Amazon News

5 Questions to Ask Distributors Before Letting Them Sell Your Brand on Amazon

Here at Bobsled Marketing, we’re strong believers that brands should be representing themselves on Amazon. Amazon accounts for an estimated 50% of ecommerce sales, and many shoppers start their product searches on Amazon. Brands should be using the channel to gather insight into product and competitive trends, get feedback from customers, represent their brand (and pricing!) consistently, own & grow the direct revenue, and own as much of the data they can get from Amazon.   

Still, some manufacturers figure that they’d have an easier time allowing their distributors or a specialized reseller to handle Amazon for them: out of sight, out of mind. 

While we don’t endorse this approach, we do understand that it can be the simplest way for brands to check Amazon off the list, and be a good option for expanding into international markets. In order for brands to practice “safe distributing”, we’ve compiled a list of questions that brands can ask potential distributors and resellers to ask before giving up their Amazon channel to a third party.    

 

1. What data will the reseller share with the brand?

Amazon isn’t known for sharing a ton of data with the merchants that sell there. From their perspective, shoppers on Amazon are “their” customers, and merchants don’t get a ton of insight into who the buyers are or their purchasing habits.

Still, there is helpful data that can be gathered in Seller Central & Vendor Central (depending on which platform the reseller is using), which you should request reporting on.
 

  • Sales data over time, by product. Which products are most popular based on units sold, and total revenue. How are those trends changing over time? Lower sales over time could signal higher competition.
     
  • Conversion data over time, by product. Which products sell the best once a shopper finds them? Are conversion rates getting better or worse over time?
     
  • Search Term Report, when running PPC ads. This report is essential reading to understand what keywords and phrases shoppers are using to find your product, and which terms actually convert into sales.
     
  • Other ASIN Report, when running PPC ads. This report shows you competitors’ products that shoppers bought after clicking on an ad for your product. This is essential competitor insight.
     
  • Order reports. Although you cannot re-market Amazon customers, you can generate reports which show where customers who bought your products are located. This can give you valuable demographic information about who your customers are.  This is only available to Sellers, not Vendors.

 

2. What marketing activities will the reseller deploy?

A potential issue with resellers and distributors is that they may not care as much as you would about representing your brand in the best possible way. 

At Bobsled Marketing, we have seen issues where products were materially misrepresented on Amazon, causing big customer service issues and damage to the brand. 

But on a more innocuous level, if could be as basic as making a half-hearted attempt to produce product listings with great images and compelling copywriting.

If your products aren’t represented in the best way possible, it will mean lower conversions and sales.

  Above: example of a Amazon product page, with a keyword-optimized title, descriptive bullets, quality product images, logical flavor variations, and enrolled in the Subscribe & Save subscription program. 

Above: example of a Amazon product page, with a keyword-optimized title, descriptive bullets, quality product images, logical flavor variations, and enrolled in the Subscribe & Save subscription program. 

You should also ask the reseller if they will be running promotions like shopper coupons and lightning deals; how they plan to get product reviews; and whether they will be running PPC ads to drive qualified traffic to your brand’s products. Each of these efforts can increase sales considerably.

 

3. How will inventory be managed?

As a manufacturer, you know that everything grinds to a halt when you run out of inventory. So what are your distributor’s processes for ensuring they have adequate levels of stock? Do they use software to calculate the quantity and frequency of orders from you?

Another concern may be around how they will handle product returns. Amazon has different options for handling returns when the items is shipped by Amazon (using FBA or Vendor Central), and the default option is for Amazon to re-stock any inventory that appears to be in sellable condition. That can create huge issues for the brand when the following customer receives a product that has been opened or appears used. 

  Above: a disgruntled Amazon customer who received a product that was not in the condition described by a reseller.

Above: a disgruntled Amazon customer who received a product that was not in the condition described by a reseller.

Distributors may also liquidate returned inventory through other channels, and even to other resellers on Amazon like Amazon Warehouse Deals. These downstream sellers can create issues of their own.

 

4. What are the reseller’s customer experience processes?

Amazon customers are savvy and sometimes demanding! They know that by shopping on Amazon they can expect an almost immediate response, and for problems with orders to be solved instantly. 

