According to 2018 data provided by eMarketer, Amazon’s retail market share is approximately 49.1% in the United States. For small and independent retailers, this significant market share can be perceived as a threat to business. How can a mom-and-pop brand compete with one of the largest sales platforms the world has ever seen?
But according to entrepreneur Leland Taylor, Vice President of Brand Buddy, smaller brands don’t need to compete with Amazon. Rather, he says, they need to embrace Amazon – use the platform’s massive reach to their advantage to grow sales, brand awareness, and profitability.
But could it be too late? Grit Daily spoke with Taylor to find out why competing directly with Amazon might be a fool’s errand.
Grit Daily: Why do you think many small businesses view platforms like Amazon as being a threat?
Leland Taylor: Amazon is a major player in the market and, understandably so, it uses its power as the 800-pound gorilla to dominate multiple categories. Amazon has launched its own private label brands and operates a retail division that negotiates very hard on price, like its smaller rival Walmart.
Amazon is also thought to control price in a way that is disruptive to retailers. Because of the unique way Amazon uses its 3rd party, many retailers experience the negative consequence of not being able to control “Buy Box” and seeing their MSRP decline – while their authorized and unauthorized resellers compete on price.
GD: And, why should small retailers embrace Amazon instead of fearing it?
LT: There are three key reasons why small retailers should embrace Amazon. First, Amazon is where all the significant action is online (and, they continue to develop serious advantages in the US market and abroad). At this moment, one in four Americans have Amazon Prime. And, in today’s age, Amazon buyers are primarily convenience shoppers – not price shoppers. This is demonstrated by the fact that more than 2/3 of traffic doesn’t go past page one of a search result. Second, Amazon has an incredible fulfillment network (Fulfillment By Amazon, often called FBA) when delivering both domestically in the US as well as internationally.
What are some of the easiest things retailers can do to kickstart an effective Amazon selling campaign?
LT: Before they launch, retailers should use Amazon’s free tools to really understand their profit on Amazon. Like all big retailers, it is an expensive channel with both the Referral Fee and the Fulfillment By Amazon fees that are charged to the retailer. Understanding the profit of their would-be products on Amazon can prepare retailers to truly understand what volume of units sales, what price points to set, as well as what product merchandising makes the most sense for their brand & products. An important strategy to consider is doing two packs, three packs, or any strategy that can strategically increase the average order value of their products on Amazon.
After you really understand your profit, use your existing email marketing and customer lists to drive sales at the beginning of your journey. Asking customers (new and old) to write a fair and honest review is the best way to quickly build social proof in the form of 4 and 5 star reviews that go a long way towards improving sales. Most importantly, use the Advertising tools – both Paid Advertising and Promotions & Coupons – provided by Amazon to promote and market your products on their platform. For advanced strategies, consider creating dedicated campaigns off Amazon that direct sales and traffic to your online Amazon product listings.
GD: Through your work, you see companies completely transformed by turning to Amazon. Tell us about some of the most surprising examples of this that you’ve seen.
LT: One of the most impressive examples of Amazon is how quickly it can boost your product’s visibility and sales almost overnight. Early on we helped a small skincare brand out of Santa Monica change from selling expensive bundles using the Fulfillment By Merchant option (where the merchant fulfills orders versus Amazon using it’s 100+ US based fulfillment centers) to adopting the Fulfillment by Amazon service. By opting into the Fulfillment by Amazon service and selling the product on Amazon, the product was able to skyrocket to $30K / month, tapping into thousands of existing customers who were actively searching for the product. Through the creation of advertising on Amazon, this client was able to market their products on top name brand products in the skincare industry – easily putting her product in front of her ideal clients.
GD: What’s the biggest mistake ecommerce companies make when entering the Amazon market?
LT: The biggest mistake e-commerce companies make when entering the Amazon market is not understanding the important Key Performance Indicators of Profit and Lifetime Value and importantly, recognizing that the way to succeed on Amazon is to play by the rules to develop a long-standing brand. If the brand understands that they can control the price and merchandising strategy to optimize profit before listing their products, they can design a pricing strategy and merchandising strategy that contributes to profit. In addition, by truly understanding Repeat Buyer rates and how many people are searching & buying their products on Amazon, retailers can set realistic expectations for how many monthly sales they can generate on Amazon.
GD: What are 2-3 key factors ecommerce companies should pay attention to in order to outperform other Amazon sellers?
LT: The three key factors to pay attention to in order to outperform other sellers are copywriting, product images, and creating a great product & superb customer service experience.
Use Copywriting to Improve your Product Detail Page’s On-Page Conversion Rate: By using proven copy-writing techniques that emphasize the benefit of the product, not the product features, sellers can create high converting listings that naturally increases the organic rank of their products.
Product Images: Poor images that aren’t optimized, and not using all 9 images is a huge mistake where so many sellers are leaving thousands of dollars in sales by simply not using all the images provided, nor using mobile and desktop optimized images.
Create a Great Product & a Wonderful Customer Service Experience: At the end of the day, the quality of the product and the fast and reliable customer service that Amazon Sellers can provide will make the greatest difference in generating positive reviews for their brand. Constantly asking your biggest fans to write a fair and honest review, servicing quickly and efficiently the customer complaints and questions, and continuously improving your product are the most effective ways to consistently outperform other Amazon sellers and create a brand that lasts the test of time on this highly competitive marketplace.
With thoughtful planning and preparation, even the smallest of retailers can bring their product offerings online and scale their business quickly. Amazon is a powerful tool that makes it possible for independent, local, and other small brands to expand their reach efficiently and effectively, opening up a world of possibilities for entrepreneurs willing to embrace the platform.