PO using the VIPO topic.
6) Check your catalog for items mistakenly set to Obsolete. Obsolete products don’t get ordered. Go to ARA Basic, go to your Vendor Catalog, and set the manual filtering to show you obsolete products. Obsolete products are NOT shown in your catalog by default. File a ticket for any products that are not obsolete and request that they be reset to Planned Replenishment through Contact Us.
7) Look for merchandising slot fall outs and take their space. Amazon has a limited inventory of merchandising deal slots during Holiday. These are sold at premium prices and they become more valuable around Black Friday and Cyber Monday. These slots are often sold to larger brands, and sometimes…rarely, these Brands back out of the deal. Perhaps they are offered a better deal, perhaps the marketing well runs dry, who knows, we just know that your Amazon Vendor Manager should know that Your Brand is ready to fill a slot in one of the coveted time slots. Email your Vendor Manager and be clear that you want to be kept in the Stand By list for a slot. Watch your email at least four times a day, and night (!) for message that you have a Vendor Agreement to sign!
8) Solicit reviews and monitor your top products for bad reviews! With all this product selling through you should be thinking about reviews. How do you ask someone to review your product? How do you do it in a way that complies with Amazon’s terms and is FTC compliant? Reviews are one of the most important aspects of your success on Amazon. You should scan your top products for bad reviews on a weekly basis during Holiday. Respond to them with your account as the manufacturer if they are legitimate and you can help. File Contact Us tickets to have reviews removed if they violate Amazon’s customer review submission guidelines
9) Take advantage of free single-module A+ pages. The construction of enhanced or “A+” detail pages have changed quite a bit over the years. What hasn’t changed is their positive effect on conversion. During the holidays when traffic is at its peak, you want your conversion to be as high as possible. Until 12/31/14, single module A+ pages are free. You can always add more modules to the pages later if you want to spend a little money, but free is a pretty good deal.
10) Ship as quickly and accurately as possible. Amazon POs are “fill or kill”–meaning no backordering–until sometime in late December. Also, the ship/delivery windows have been squeezed. This can be a recipe for out of stocks if you’re used to longer lead times. Now is the time to ramp things up, to push your warehouse to maximum efficiency, and get products out faster than you’re used to. The alternative is to go out of stock and you don’t make money when you’re out of stock.
11) Bonus Pro Tip – Be Flexible and keep your sense of humor. Amazon works at Internet speed to constantly optimize…well just about everything. That also means that its OK for them to do things less than optimally to start. Be forgiving and be flexible as your products are re-routed, promoted, bumped from a merchandising slotted time, or sold out prematurely. Prep YOUR team to be thoughtfully reactive to meet Amazon’s needs. And as always, if it doesn’t make business sense for you, don’t hesitate to say “no!”
To quote another Amazonism…”Lower the safety bar…here we go!” Have a great business Holiday season!
Whether or not you sell to Amazon.com, your products are most likely listed on the platform. If you’re not actively managing your brand presence in the biggest ecommerce channel, then you could be doing real damage to your brand. How do you manage retailers who sell your products as 3rd party merchants? How do you maintain consistent branding and pricing?
Selling on Amazon.com’s platform is a huge potential opportunity for success but it’s also full of pitfalls that can hurt how customers and retailers view your brand. Your Amazon.com strategy has to be comprehensive to protect what you’ve spent so much time and money to build.
1. Allow any retailer to sell your product in the marketplace
Amazon doesn’t care who sells your products on their site but you should. While you might have some good retail partners selling your products on Amazon, you’re doing your brand a huge disservice by allowing almost anyone to sell on the platform. Price degradation is the biggest issue. Amazon matches prices from sellers and if your retailers are unrestrained, the selling prices will come tumbling down. You also need to know who’s selling on the platform. If you don’t know who they are, then you’ve effectively lost control of your distribution. Now, this may sound drastic, but implementing new retailer agreements taking Amazon into account is the first step. The goal is to have a short list of approved sellers who will help maintain your pricing and branding (more on that in sec). Resellers should be restricted from selling in online marketplaces unless authorized by you in writing. I know many of you probably want to know how to weed out those rogue merchants but that’s a much longer discussion for a different time.