Make sure the reseller has processes in place to respond to buyer messages within the 24-hour  window required by Amazon, and that they’ll also be responding to negative product reviews. 

Remember that most shoppers will have no idea that they are buying from a reseller or distributor - to them, it’s simply your brand’s products. 

 

5. What are the terms of the reseller agreement?

Make sure there are provisions in the agreement that mean you can cancel if the reseller doesn’t meet the agreed requirements. Consider adding some terms from the above questions to ensure your brand is being represented correctly and has the best opportunity to grow.
 
Be careful if you give permission for your reseller to apply for Amazon’s Brand Registry. This means that if you decide to eventually take back control of your brand on Amazon, the reseller will already have primary rights to edit product listing content, and make it harder for you to represent your own brand.  

 

In summary

The decision to relinquish your brand on Amazon to a third party shouldn’t be taken lightly. But if the distributor or reseller can answer these questions to your satisfaction, you might have a win-win partnership. Be sure to revisit the strategy of your Amazon channel periodically, especially if you find that purchase orders from the distributor are growing at a good clip. And if you decide that your brand’s Amazon channel should be fully owned by your company, you don’t have to do it alone.


Bobsled Marketing has worked with hundreds of companies to grow and protect their brands on Amazon, without giving up control. Request a consultation with our team today or learn more about our services.   


FBA Small & Light: Is It Worth It?

The FBA Small and Light program is a fulfillment option for products that are priced under $15, measure 16” x 9” x 4” or smaller, and weigh 15 ounces or less. In this blog post we’ve broken down all the important aspects of the program.

 

WHAT ARE THE BENEFITS OF SMALL AND LIGHT?

  • Small and Light offers are eligible for FREE Standard Shipping (4-5 business days), but not other Prime shipping options such as Prime 2-Day Shipping. 
  • Non-Prime customers receive FREE shipping (6-8 business days) with no minimum order requirement. Non-Prime customers all have the option of upgrading to 4-5 business days shipping for $0.99. 
  • It is possible to fulfill the same product through both the Small and Light program and standard FBA fulfillment. Fulfillment through the Program and standard FBA require separate inbounding processes.
  Image Source: Amazon.com

Image Source: Amazon.com

 

WHICH PRODUCTS AND SELLERS ARE ELIGIBLE?

The Program is currently only available for ASINs and sellers who meet certain criteria and are approved at Amazon’s discretion. Eligible sellers may submit the ASINs that they want to enroll in the program for approval. Sellers participating in the Program must already be enrolled in FBA and not have Premium Placement enabled.

In addition to Restricted Products and FBA Prohibited Products, the following products cannot be fulfilled through the program:
 

  • Hazmat products
  • Adult products
  • Temperature-sensitive products (such as chocolates)
  • Any product that is not in new condition
  • Existing FBA product offers that use manufacturer barcodes for tracking (commingled offers) instead of Amazon barcodes
  • ASINs that have been on Amazon.com for more than 90 days and have sold in the trailing 4 weeks (or are expected to sell in the upcoming 4 weeks) fewer than 25 units
  • Products with package dimensions greater than 16x9x4 inches or weighing more than 15 ounces.
  Image Source: Amazon.com

Image Source: Amazon.com

 

SHIPPING PREP REQUIRED FOR SMALL AND LIGHT PRODUCTS

  • All same-ASIN units within a box must be bundled together using a plastic bag, manufacturer/seller case pack (i.e. boxed or shrink-wrapped), or other means of grouping your same-ASIN units together.
  • A minimum of 30 units per ASIN must be sent in each shipment.
  • On the outside of each same-ASIN bag/pack, the total quantity of sellable units must be clearly labeled or a packing list must be included in each shipping box.
  • Each unit must have a scannable barcode (UPC/EAN/FNSKU) or be individually stickered (if no barcode is available or if the barcode applies to more than one ASIN).
  • All units must also be prepared according to the FBA Small and Light Prep Requirements. Units prepared according to the FBA Small and Light Prep Requirements will typically be available for purchase 5 days after Amazon’s receives the shipment in the IVSA fulfillment center in Erlanger, Kentucky.

