For online brands, Amazon is a channel that can’t be ignored. It’s homebase to nearly 105 million Prime subscribers in the U.S., 300,000 third-party sellers and over 352 million products spanning every major category. In 2018 alone, the giant captured $233 billion in net sales, up from $177 billion the previous year.
That’s probably why you’re here. As Amazon continues to flex its ability to scale and disrupt industries of all kinds, your brand faces a critical decision of whether or not to jump into the ring and sell on Amazon’s vast marketplace.
This guide will cover what you need to know as a brand selling on Amazon. Keep reading for answers to today’s most commonly asked questions and tips for maximizing your success.
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1. Why should your brand start selling on Amazon?
Today, ignoring Amazon comes at a big cost. While ten years ago, the customer chased the brand, the reverse is happening today as customers are migrating online. Customers have the freedom to bounce from site to site or store to store to find the same (or similar) products at the best value.
Customers now trust Amazon for a variety of reasons. Aside from being the “everything” store with competitive prices, Amazon offers the convenience of one-click purchases and highly personalized product recommendations. Prime members get the added bonus of fast shipping (including one-day and same-day shipping) and access to exclusives like Prime Pantry, Lightning Deals and Prime Day.
Moveover, Amazon’s decades’ long investment into the customer experience is resulting in a phenomenon in which customers are becoming more loyal to marketplaces above individual brands. Sixty-five percent of consumers already say they feel comfortable purchasing from merchants they’ve never heard of on marketplaces, according to a survey by DigitalCommerce360. Amazon alone rakes in billions of visitors each month.
So, whether or not you’re selling on Amazon, your customers are already going there. Will you fight to stay in front of the audience that’s rightfully yours?
2. What’s the difference between Amazon 1P vs. 3P?
If you decide to sell on Amazon, there are two different platforms to be aware of: Vendor Central and Seller Central.
- Vendor Central is an invitation-only platform for Amazon’s first-party (1P) partners. Amazon will often approach sellers about wholesaling SKUs that are performing well on their third-party marketplace or fill a gap in its product catalog. If you opt into this, Amazon will buy your products in bulk and gain ownership of your products. Any listings of your products will display “Ships to and sold by Amazon.com” and while you can send a minimum advertised price (MAP), Amazon ultimately has final say over the price. Brands often choose this option in lieu of selling direct-to-consumer (DTC) or to earn more revenue up front. However, this often comes at the cost of lower prices, lower margins, harsh contract terms and hidden fees.
- Seller Central is the platform for Amazon’s third-party (3P) vendors. As a 3P vendor, you retain ownership over your products and are responsible for fulfilling orders as they come in. You can better control your own margins by deciding product prices and shipping options. The only costs you face include a flat fee per item sold or monthly subscription fee (depending on whether you choose an Individual of Professional selling plan, respectively), plus a variable closing fee and referral fee from your overall sale.
It’s important to note that Amazon is rumored to be consolidating these platforms in the near future. While the company remains tight-lipped about this rumored consolidation (dubbed One Vendor), evidence shows that it’s a very real possibility.
For starters, the company has already begun purging small suppliers from their 1P channel and directing them to Seller Central. Several features that were once limited to Vendor Central are now available for use by third-party sellers, who’ve started to overshadow Amazon’s first-party business in recent years.
Amazon also stands to receive higher margins from its seller services than commissions from product sales, incentivizing it to build out its third-party platform. In fact, third-party seller services accounted for 18.4% of the company's total revenue in 2018, up from 13.2% in 2014. By comparison, revenue share of its online stores dropped from 77% in 2014 to 52.8% in 2018.
The opportunity moving forward remains big for Amazon. An increasing number of sellers are seeking expert guidance for growing their marketplace profits. By embracing its role as a service provider, Amazon can keep this type of support in-house, becoming the emblem of convenience for both sellers and customers.
