Welcome to the first round-up from our new Amazon Experts series, regular webinars where we host a 30-minute deep dive into the world of Amazon with other experts in the field, and together unlock the secrets of marketplace success for your business!
For our launch episode, Venture Forge CEO Andy Banks was joined by Paul Sonneveld of analytics platform MerchantSpring to discuss how critical it is to have accurate, real-time data at your fingertips when it comes to building a successful and profitable Amazon business.
This was a half-hour packed with incredible value!
The importance of a Trading Mindset
Just as in the world of traditional Retail, the key to e-commerce success lies in a brand’s ability to stay agile and react quickly to market changes – and nowhere is this more true than on Amazon.
“I can’t think of a more competitive place where things move so fast,” agrees Paul.
“The customers are there, the demand is there but things move so quickly, so you’ve got to stay on top of it.”
This means that, for any Amazon Seller or Vendor, there is immeasurable value to be gained from reliable, real-time data that you can take fast action on.
Yet, in a live poll we conducted during the webinar, a huge 67% of attendees confirmed that they are unable to pull an Amazon P&L in real time.
“That for me is quite concerning actually, for a channel that’s all about driving profit, not sales,” responded Andy.
But how would adopting a trading mindset help change this for the better – for Sellers and Vendors alike?
What is a trading mindset, and how can it help?
Traditionally, Seller brands have operated the same B2B system for Amazon as they do for their other channels.
But, following marketplace changes that have shifted the whole competitive landscape, smart Sellers and big brands are recognising that there is a huge opportunity on the table if they approach Amazon as a proper, B2C trading channel – adopting the same trading mindset that retailers do.
What do we mean by a trading mindset?
A trading mindset focuses on adaptability – maintaining the agility to react quickly to the dynamic environment of Amazon marketplace selling.
It requires resilience, allowing brands to bounce back fast from setbacks like pricing fluctuations, changes in consumer behaviour or increased competition.
And it involves a strong element of risk management.
Analysing the potential threats in all areas, from inventory management through pricing decisions to product selection, allows brands to calculate and implement strategies to mitigate losses and make informed decisions that turn things in their favour as soon as possible.
As Paul points out, in such a fast-paced environment, small, canny tweaks made through the course of a day can make a huge difference.
What about those Sellers who find such a switch in mindset a big bridge to cross?
Paul suggests that this is an area where expert Amazon Agencies like Venture Forge have a big role to play.
As an agency built exclusively by Retailers (learn more), we’re easily able to bring our many years of expertise to bear for the ambitious brands we partner with.
Data drives a trading mindset
Behind all the elements of a trading mindset lies good data.
Enabling informed decisions, the right kind of accurate intelligence allows brands to get to the heart of complex issues swiftly and react accordingly – in turn allowing the protection of profitability and the maintenance of competitive advantage.
But, especially for brands with multiple channels and international stores, things can get very complex, very quickly in the world of Amazon marketplace and it’s all too easy to lose strategic perspective in a world of spreadsheets.
The key lies in being able to easily interpret the data that’s in front of you, make the right decisions and take fast action.
The right kind of data
Is it market conditions, or something that’s within your control? What should you focus on, and how do you prioritise what to tackle first?
The beauty of Amazon is that – as long as you have stock – there are lots of levers that you can pull to rapidly change your marketplace fortunes in terms of both sales and profitability – from changing your prices to improving your content to investing in ads.
But, when the numbers show you something’s going wrong, they also need to highlight what’s happening so you can quickly see what you need to do to fix it.
And this calls for data which is not just up-to-date and accurate – but also easily digestible.
Although much of the data you need is available within Seller and Vendor Central, it’s not simple or quick to access, living across a range of spaces.
And, with Amazon’s notoriety for changing APIs with little or no warning, nor is it easy to build out your own reporting analytics apps.
This is exactly why our expert team love MerchantSpring, Paul’s brilliantly user-friendly analytics software.
Founded on the back of their own e-commerce reporting experiences, MerchantSpring brings all the big picture data you need to drive your Amazon profits and growth within one visual interface.
Bringing all the parts of the Amazon “puzzle” together, your “to-do” tasks can be viewed at a glance, with beautiful, UX-designed dashboards that flag areas of concern using a traffic light system, rapidly speeding up your ability to make changes and drive your strongest performance.
So, what should brands be looking at?
Today’s e-commerce world is much-evolved from when the three core KPIs were traffic, conversion and average basket value.
Brands should also be looking carefully at:
The importance of looking after your Seller account health can’t be overestimated.
Brands must ensure they are delivering for their customers and maintaining the hygiene of their account, or Amazon’s mark down will render all that work on wonderful content, strong PPC strategies and complex inventory systems essentially useless.
Profit, profit and more profit…
Profit is king in any business – and your Amazon brand isn’t successful or sustainable without it.
While there’s unquestionably a buzz to be found from trading and seeing your numbers rise, success is all about money in the bank – it’s easy to pump up your sales volumes through ads, but you must make sure you’re seeing profitable returns.
So how do you consistently manage and drive your profitability?
The key is to look at a more granular level. Don’t just consider your account-level profitability – drill down into your product-level profits.
Within MerchantSpring, accessing this product-level data means you can really get into the nuts and bolts of what’s working for you and what isn’t.
You can then use this unit economics information to tweak or phase out products with lower profitability and prioritise those offering higher margins.
As an example, Paul cites a real-life situation where a client was being charged £5 per item by Amazon – but the item qualified as a small and light product, which meant it could be charged at less than half of what the client was paying.