 

HOW DO THE FEES WORK?

There is a difference between FBA standard and S&L Fulfilment Fees, and your S&L margin improves for individual orders with more than 1 unit sold. Therefore, the program makes economic sense for brands that sell small products but in large quantities (per individual order). 

 

WHAT KIND OF PRODUCTS IS THE PROGRAM MOST SUITED TO?

We recommend reviewing your sales history (on Amazon plus other channels) to see if there’s any products in your catalog that are bought in large quantities via single orders. Often times due to the low price-point such items are not suitable for standard FBA, and have been listed as FBM (Fulfilled By Merchant) on Amazon to protect profit margins. Chances are, if you consistently sell multiple units of these products via single orders, you can see an improved margin on the S&L program compared to FBA standard.

Let's use an example to illustrate the potential savings of S&L.

The following 8" harp set from I Like That Lamp has a total weight of 3.2 oz, dimensions of 11" x 5" x 1" and retails on Amazon for $9.95.

Here's a breakdown of how the FBA vs. S&L fees would work assuming 1 unit was purchased in a single order.

The general S&L concept is that the more units you can sell with individual orders the better your profit margins will become. If you are in doubt we would recommend crunching the S&L fees using the above table before confirming with Amazon support that your calculations check out prior to prepping S&L inventory.

Small&Light.jpg

 

ALWAYS CHECK THE FEES

Ensuring that Amazon fees are correct is a big part of Bobsled’s operational deliverables as a full channel management Amazon agency. Unfortunately we’ve noticed discrepancies across several accounts with expected vs. actual Amazon S&L fees.

It is up to each individual seller and vendor to keep track of all Amazon fees across the product catalog. If there’s any S&L fee errors you should open a case with support who will ask for more info and investigate. The issue may be related to a product having incorrect dimensions/weight or simply a glitch in the system. If you can prove to Amazon that fees have been calculated incorrectly, you will be reimbursed accordingly.


WANT TO KNOW MORE?

To learn more about the S&L program and Bobsled’s Amazon channel management service, please schedule an appointment below:


What's Changed in 2 Years of Selling on Amazon?

In November 2016 I published my book, “The Amazon Expansion Plan: Learn how to skyrocket your sales, sell globally and make your brand an international success” in kindle version on Amazon (naturally). 

It was an attempt to document all the best practices and processes that we had learnt at my agency Bobsled Marketing, as well as some of the lessons I’d learnt as a seller myself before starting Bobsled. 

The book covered the various platforms for selling on Amazon either as a wholesale supplier to Amazon or on the marketplace, various marketing techniques, how to initiate an international selling strategy, and the basics of brand protection. 

Fast forward to June 2018, when I am releasing the 2nd edition of this book. I’ll be honest, updating this was almost as much work as writing it the first time. So much has changed with Amazon in less than 2 years, and outlining the myriad new programs, policy changes, and best practices, took a lot of effort. Here are a few of the major changes that have occured over the past 2 years. 

The book will be FREE to download on Kindle from June 27th until the 1st of July, 2018.

 

Vendor Express closes and the Hybrid selling model emerges 

I never liked Vendor Express - Amazon’s fully automated wholesale supplier portal - and was pleased when Amazon announced its eventual closure earlier in 2018. Now we are left with two primary platforms: Vendor Central (VC, for wholesale suppliers) and Seller Central (SC). But with Amazon automating as much of the buying process as possible on VC and pulling back human support, many brands which have historically been Amazon Vendors are now looking at selling on the SC marketplace. Many find that it affords more control over pricing, inventory, and the customer experience than being a Vendor. It can also be more profitable, with Amazon taking a 15% cut of sales across most categories, plus fulfillment fees. Still, Vendors aren’t always prepared to cut all ties with VC, so are opting to set up an additional SC account and access the best of both worlds.