2. Let online retailers control content and branding
Amazon allows vendors and merchants to contribute content for each product. Title, brand name, up to 5 bullet points, and a product description are all customers can read about an item. This may be the first time a potential customer is exposed to your brand. Why would you let a merchant control all of this? Most merchants contribute a minimal amount of content–maybe a bullet point or two and a very short description. Title structure is inconsistent and brand names are most often not the actual brand name. This gives customers very little to go on in terms of making a purchase decision. You need to have consistent content and branding policies for anyone who sells your products. It’s best to keep content in a PIM system so that you have the most up-to-date version on hand and ready for dissemination.
3. Don’t have an electronic catalog with UPCs available
When you decide to sell directly to Amazon, they require every product to have a UPC and a model number. Amazon uses these to match the products you’re setting up with products already sold on the platform. Very often, merchants will use different UPCs and model numbers in order to establish their own listings and reduce competition with Amazon and other merchants. This practice violates Amazon’s Seller rules, but is quite common. It’s not unheard of to find up to 10 listings for a single product. This causes reviews to be split up between all versions, lowering the product’s discoverability, and impedes Amazon from recognizing and merging listings into one detail page. As with product content, it’s important for everyone selling your product to use the correct UPCs and model numbers. Again, a PIM system is optimal.
4. Never update your product content or hidden keywords
If you’ve sold the same products on Amazon for years, your existing detail page content is probably getting stale and your hidden keywords are insufficient. We’ve seen this nearly everytime we’ve worked with an existing Amazon vendor. You can overhaul all of it and have Amazon upload it for free. You should assess your existing content at least once per year. You’re sure to find errors and/or opportunities for improvement. Customer behavior changes all the time and new competitors are entering Amazon every day. Any competitor worth its salt is going to put your brand name or product names in their hidden keywords, this will give them a boost in search. It’s vitally important to keep your content fresh to maintain or improve your discoverability and conversion.
5. Ignore customer feedback
There are two places to see customer feedback: Customer Reviews and Customer Q&A–both located on the detail page. The most important one of these is customer reviews. If a product doesn’t have reviews or if it has bad reviews, it’s not going to sell very well. The higher number of positive reviews, the better the product will sell. One big upside from reviews regardless of being good or bad is that you can glean extremely useful information from them. It’s a great way to learn about your customer and how they use your products. Vendors have found out about product flaws and fixed them due to reviews. They learn what customers like and dislike about products. They learn about competitor’s products. They learn about how products are used and adjust marketing efforts. The bottom line: don’t ignore customer reviews. The last thing you want to do is try to build a brand with a bunch of 1 and 2-star reviews. If you don’t have any reviews, start engaging your existing customer base to leave them on Amazon. Lastly, set the right expectation for the product with your content. Amazon sells amazing top-end products, and they sell low-end products. Your product content should set the right expectation in order to get a good review. Low-end products can have great reviews if they meet or exceed customer expectations.
6. Prioritize merchant pricing and inventory allocation over Amazon direct
Many vendors have tiered pricing based on sales velocity or order size. Amazon has the potential to be one of your top 3 retailers. So they should get top tier pricing. If you have online retailers with significantly lower costs, they can undercut Amazon’s price at will. You can’t build your business on Amazon if Amazon doesn’t sell your product profitably. There’s no incentive to participate in merchandising efforts or to even sell directly to Amazon if your online retailers have preferred pricing. Another drastic step is to examine and eliminate volume-based pricing. Amazon will order organically and stock up based on a forecast. Your sales volume will increase over time and Amazon will eventually be one of your most important channels. If you allocate inventory to merchants who sell on Amazon, over Amazon itself, you’re also defeating the purpose of directly selling to them. One of the biggest advantages of selling directly to Amazon is to have the “Ships and Sold by Amazon” message on the detail pages. There is a higher level of customer trust than with merchant offerings. In fact, vendors who move from selling as a merchant to selling direct can see a 2 – 3 times increase in sales simply from the addition of that “Ships and Sold” message. When a merchant “wins” the buy box–meaning they are the primary offer–your conversion, search relevance, and sales all suffer.