Given all this, you’ll want to prioritize Seller Central or adopt a hybrid approach (in which only a portion of SKUs are sold 1P to Amazon). These options give you the greatest control over your brand and offer the best protection against sudden changes to a wholesaler relationship or emergence of One Vendor. You never want to be in a position where Amazon can throttle your sales, and you can bet that Amazon will continue beefing up Seller Central with essential tools.
3. Should you use Amazon FBA?
Fulfillment by Amazon (FBA) lets you tap into Amazon’s extensive network of over 175 fulfillment centers across the world. Many brands are attracted to the promise of hassle-free logistics, shipping and customer service management. Some even turn to FBA for multichannel fulfillment (MCF) to take care of orders across other marketplaces if it’s allowed. Note: marketplaces like Walmart forbid sellers from fulfilling through Amazon.
FBA additionally rewards sellers by cutting shipping costs. Amazon’s has agreements with today’s major shipping carriers (minus FedEx as of this year) that offer steep discounts on shipping. Moreover, Amazon handles returns and refunds for you at a fee, which many justify with the amount of work and headache FBA saves.
The big downside to this is that, once again, Amazon has control over your fate. You lose visibility over where your inventory is located—Amazon may even pool your inventory together with another seller’s if you’re selling the same product, fulfilling orders made by other sellers using your stock.
You’re also subject to shipping, fulfillment fees and storage fees, which may fluctuate with the season. Retrieving your inventory from an FBA warehouse comes at a steep cost as does stale inventory. And if ever Amazon suspends your seller account, your fulfillment network will go down with it.
Similar to the advice above, you’ll want to take a hybrid approach or find an alternative. Third-party logistics partners (3PLs) are becoming increasingly popular among brands who still want to outsource fulfillment without becoming too reliant on Amazon. 3PLs give you more ownership of your inventory and act like an extension of your operations. Some even offer robotics to rival Amazon’s speed for picking, packing and shipping orders.
What about FBA Onsite?
FBA Onsite is an invitation-only program in which your warehouse becomes a node in Amazon’s fulfillment network. As a participant, you’re responsible for storing inventory sent by other sellers in addition to your own. Amazon will continue to handle shipping, customer service and returns.
As a reward for your participation, you won’t have to pay any FBA storage or inbound shipping fees for your own products. You’ll also gain all the normal advantages of being an FBA seller, including a customized rate card.
The major drawback is that Amazon can deputize your warehouse. The company will install its own warehouse management system (WMS) on your servers and control your warehouse to act fully in the name of an Amazon fulfillment center. For some, this trade-off isn’t worth the risk. For others, it’s a program they’re willing to test out, though it’s still in its early stages.
4. Should you enroll in Amazon’s Brand Registry?
Yes. Amazon’s Brand Registry is free for anyone with a registered trademark and is easy to enroll in. It gives you access to brand-building tools, like enhanced brand content (EBC) and multi-page Stores.
It’s also the best defense against counterfeiters, unauthorized resellers and inaccurate listings of your products. As a registered brand, you can block other sellers from altering the title, description or other details of your product pages. You can further remove unauthorized resellers without having to file an IP infringement claim and waiting for Amazon to respond.
Amazon itself claims that enrolled brands report 99% fewer suspected infringements than before registration. Its predictive algorithm proactively uses the information you provide in the Brand Registry to detect bad listings, including ones that:
- Incorrectly use your trademarked terms in their titles
- Incorrectly use your logo in photos that don’t show your product
- Ship products from countries where you do no manufacture or ship your brand
- Are listed as new products by other sellers, though you’ve already listed your full catalog to Amazon
So the question becomes why not enroll in Amazon’s Brand Registry? On a platform that’s as crowded as Amazon’s, it’s important to mark your territory as the rightful owner of your products.
5. What are Amazon listing best practices?
When it comes to listing your products, you’ll want to keep in mind the basic anatomy of an Amazon product listing. Amazon’s algorithm looks at these traits (plus many, many others) to decide which sellers and products to show when a customer searches its site.