 

Advertising is a significant revenue driver for brands
...and Amazon

The 2016 edition of The Amazon Expansion Plan provided an overview of the various PPC campaign types on Amazon, acknowledging that paid traffic can boost organic marketing efforts on Amazon. Today, advertising on Amazon is part of most digitally-active brands’ playbooks. Amazon themselves are seeing the revenue potential of digital advertising and have been quickly rolling out new features and tools to drive more spend and brand engagement. They have hired thousands of new employees for their display advertising division, Amazon Media Group. Analysts view Amazon as an ultimate third challenger to the Facebook/Google duopoly. We have certainly given PPC pride of place at Bobsled, in terms of methods to drive revenue for our clients with almost immediate ROI. 

 

Brand protection is more important than ever

Selling products on Amazon has become a new business model for entrepreneurial types almost overnight, and for good reason - the size of the market and ability to quickly capture revenue is highly unique. Thus, Amazon has also captured the attention of bad actors and those wishing to make a quick buck. Unfortunately Amazon is limited in their willingness or ability (depending on the situation) to play policeman in their own neighborhood. Brands have learnt that they must actively defend their product catalogs against unauthorized sellers, counterfeiters, and black hat tactics that attempt to erode the revenue and reputation of incumbent brands.

These are some of the major themes I have observed in updating the 2018 edition of The Amazon Expansion Plan. But there have been many more changes, both strategic and tactical in nature, that are important for any Seller or Vendor, aspiring or current, to be aware of.  

The new edition goes live on June 27th, 2018, and the book will be FREE to download on Kindle from June 27th until the 1st of July, 2018. For the first time a paperback version of the book will be available as well. It’s somewhat painful to recognize that in just another 6 months, there will be new material to add and changes to make - that is the nature of Amazon. But for right now, you can trust that this is the most comprehensive, up-to-date playbook that’s penned specifically for established brands looking to launch or improve their Amazon game. I hope you enjoy it!

Interested in the new edition of The Amazon Expansion Plan? The book will be available on Kindle & Amazon and in Paperback right here.

Amazon Weekly News: May 1, 2018

Time for the weekly recap of Amazon news! It's always good to keep up with events related to the fast-moving world of the Amazon ecosystem. I select the most important news updates to share with subscribers each week, which you can sign up to receive right here.

 

Prime Membership Bumped Up To $119, But Will People Care?

Amazon+Prime.jpg

Last week, Amazon announced that it will increase the price for Prime membership from $99 per year up to $119. The Prime program is central to Amazon’s growth “flywheel,” locking consumers into an ecosystem that provides free, 2-day delivery and digital services like Prime Video.

So will the price hike affect Amazon’s ability to attract new members and customers?

Past experience tells us that this price hike isn’t likely to have a material impact on membership and loyalty. Amazon raised the fee for Prime in 2014 from $79 to $99 per year, and membership is estimated to have increased by from 40 million to 54 million from 2014 to 2015.

Similarly, Netflix has increased their monthly subscriptions twice: a $1-per-month increase in 2017, and $2-per-month in 2015 across their most popular plans. The hike seemed to have had no effect on membership growth, with an estimated 125 million customers today. 


In the same way, Prime has become such an integral part of the daily ritual for so many people, that they couldn’t fathom life without it. Eighty-five percent of Prime members browse for products at least once a week, and nearly half (45%) make a purchase at least once a week, according to a Feedvisor survey of 1,500 Amazon shoppers. 

 
  eMarketer cites research from Feedvisor which found that Prime members are more frequent visitors and make more frequent purchases than non-members.

eMarketer cites research from Feedvisor which found that Prime members are more frequent visitors and make more frequent purchases than non-members.

 

Amazon recently announced that they have more than 100 million subscribers and that the number is growing. Many equity analysts also believe that Prime membership will continue to grow. Even after this price hike, the utility that Prime offers is still good value for money, especially for consumers who have come to value the convenience and ease of use.

It would be a stretch to assume that the price increase will make the Prime program profitable for Amazon. There are massive costs associated with offering free 1- or 2-day shipping nationwide, which few consumers appreciate. But with a higher price point, Amazon will be able to offset the increasing operating costs of the service as they build up their fulfillment infrastructure in the United States and abroad. 