By not considering their data at a product level, this potential profit improvement had slipped through the net.
But, once it was discovered that charges were shearing off a large percentage of the product’s margin, the client was able to very quickly diagnose the issue, contact Amazon and have the product reclassified, mitigating their profit losses.
Great Stock Management
Inventory management is one of the single biggest challenges on Amazon and, even with the best stock control systems, there are times where events are simply out of your control.
But there are two issues at either side of the spectrum that arise out of poor stock management.
On the one hand, tying up large amounts of working capital to put vast stock levels into FBA can see you incur heavy Amazon charges.
On the other, going out of stock on Amazon costs you far more than just the missed sales.
In fact, our data suggests that being out of stock on Amazon for 1 week can actually cost you up to 5 weeks’ worth of sales, simply through a loss of sales velocity from the measures Amazon imposes on your items – from suppressed listings to Buy Box issues.
MerchantSpring makes it easy to avoid out of stocks, with a tool that allows you to set stock level alerts as well as providing all the historical sales information you need to forward plan replenishments.
And it’s not just about stock availability.
Brands also need to carefully consider fragmentation, looking at the depth of granularity in their stocks.
For example, a Seller of apparel might have plenty of stock available at first glance, but on a deeper analysis find they only have uncommon sizes – missing the most popular sizes that are where the value, volume and ongoing success of that product line lies.
Growth and the Customer Funnel
However you want to measure your growth – in terms of traffic, revenues, sales or volume – it’s key to ensure you’re constantly on an upwards trajectory.
And it’s worth noting that, with average basket sizes between 1 and 1.1 units per order on Amazon, average order value isn’t a priority metric on the marketplace of today.
Instead, it’s crucial to ensure that you have an effective customer funnel that is consistently driving user sessions up.
Is the content of your pages working well?
What tweaks could you make to drive more traffic, improve impressions, boost click throughs and strengthen your conversion rates?
These questions will help brands grow a sustainable and healthy business over the long-term.
Keeping the right balance between your Organic and Inorganic (Paid) Views
When looking at your impressions and page views, distinguishing between those driven by Ads and those gained organically is such a big part of any successful – and profitable – Amazon business.
It’s easy to see an artificial inflation of page views driven by Ads, but being able to identify what is coming from where helps you avoid the dual profitability traps of high ad spend and the cannibalisation of your organic views by your paid activity.
Always aim for – and protect – those Best Seller Ranks
In an ideal Amazon world, your brand gets the number 1 spot on all your listings, and all your traffic is organic and profitable.
Whether that’s likely (or easy) or not, it’s still where brands should be aiming.
Look to ensure you’re constantly improving vis-a-vis your competitors. What levers, such as reviews, can you pull to improve your rankings?
Monitor your TACOS for the full picture
Amazon success isn’t about having a strong Ads strategy or a strong organic presence – it’s about the blend of the two.
So it’s important that Sellers and Vendors look at the whole picture, and analyse their Total Ad Cost of Sales figures (TACOS) that show the ratio of ad spend to overall sales, not just Ad Cost of Sales figures (ACOS).
Taking these “all spend and all return” figures into account is the key to gaining a proper understanding of the effectiveness of your Ads strategy, and how it’s truly affecting your profitability.
Take swift action based on real-time data!
Accurate data is critical, but looking at it daily, getting granular in your analyses and taking agile action off the back of your findings are the real drivers of your success.
Going over a historical P&L with aggregate figures on a monthly basis won’t help your brand realise its true sales and profit potential in the dynamic and complex world of Amazon.
As an expert Amazon Agency, clients who’ve not imposed a regular real-time data analysis process often present us with easy wins when we take over the management of their marketplace.
For example, we’ve seen clients overcharged hundreds of thousands of pounds – charges which have been passed over when their team considered their data on a month-by-month basis but which have accumulated to a sizable amount which should be in the brand’s pocket – not Amazon’s.
Adopt a Trading Mindset
As we discussed in detail above, the opportunity for big brand Sellers to adopt a B2C trading mindset that prioritises agility, resilience, risk analysis and fast, effective action is immense.
But some brands are just not used to this perspective – or are unable to adapt their internal culture to facilitate it – and they should…
Seek Specialist Help where it’s needed
… in these cases, it’s worth considering the benefits of using an expert Amazon Agency with a strong retail focus like Venture Forge, especially when our extensive expertise is blended with the incredible information capabilities of a data partner like MerchantSpring.
How exactly would this help?
Hiring partners who already know their way around retail environments and specialise in Amazon is the ideal, low-risk way to get started on a new B2C-based path and gain traction.
We see 3 big benefits for brands in this position from partnering with Agencies and software providers like us and MerchantSpring:
- Get immediate access to extensive, specialised expertise
- Agency partner is “on the hook” to deliver trading results
- Gives brand the time and mindspace to continue building other areas of the business and other channels
And, should a brand find that there is a business case down the line to set up an in-house team, a good Agency built on strong ethics will simply switch their attention to the new problem to solve – helping to project manage a smooth and effective transformation as the brand moves this key resource in-house.
Want to delve deeper? Listen on catch up…
As you can see, we covered a lot in just 30 minutes!
And there was more, with a Q&A session at the end diving into topics like:
- How do we see the role of an Amazon Vendor Account Manager changing in the future?
- How can brands monitor buy box performance, and how does it affect overall sales?
- Emerging frictions within the buying process
- The impact of other channel activity on your Amazon sales
And, to make sure you don’t miss out on our other upcoming webinars, including more in this Amazon Experts series, join our mailing list here!