Like Google’s search engine, Amazon’s algorithm is meant to connect people with the most relevant and reliable results. It rewards high-quality listings and suppresses incomplete pages.
Certain search engine optimization (SEO) tricks keep you ahead of the pack, though Amazon’s algorithm is unique from Google’s. Amazon cares about the formatting of your listings as much as it does keyword matches, and it rewards sellers who can offer the best customer experience.
Amazon’s interface is constantly evolving, too, impacting how your pages will be ranked. For example, Amazon recently updated it’s requirements for shoe listings to improve the shopping experience on its U.S. marketplace. Sellers who failed to update their listings accordingly saw a drop in their page rankings or had their ASINs deactivated altogether.
It’s therefore critical that you can keep up with changes to Amazon’s listing requirements (or find a system that can, like Zentail) in addition to its algorithm.
Basic Principles for Listing on Amazon
- Make sure you categorize your listings correctly to give your products the best shot at being found on results pages (if you’re not sure how to do that, consult Amazon’s Overview of Categories or employ a tool like Zentail’s SMART Types to accurately map your product data).
- Provide complete product data to earn your customer’s and Amazon’s trust. Poor or incomplete product data can set the wrong expectations, or even prevent a purchase altogether (98% of customers have been dissuaded from buying a product because of incomplete or incorrect content).
- Create variation listings (also known as product groups) for SKUs with multiple sizes, patterns or color options instead of splitting them up into separate listings.
- Use keywords naturally throughout your title, description and bullet points.
- Tailor your product descriptions to your audience.
- Include vital ingredients, instructions and information, even if it’s not required by Amazon. Discerning customers will appreciate you for providing detailed information.
- Include multiple high-quality images of your product that meet Amazon’s image requirements and help customers envision using your product, though they can’t physically see it.
- Offer competitive pricing and shipping options.
- Leverage kits and bundles to differentiate your product listings, especially if you have resellers competing on single-unit listings.
- Join Amazon’s Early Reviewer program to earn positive customer reviews the right way.
- Apply backend (or hidden) keywords from your Seller Central account.
- If you’re a registered brand, take advantage of enhanced brand content (EBC) to make your listings more engaging through custom imagery, videos and multimedia.
- Enhance your organic strategies with pay-per-click (PPC) ads or promoting your products on Amazon Live.
Things to Avoid
- Duplicative information and words
- Misspellings or abbreviations
- Overly salesy or generic language
- Promotional phrases like “free shipping” in your titles (Amazon will penalize you for this)
- Characters, emojis or symbols for decoration
- Trademark terms, like q-tips and velcro, to describe your own products
6. How do you maintain a higher Amazon seller score and avoid suspension?
A high seller score is key to boosting the visibility of your products and gaining Amazon’s seal of approval. If you’re not closely monitoring your seller performance, then you risk the deafening blow of an account suspension.
Sellers large and small have been suspended overnight by having high order-defect rates (ODR), receiving poor customer ratings or for falling under suspicion of counterfeit products. No company is 100% safe from suspension, so it’s important to familiarize yourself with Amazon’s right-to-sell metrics, listed below.
Thankfully, automated solutions like Zentail exist to help you stay in control of these metrics even when you’re not around to monitor them yourself. Automating essential operations like inventory management and order routing can ensure that you don’t oversell on any single product or fulfill from the wrong warehouse.
Barcoding systems can further help you avoid mispicks in the warehouse. Aside from monitoring whether the right items are picked off the shelf, a barcode system like Finale Inventory’s can sync product counts with physical locations in your warehouse to develop smart pick lists that increase efficiency.
While they don’t directly impact your Amazon seller score, other KPIs like average order value (AOV) and SPAM can help you understand the health of your business. These metrics, which we’ve dubbed as “selling-right” metrics, indicate ways to grow your sales and overall profitability. Sellers who maintain high selling-right metrics are generally seen in a favorable light by marketplaces like Amazon. They may even gain access to VIP perks, like FBA Onsite or other invitation-only programs.
Still have questions?
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