7. Ignore Amazon-provided forecasts and go out of stock
Amazon works best when you’re 100% in stock. Often that’s not possible due to a variety of factors but it should be something to strive for. 25-week forecasts are available in Vendor Central–do not ignore them. These forecasts are automated and adjust weekly. Refer to them regularly–especially in the late summer. Ideally you’ll be able to stock up in time for November/December when sales peak. Note that forecasts are just that and will have varying degrees of accuracy depending on product type, in-stock rates, and seasonality. Also, feel free to come up with your own forecast—it’s for your benefit anyway. Take what Amazon has and make adjustments based on your own sales history.
8. Use Amazon to get rid of excess inventory
While Amazon does have their “Lightning Deals” and “Deal of the Day”, it is not a flash sales site. It should not be a dumping ground for your overstocked products–that’s what Groupon and Woot are for. Amazon works best when you grow reviews, improve SEO, merchandise, and stay in stock. Your product rankings will improve over time and sales will grow. Using Amazon simply to get rid of inventory will hurt your brand image. Customers will see your products constantly discounted with inconsistent availability. This leads to a poor customer experience and a poor impression of your products and brand. They will essentially be trained to expect a bargain next time they run across your products on Amazon.
9. Ignore self-service merchandising opportunities
If you get POs every week from Amazon and sales grow 30% every year you’re treading water—just growing organically. Amazon offers vendors enhanced detail pages, brand stores, coupons, and search advertising. All of these services are designed to increase product discoverability and conversion, resulting in accelerated sales. They all have a small cost associated with them, but they’re definitely worth it. We’ve run hundreds of search ads and we highly recommend them. Think about it this way: most of your competitors aren’t merchandising at all or correctly. If you do, you can leapfrog their search rankings and improve your market share.
10. Don’t have an Amazon strategy (even if you don’t sell on Amazon)
Regardless of your opinion of Amazon, you need to consider Amazon’s effect on your brand and include them in an overall ecommerce strategy. If you take only one thing away from this article, it should be this: have an Amazon strategy. Even if you don’t plan to sell to Amazon and don’t want anyone to sell your products on Amazon, at least make that an official part of your overall ecommerce strategy and try to enforce it. Most companies should sell on Amazon, but that’s not a strategy–it’s just a tactic. You need to consider who will sell your products on Amazon, what content they should use, and how Amazon affects your other channels. Also, know what % of sales Amazon accounts for. It doesn’t matter if you don’t sell to them, you need to know. For example, if you sell to a merchant who sells on Amazon, your sales reports will show that merchant’s numbers, not Amazon’s. You’ll have no idea how big of a piece of your sales pie Amazon is. This can affect your inventory allocation, pricing, and marketing. Amazon could be in your top 3 and you might not even know it.
Amazon has released a powerful and amazing self-service advertising service through Amazon Marketing Services. It allows you to create an ad that will be presented at the top of results from a search on Amazon.com. Imagine tens of millions of searches across Amazon. If you are selling a new cheese you want to promote and someone searches for “Swiss Cheese” your ad can show up letting people find your product. They click on the ad and it goes to your Brand Store or a search page of your cheeses, and they buy your amazing new Swiss cheese. Here are ten Pro Tips to help you get started with Amazon Sponsored Search ads.
1) Don’t expect miracles unless you have something miraculous: Don’t expect slow moving products with low national demand to benefit greatly from this type of advertising. Do expect this advertising tool to work wonders when you have a unique story or benefit
2) Do all the basics right: Great copy, great images, and a have reviews in place. Once people click into your detail page they will want to be convinced of your product unique benefits, and how it has impacted the lives of previous purchasers.
3) Make sure your Brand Store rocks: Develop a great hero image, use video or highlight a specific product. Use the merchandising widgets to create groupings of products with similar tag lines to your advertising.
4) Tune your logo: You will put a logo on your advertisement that will show up as a 150 X 150 pixel image on a phone. Make sure that it is compelling and fits your ad campaign.
5) Make your ad relevant: Develop an advertising phrase that resonates with the customer that will click on the keywords that you have chosen for the ad.
6) Research your keywords: Check suggested phrases that pop up when searching in Amazon.com categories. Re-use Google search terms with successful results. Other tools such as Amazon Retail Analytics Premium are great for definitive research. Use suggested keywords. Bid high on keywords to start so you can measure performance, then tune the costs later. Its all adjustable in the ad.
7) Monitor your ad: Test Keywords and monitor them daily at first to watch for failures, or large costs.
