How to Sell and Win on Amazon, A CPG Brand Manager’s Guide
By Tricia McKinnon
While CPG brands have historically focused on selling through their retail partner’s bricks and mortar stores, eCommerce presents a way of reaching new customers and bolstering sales. In 2018 total sales growth within the CPG category was 2.6% while CPG sales growth online was 29% according to a Business Insider report.
With Amazon playing such a dominant role in eCommerce for many brands it is not a matter of if they will sell on Amazon but when. For brands that are considering selling their products on Amazon or ones that are getting started this guide is for you. This guide is separated into seven sections that will help you get ahead of the competition:
1. The case for selling on Amazon
Amazon is the first channel consumers turn to when conducting a product search online. With more than 200 million monthly visitors and half of all eCommerce sales in the US, Amazon continues to dominate.
It is not just Amazon that continues to grow in popularity but online marketplaces in general. An eMarketer report found that US digital shoppers are twice as likely to prefer shopping on an online marketplace than from a retailer’s website. More than half of digital shoppers prefer to shop within an online marketplace because of the ability to compare and find the lowest prices. More than half (56%) of brand marketers believe that online marketplaces are redefining and revolutionizing retail and it is easy to see why.
While there are potential risks for selling on Amazon there are also many benefits. For example, it can be a great compliment to a brands’ existing eCommerce channel. Many brands (44% of those surveyed in a Business Insider report) said that they generated more than 50% of their eCommerce sales on Amazon. The majority of sellers on Amazon (67%) also say that more than a quarter of the traffic they see on Amazon is “net new”. With big name brands such as Calvin Klein, Tommy Hilfiger and Nike selling on Amazon many more brands will likely follow.
According to Jie Cheng, Director of Digital and eCommerce at Campbell Soup: “you can’t afford to not work with Amazon. Ecommerce is a revenue channel, but it's a brand-building channel for marketing as well. The strategy [with Amazon] is to accelerate revenue growth while building our brand, especially on Amazon, given the reach of the platform.”
According to Business Insider, 54% of business leaders of national brands surveyed are selling on Amazon today and that percentage is expected to increase to 72% within five years.
2. What to sell on Amazon
Before you start selling on Amazon it is a good idea to take a look at which categories Amazon has the biggest share in as well which categories are growing the fastest. The largest amount of Amazon’s eCommerce sales comes from electronics, apparel and accessories and of course books, the category Amazon started selling 25 years ago.
Amazon’s Retail eCommerce Sales Growth by Category (2018 % Change)
Food & beverage – 40.1%
Apparel & accessories – 38.2%
Health, personal care & beauty – 37.9%
Furniture & home furnishings – 37.2%
Toys & hobby – 30.7%
Other categories – 30.4%
Auto & parts – 29.4%
Office equipment – 29.4%
Computer & consumer electronics – 23.0%
Books, music & video – 18.9%
Amazon’s Retail eCommerce Sales by Category (2018)
Computer & consumer electronics – $65.8 B
Apparel & accessories – $39.9 B
Books/music/video – $30.8 B
Furniture & home furnishings – $23.1 B
Toys & hobby – $17.2 B
Health & personal care and beauty – $16 B
Auto & parts – $7.8 B
Office equipment – $7.4 B
Food & beverage – $4.8 B
Other – 45.4 B
Amazon’s fastest growing category is food & beverage. But that category only represents 1.8% of Amazon’s eCommerce sales which means it is growing fast but from a small base. People still like to go into stores to touch, feel and select their produce. But with heightened competition and innovation within the online grocery delivery sector this category is poised for growth.
The real eCommerce breakout star for Amazon is apparel & accessories. With a 38.2% growth rate, apparel & accessories is Amazon’s second fastest growing category. Last year Morgan Stanley predicted that by the end of 2018 Amazon would become the number one retailer of apparel in the US ahead of Walmart and Target. You will likely need to do more analysis to figure out which category and subcategories to focus on but this data can get you started.
3. How to sell on Amazon: first party vs. third party sales
There are two ways of selling on Amazon. Either Amazon purchases your inventory and resells it (first party sales) or you sell your products on Amazon’s marketplace directly to customers and Amazon takes a cut of the sale.
First party sales are by invitation only. In this case Amazon purchases your goods at wholesale prices. Amazon owns the inventory, warehouses it, sets pricing, fulfills orders including shipping and handles customer care. According to a Business Insider report, 81% of first party sellers on Amazon surveyed, said they want to expand to Amazon’s marketplace so they can have more control over pricing, have a larger audience and increase their presence.
Third party sellers on Amazon are independent sellers that sell a range of new and used merchandise. Amazon has the largest marketplace for third party sellers in the US and by the fourth quarter of 2018, 52% of Amazon’s eCommerce sales were from third party sellers. Third party sales are more profitable for Amazon and it has allocated more resources to this channel over time.
4. Choosing a fulfillment option that works
Another key decision to make is whether your inventory will be fulfilled by Amazon (FBA) or fulfilled by the merchant (FBM). Some of the benefits of choosing FBA are, Amazon handles warehousing, customer shipping, returns and 24/7 customer care. Under FBA items are eligible for free Prime two-day delivery or free standard shipping for non-prime items.