 

Global sellers account for 25% of third party marketplace sales

In its first-quarter earnings report on Thursday, Amazon announced an increase of 50% of sales from global sellers from the previous year. This comes with mixed blessings for other suppliers and sellers on Amazon. Unvetted overseas sellers are sometimes claimed to be largely responsible for counterfeit goods and fake product reviews. And the huge number of new global sellers entering the market means it’s imperative for all Amazon sellers to differentiate their own offering from the growing pack.

 

Chico's will start selling on Amazon

Chico’s will start selling its clothes and accessories on Amazon in May, and potentially add its sister brands White House Black Market and Soma later. The brand will make all of its products Prime-eligible -- presumably through a direct vendor relationship with Amazon, or through using the Fulfillment By Amazon program. Amazon has been investing heavily in its apparel division, forging partnerships with brands like Nike and Calvin Klein to prompt them to sell more of their assortment on Amazon. The company has also been launching its own private apparel labels too.

 

Amazon testing advertising pixel

According to interviews that AdAge conducted with advertising agencies, Amazon is testing a pixel that will track conversions on Amazon.com from display ads. Brands would place the pixel within their external (non-Amazon) ads, which would track users who viewed or clicked the advertisement to see if they eventually bought the product on Amazon.This kind of tracking and conversion data could potentially allow Amazon to prove a stronger, more direct ROI than incumbent advertising platforms from Facebook and Google.

"Advertisers can leverage Amazon's specific data for targeting, there's unique access to inventory through Amazon properties, and there are unique analytics by virtue of its sales data," said a source quoted by AdAge.

 

This is all the news I have to share with you this week. Subscribe to our newsletter to make sure you receive my news recap next week!

Amazon Weekly News: April 24, 2018

Each week I share the top news that impacts brands and merchants who sell on Amazon. My digest for this week includes what 100 million Prime members means to merchants and how fake product reviews continue to proliferate on Amazon despite a ban since 2016. Also, Amazon will now deliver packages to the trunk of your car, and the company finally reveals criteria for "Amazon’s Choice"...then takes it away.

 

What 100 million Prime members means to merchants

  Image Source: Lionel Bonaventure - Getty Images

Image Source: Lionel Bonaventure - Getty Images

Amazon’s prime program is at the center of the company's “flywheel” for growth. Research from Consumer Intelligence Research Partners found that Prime members spend almost twice as much per year on Amazon than non-subscribers.

With an estimated 40-60% of U.S. households already having Prime membership, Amazon needs to look to new segments for growth in the program. Thus, Amazon has taken steps in recent years to appeal to low-income customers, according to Recode.


Amazon also started targeting teens within Prime households late last year, allowing them to shop on Amazon with their own login.

What does this mean for brands selling on Amazon? As Amazon targets these new demographic segments with smaller wallets, merchants who can offer lower-priced products will benefit. Amazon recently launched a “$10 and under” storefront, and also reduced the selling fees on products priced under $7, to make selling these products more profitable. Prime-eligible products are still the most successful on the platform, so brands on the Seller Central platform should also consider enrolling low-priced products in the FBA "Small and Light" program.

 

Fake reviews continue to plague Amazon

Despite Amazon suspending the accounts of hundreds of customers over the past month on the basis of review fraud or suspicious activity, Amazon still has a big review problem, according to The Washington Post. “The vision Bezos popularized, of a review and ratings system that serves as a guide for consumers to make smarter choices, has given way to a system in which some consumers are manipulated and misled,” the article says. 

The Washington Post cites research from Data for Democracy, a nonprofit group of technology researchers dedicated to promoting integrity online, which went undercover in Facebook groups where merchants offer to pay Amazon customers to write reviews of their products. Amazon banned incentivized reviews in late 2016, but the practice still proliferates as a grey-hat marketing technique.

The Washington Post also tells the story of an Amazon seller, Atgoin, which began ranking #1 for bluetooth headphones. In November, the product had zero reviews, but gained 300 reviews within a five-day period during December. Analysis from the online review monitoring app ReviewMeta found more than 90% of the product reviews to be suspicious. Amazon removed Atgoin as a seller after The Washington Post made inquiries.