8) Be an advertising scientist: Test first with $100 and try it before you do big spends. Expect some failure and learn from it to optimize your ads. Test your Logo. Test your Advertising tag line. Compare performance between ads and let the data tell you which one to invest in.
9) Change is the only constant: Recognize that you are in an environment that changes all the time. What you know now may no longer be relevant or correct as Amazon advertising evolves. Amazon has big plans for search ads and will be adding new features.
10) Watch the metrics: Understand what they are. Impressions, detail page views, and click throughs all have different, very important meanings. Your goal is an efficient spend versus return.
Creating Amazon sponsored search ads can be easy. Doing effective sponsored search advertising involves planning, coordination, testing and measurement of success. If it all seems daunting, consider reaching out to someone to help navigate you through the process a few times. Join the Amazon Marketing Services User Group on Linkedin at https://www.linkedin.com/groups?gid=6693102
Vendors have a damage or returns allowance deducted from their remittances. This is initially estimated by the Amazon Vendor Manager and is part of the of the legal agreements you sign in Vendor Central when you first get setup (Question: Do you have all your agreements downloaded? They are legal contracts!). A better name for it would be “Return Allowance.” On return to Amazon, products may be either placed back in inventory if unopened, refurbished/evaluated and sold on Warehouse Deals, liquidated, or destroyed. In any case, that agreement means they won’t come back. As this allowance agreement comes to the end of its term, your vendor manager will pull a report and review your returns rate. They will then negotiate with you to cover return costs if your return rate exceeds your current deduction.
Here are PRO TIPS to manage this:
1) Amazon doesn’t care what your national return rate is or that you “never get it back” from other channels. They have data on their rates and it can fluctuate up or down (preferably) during the year. Your only hope is to use data too! Get familiar with Amazon Retail Analytics Basic (or Premium if you have it) reports. You can see Customer Return Units in the “Sales & Inventory – Item Detail” report.
2) Know your return rate as a percentage of the cost of goods sold (Amazon abbreviates it as “COGS”): Amazon gives you units, but they deduct a percentage of dollars of COGS from your remittances, so you need to know dollars over dollars. You calculate that from your item detail reports in ARA Basic at the month, quarter, and trailing twelve months level. Build formulas to calculate the item UNIT COGS from COGS/Units Sold then Unit COGS* Units Returned for COGS Returned. Do the basic math for COGS Returned/COGS to get your percentage per item, and using the totals get the overall return rate. Somewhere in there you will want to use an Excel Pivot if you want to really show off, as well as some logic to avoid dividing by zero: =IF(OR(O3=0,H3=0),0,(I3/H3)*O3).
3) Know your big returns offenders. Sort your products once you have the data by the Returns COGS as a % of Total COGS Returns. The Pivot Table will allow you to do that easily. Fix the reason why all of your dog blankets come back so that Amazon won’t have a reason to increase your damage allowance.
4) Amazon is your canary in the coal mine. Estimate remorse returns (I didn’t like the color!) versus product issues from packaging feedback. You can see this under Reports > Packaging Reports. If you have issues deal with them immediately. A high return rate is usually, but not necessarily, coupled with a low feedback rating. Both can initiate a deadly “Downward Spiral.” Don’t let this to happen.
5) Review progress on the metric–Amazon won’t do that for you. Pull reports monthly and analyze and store this data. Amazon will come back every year to set your damage allowance based on the previous year’s average performance. That measurement doesn’t reflect trend or recent improvements.
6) Don’t design products that come back. Returns can occur because of defects in packaging, product, or choice of carriers. Root out the defects and create satisfied customers the first time. Its the cheapest, most powerful marketing that you can do.
7) Provide accurate information on the detail page. You may have a low-defect product, but an Amazon detail page that doesn’t accurately describe the product, its value or its function. Your perfectly fine product may be returned to Amazon as a result of this gap in the expectations set on the detail page versus reality.
8) Get business geek help. Does this sound daunting, complex, and time consuming? It can be if you aren’t a business analyst with an MBA, supply chain training, engineering and process improvement skills. Consider hiring the right skilled person for this, or buying a chunk of an Amazon navigator’s time to help you out with setting this up.