Choosing FBA increases the chances of your products winning the buy-box (read more about this below). Since items that are FBA are listed as fulfilled by Amazon customers have the added reassurance that shipping is being managed by Amazon. Since this branding is visible to customers it might be a good option for a new seller that does not have brand name recognition yet. Prime eligibility is especially important since Prime members spend more than double than non-Prime members. Finally, choosing FBA allows the seller to transfer ever increasing customer expectations for fast delivery to Amazon. On the other hand, if the merchant decides to manage fulfilment itself it will have greater control over shipping and handling.
5. Product listing pages that convert
Instead of having an elaborate website, it is your product listing pages on Amazon that form your branding on the site. Perhaps the site of Amazon’s minimalistic product pages makes you faint of heart. Well at least everyone is in the same boat. Given that consumers keep coming back for more there must be a secret sauce to these pages.
In general your product listing page should be clear and concise Including the keywords that a customer would typically use to find your product is critical. Having the right keywords will increase the visibility of your product within Amazon’s search engine. Have you thought about the keywords a prospective customer puts in the search bar when looking for a product like yours? When thinking about which key words to use put them into Amazon’s search engine and see what products come up. Do the products that come up match the products that you are trying to sell?
Once the keywords are selected craft a product description that is concise yet detailed enough so that the customer has enough information to make a decision. Focus on benefits and remember that people like to know “what’s in it for me”. To get ideas for your product description read the descriptions of similar products as well as best-selling products. What can you learn from others? Also take a look at customer reviews for similar products to understand customer likes and dislikes. This can be a great way to generate which product benefits you should highlight and the ways your product can solve common customer concerns.
Take care when crafting product titles since the title is often the first thing a prospective buyer sees when your product surfaces in search results. Ensure product tittles are concise and easy to read, between 80-120 characters.
The saying that a picture is worth a thousand words could not be more true when selecting photos to showcase your product. High quality photos that present the product clearly while holding the customer’s attention is very important. According to a 2018 eMarketer study, the most influential product detail feature for US smartphone owners’ digital purchase decision is product images/photos, followed by product descriptions/specs, followed by product reviews (from customers) then star ratings. That means invest time in getting great pictures for your product pages.
6. Winning the buy-box
After clicking on a product listing on Amazon, the buy-box is a box on the right-hand side of the screen where a customer can add an item to their cart or where they can click “buy now”. If you win the buy-box the default option for the seller of the product is you. If there is more than one seller for the same product (think about how many stores sell your favourite pair of jeans) then each seller will compete to be featured in the buy-box. It is very competitive to win the buy-box and it is lucrative real estate since an estimated 80% of sales on Amazon come from the buy-box. Most customers do not even realize they have the option to choose other sellers when purchasing a product and instead chose the one that is presented to them. If you are going to sell on Amazon you need to win the buy-box or it will be harder for customers to find your products.
Winning the buy-box is based on several factors including having a competitive price, fulfillment options (i.e. is it prime eligible) and seller ratings. A brand can increase its chances of getting featured in the buy-box by choosing to be FBA or ensuring that their items are prime eligible. Seller ratings are based on: shipping speed, adequate inventory, positive customer reviews, ability to handle customer questions and complaints and low product defect rates. Product availability is very important. Ensure that products do not go out of stock as that will hurt your rating. Other ways to increase your chances of winning the buy-box is to boost sales and offering free shipping and prime eligible products.
7. Boosting sales with sponsored ads
To boost your brands visibility while selling on Amazon, invest in sponsored ads. These ads are based on a cost-per-click auction based pricing model. To begin advertising on Amazon select the keywords customers use when searching for your products. You can choose the keywords manually or you can use Amazon’s automatic keyword targeting feature.
Sponsored ads show up within search results in highly visible positions. You only pay when a customer clicks on your ad which then takes them to your product listing page. The seller has control over how much to bid for a click and will need to bid competitively. Sponsored ads will only show if you have won the buy-box for the product you are advertising.
Using a sponsored ad campaign is especially useful when a brand begins to sell a new product on Amazon. These ads can help your product to stand out in a crowd especially if there are many similar products that have a longer history on the site. Sponsored ads also help to increase traffic to your brand’s product listing page if it is suffering from a low number of views. Even if your organic rankings are high sponsored ads can be used to drive even more visitors to your page.
Try implementing a test and learn strategy to see which keywords are driving the most traffic and conversions. When you have a sense of which keywords are converting ensure that those keywords are also placed in the product listing pages. It is important when implementing this type of campaign to constantly monitor inventory levels to ensure that you do not go out of stock.
If you choose to implement a sponsored ad campaign you will not be alone in your efforts. Many brands choose to advertise on Amazon. According to a Business Insider report, 57% of brands surveyed advertise on Amazon and the majority of brands see a great deal of value from their adverting efforts.
Finally, in addition to sponsored ads consider using additional tactics to drive traffic to your brand’s Amazon store. For example, many YouTube influencers drive their followers to Amazon to purchase products that they are promoting. This could be one of many options for driving more traffic to the products that you are selling on Amazon.