Sadly, this is not an isolated incident. Many brands complain not only that competitors are using underhanded techniques to obtain reviews, but that competitors are initiating fake negative reviews on their own product pages. 

 

Amazon delivers packages to the trunk of your car

Amazon today launched a new program for Prime members called Amazon Key In-Car. Amazon delivery drivers bring the package to the car, unlock the vehicle and then stow the package inside, and then re-lock the car.

The program is currently available in 37 cities in the U.S., and works with most 2015 model year or newer Chevrolet, Buick, GMC, Cadillac and Volvo vehicles with an active connected car service plan.

“We were really happy with the response to in-home delivery,” Peter Larsen, vice president of delivery technology at Amazon, told The Verge. “What we wanted to do — and it was part of the plan all along — is how we take that beyond the home.”

Amazon published a video today that features the first customers of the service. The customers cited ease of use, and being useful to families who want to receive their orders quietly or privately.

What does this mean for brands and retailers selling on Amazon? This new program is part of Amazon’s mission to target new customer segments and rolling out features to attract and retain Prime members. Following the launch of the in-home ‘Key’ secure delivery product, Amazon is looking for more ways to make online shopping convenient for customers. With package theft rates rising, and some employers banning online shopping deliveries to their offices, Amazon needs new ways to get products into the hands, or trunks, of consumers.

 

Amazon finally reveals criteria for ‘Amazon’s Choice’
... then takes it away

A couple of weeks ago Amazon started publishing the criteria for the coveted "Amazon’s Choice” badge. On product detail pages within the mobile app, three reasons were provided for why a particular product has been awarded the badge for a given search term. For the first time, it shed light into Amazon’s criteria for awarding these badges.

  Netgear product detail page on Amazon's mobile app. The above image shows the criteria for the Amazon's Choice badge on April 15. The below image shows the same page two weeks later without the criteria for the Amazon's Choice badge.

Netgear product detail page on Amazon's mobile app. The above image shows the criteria for the Amazon's Choice badge on April 15. The below image shows the same page two weeks later without the criteria for the Amazon's Choice badge.

Geekwire first reported on this change on April 15. However, in looking at the same product pages this week, the reasons for the badge are no longer displaying. It’s unclear why Amazon would remove this feature, but A/B testing has always been part of Amazon’s DNA.

During the time when Amazon published the criteria for the badge, the reasons cited centered around average customer ratings of at least 4 stars, low return rates compared to similar products, popularity in Amazon search results, and eligibility for Amazon Prime delivery.

The "Amazon’s Choice" badge is important to brands for several reasons. It lends credibility to a given product, since Amazon has bestowed a literal badge on the product. It also means the product is the default item chosen in voice search with Amazon Alexa. As more customers turn to their voice assistant for shopping and re-ordering, the default #1 rank will become an important factor in a product’s success.

 

This is all the news I have to share with you this week. Subscribe to our newsletter to make sure you receive my news recap next week!

Amazon Weekly News: April 17, 2018

Each week I share the top news that impacts brands and merchants who sell on Amazon. My digest for this week includes new estimates for how many consumers use their phones to comparison-shop while in store, Amazon dominates wallets in the UK as well as the teen market, a landmark sales tax case goes to the Supreme Court, and a seller fee promotion to boost sales of products priced under $7.

 

Seventy percent of shoppers use their phones for comparison shopping while in-store

  A customer uses his iphone to photograph the new HomePod during the launch of the HomePod at the Apple Store on February 9, 2018 in Sydney, Australia.     Photo Source: James D. Morgan/Getty Images)

A customer uses his iphone to photograph the new HomePod during the launch of the HomePod at the Apple Store on February 9, 2018 in Sydney, Australia.

Photo Source: James D. Morgan/Getty Images)

A survey from UPS on online shopper habits revealed that almost all (96% to 99%) of online shoppers surveyed in the U.S., Asia, Europe, Canada, Mexico, and Brazil, have made purchases from online marketplaces (Amazon, eBay, etc). Not groundbreaking news, but what was interesting were the findings that 70% of shoppers in all regions are using mobile phones for comparison shopping while in-store.