Amazon is called the 800 pound gorilla and an unfeeling machine, but the fact is they are a group of very smart people led by a unique individual with a unique vision. They have changed the world with their passion, technology, and hard work. Working smartly, you too can benefit from this amazing online marketplace. But you must treat Amazon as a customer.
1) Understand your customer: Read articles, stock market filings, Industry analyses to understand the unique nature of their size, scope, and goals. Have clarity on their weaknesses as well. They do not work like any other Bricks and Mortar Retailer you work with. Know where their fulfillment centers are and where new ones will be built.
2) Respect Amazon’s time: Your Vendor Manager (buyer) manages 300+ vendors and has to closely manage their time. The typical VM will prioritize by impact on their business. Don’t expect an immediate response to a question and be prepared to not receive an answer at all if it’s not business critical. Use the Contact Us system for most Amazon correspondence–you’ll get to a solution faster.
3) Speak their language: Amazon isn’t a Bricks & Mortar company. Internally they don’t use terms like “shelving”, “endcaps”, or “flooring out”. Entire concepts that you may use in B&M have no relevance at Amazon. Read up on e-commerce concepts and terminology. Amazon is continually paving the e-commerce highway–the way they speak is the way most big e-commerce websites speak, will speak, or should speak.
4) The customer is always right, until they aren’t: Amazon will teach you about eCommerce if you let them. It’s all about the end Customer. They will constantly work to reduce prices, cut costs, eliminate waste and secure more margin, all the while adding every single competitor you have to the Amazon marketplace. Collaborate with Amazon every chance you get, however ensure that you make decisions that are profitable and benefit your brand in the long run. These decisions can potentially result in you saying “no” to Amazon for good reason. Don’t anguish about saying “no” to Amazon.
5) Be patient: Amazon’s Retail Business Services group handles all of the Contact Us tickets (thousands of them). If the person who processes your ticket can’t action it right away, they will escalate to the appropriate team. Depending on the complexity of the request, some get resolved right away, some take a few days, and some may take a couple weeks. Don’t get frustrated if you don’t get an immediate response or resolution. More than likely they are actively working on your request.
6) Don’t take it personally: Amazon isn’t out to get you. They want to sell your products and maintain a positive relationship with your company. However, they abide by a set of constantly-evolving business practices that are applied broadly across entire categories. Your brand is one of thousands affected by any changes and most of their processes are automated.
7) 99% of success is showing up: For all of the automation, technology, “giant mechanized gorilla” aspect of Amazon, the reality is that it is run by people. They eat lunch, worry about their vacation time, have whopping student college loans, and are challenged daily by their managers to do amazing things. JUST LIKE YOU. If you can get their attention, show up in Seattle and meet your Vendor Manager. Listen very hard when they explain how you can be successful. If you can’t show up, consider securing a professional navigator of Amazon to create that connection on your behalf. Woody Allen was right; 99% of success is showing up…in the lobby of Amazon Retail Team’s building called Arizona.
1) Pick a product that is already selling well on Amazon as your first choice.
2) Pick a product that is selling well nationally but needs some pump-priming as your second choice.
3) Make sure that Amazon has it in stock and you can deliver if the POs pick up.
4) Make sure that you can select the Amazon customer or segment that you market to. Don’t let Amazon pick if you can help it.
5) Make sure that your main image is AWESOME and optimized for a small image size. It needs to fill your image canvas as much as possible. The advertisement will be small! This gets you bonus points when someone shops on their phone or tablet.
6) Don’t make unsubstantiated claims in the advert title. Smallest, brightest don’t work. Small and bright work.
7) Test first with $100 and try it before you do the big spend.
8) Watch the metrics. Understand what they are. Impressions, detail page views, and click throughs all have different, very important meanings.
9) Consider the time period for the advert carefully if you have seasonal products. Pay attention to fitting into scheduled merchandising programs in your Amazon department.
10) Doing ads are easy. Doing effective advertising involves testing and measurement of success. If it all seems daunting, consider reaching out to someone to help navigate you through the process a few times.
Log in to Vendor Central and read the notice on the landing page for the three solutions that Amazon will accept for their new box label requirements. SSCC (GS1 labeling), multiple 2D labels like QR codes, or their new home-grown labelling solution (due August 31). This is a BIG change for your warehouse teams if you aren’t already bought into an existing technology. Consider using outside help to navigate this so that you get it right and avoid chargebacks.