This is important for brands selling on Amazon and other marketplaces because it confirms the need for consistency across sales channels. A large discrepancy in price point can cause channel conflict for brands and put a strain on relationships with retail partners who find their customers are completing their purchases on Amazon because the price is lower.

But this phenomenon also reinforces the need for brands to provide detailed product information on their marketplace product listings. It could be that a customer is unable to get help from an associate while in the store, or wants to check out product reviews from other customers before completing their purchase. Whether the final transaction is completed in store or on a marketplace like Amazon, it’s in brands’ best interest to have their online product listings fully optimized.

 

Amazon dominates UK retail scene

Analysis from GlobalData has found that Amazon is the fifth largest retailer in the UK, accounting for 33.5% of all UK spend online in 2017, versus 29.6% in 2016.

GlobalData says that Amazon continues to outstrip online spending growth in the UK, with revenue estimated to have risen by 22.5% compared with total online spend increasing 8.4%.

Amazon has invested heavily in the UK market over the past few years, challenging well established grocers and department stores with the Amazon Prime service. The Fulfillment By Amazon (FBA) program allows merchants from there countries to send inventory to Amazon in the UK to be fulfilled locally. Amazon confirmed at the retail industry's Shoptalk conference in April that there are 175 fulfillment centers worldwide.

 

Amazon promotes low-cost items with minimum fee promotion

Amazon is offering a $0.30 discount on referral fees paid by Third Party merchants for products priced under $7.00, and a discount of $0.50 on products priced under $3.50.

The promotion is limited to new products that are launched between April 10 and August 15 this year. Grocery & Gourmet and Media products are also excluded.

  Amazon's "$10 and Under" storefront.

Amazon's "$10 and Under" storefront.

A few months ago, Amazon launched a microsite for products priced at $10 or less. Some speculated that this was a direct swipe at the dollar store market, which seems to be relatively immune to Amazon. By widening their low-priced selection, Amazon is able to attract and retain more value-oriented customers, including teens (more on that below). And the fee discount makes if more attractive for merchants to offer products at this price point.

 

Ongoing threat of sales tax reform spooks retailers

Today, the Supreme Court will begin hearings from retailers who are challenging a South Dakota law that requires out-of-state retailers to collect sales tax in the state. The decision will have implications for other states who are looking at updating sales tax laws.

Amazon already collects and pays sales tax on orders for its own inventory, but more than half of all Amazon orders are sold by third party merchants, who are responsible for complying with states’ requirements. The issue of which states to collect and remit sales tax in is further complicated for merchants who use Amazon’s FBA program, which distributes inventory to various states depending on customer demand and warehouse capacity. If laws are passed that require only a physical presence in a state in order to be taxed, merchants may unwittingly end up with sales tax obligations in dozens of states.

The ultimate cost of administering the often complex filings of each state is a cost that many merchants--large and small--are concerned with.  According to the publication Accounting Today, Max Behlke, director of budget and tax at the National Conference of State Legislatures, calls this case the "tax case of the millennium."    

 

Amazon’s R&D investment soars

According to FactSet data reported by ReCode, Amazon spent $22.6 billion on research and development in 2017, 41% more than the prior year. This includes spending on AWS, Alexa, and technology used in the cashierless stores that are being rolled out.

This investment is promising for brands selling on Amazon. Voice commerce is widely cited as being the next major technology that consumers will use to search and buy products, along with a whole host of other activities. And AWS is a cash cow that Amazon can use as a buffer with the capital intensive retail business. Amazon is setting itself up for the future.

 

44% of teens call Amazon their favorite retailer

New research from investment bank Piper Jaffray finds that Amazon is the clear leader in the teen market. 44% of teens say that Amazon is their favorite shopping website, with Nike a distant second at 8%.

A shift to online shopping was a broader trend seen in this year’s survey, with teens spending 2% more than a year ago, and online shopping accounts for 19% of shopping a compared with 17% a year ago. This was at the expense of department store shopping, which was down to 38% of shopping time versus 41% a year ago.

Today's teens represent an important market for Amazon--winning the hearts (and wallets) of this group ensures a strong customer base going forward.

 

This is all the news I have to share with you this week. Subscribe to our newsletter to make sure you receive my news recap next week!

Amazon's Shift To Subscription Models Is A Mixed Blessing For Brands And Retailers

Amazon announced plans on Friday to move its Prime Pantry service away from a flat fee of $5.99 per box to a $5/month subscription model. Prime Pantry delivers non-perishable household goods to customers in limited-capacity shipments.

Previously, Prime Pantry users were always looking to optimize their shipments by fitting as many items into a shipment as possible to get the most out of the $5.99 shipping fee. But it was time-consuming and mentally taxing for customers to maximize the box contents. By moving to a subscription service, Amazon can count on consumers placing orders more frequently so they can make the most out of the subscription, rather than painstakingly building a shipment they might abandon because of the effort.

Besides more predictable fee income, the benefit for Amazon in shifting to a subscription model is that the consumer has consciously or unconsciously made a decision to regularly use the service, or at least use it enough to offset the monthly subscription. In this way, Amazon increases the average order value and customer lifetime value of each subscriber. This effect is seen with Prime members, who spend an average of $600 more per year on Amazon compared with their non-Prime counterparts.

 

Amazon’s subscription model takes aim at other retailers

For retailers trying to compete with Amazon, it is another blow. Amazon has rolled out subscription programs for household staples (Prime Pantry), grocery and product (Amazon Fresh) as well as a widening range of products available to buy on Amazon through the Prime program. This means brick-and-mortar retailers are losing as consumers have less reason to visit physical stores to buy products. Other online retailers suffer too. As the psychological lock-in effect from subscription models takes hold, consumers are less willing to pay shipping fees on products they can’t buy as part of their subscription.  

Amazon is presumably losing money on fulfilling Prime orders - no-one can ship a 48 pound box of household goods for even close to $5.00, even Amazon themselves. The service is not inherently profitable, but that has never been Amazon’s main game. Following their corporate playbook, the drive toward subscriptions is designed to increase adoption of the core Prime service (of which almost 50% of US households are already members), create a psychological lock-in effect for consumers, and freeze out the competition.

To compete on the consumer inertia created by these subscription programs, retailers need to identify and leverage unique differentiators that Amazon doesn’t have. Physical stores can throw events and offer in-person services that Amazon can’t. Online retailers can offer unique product assortments that aren’t available on Amazon, collaborate with online influencers on marketing and even developing limited-edition product lines. And all retailers could benefit from making guarantees around the authenticity of their products and playing up Amazon’s recent issues with counterfeiting on the marketplace. 

 

Amazon subscriptions may be good news for brands

Subscriptions offer a predictable source of revenue that is rare in the world of retail where many companies make the bulk of their total annual revenue in the last three months of the year.

Beefing up their subscription service offerings could be beneficial for companies and brands who supply Amazon inventory, who benefit from the psychological lock-in effect that subscriptions have on consumers. Once you’re spending part of your household budget on a subscription, you feel compelled to make the most of it.

Brands who sell on Amazon stand to realize incremental increases in sales as consumers take out these subscriptions and spend more on the Amazon platform over their lifetime. Companies who continue to invest in making their products easy to find and attractive to customers will benefit from further entrenchment of Prime subscription programs in US households. But companies who primarily distribute their products through brick and mortar retailers may come under more pressure if wholesale purchase orders start drying up as a result of less foot traffic and online orders through these channels.

To make the most of Amazon’s foray into subscriptions, brands need to optimize their presence on the platform so their products are discoverable and compelling to subscribers. There are several programs and promotions that brands can use to get traction here, including Amazon’s own “Subscribe & Save” program which many brands are eligible to enroll products in.

Subscribe to the Bobsled Marketing newsletter for more Amazon marketing tips and news.

The 2018 Catalog and Integrated Marketing Summit

We are more than happy to share with you that Bobsled Marketing has committed to sponsoring the 2018 Catalog and Integrated Marketing Summit hosted by CohereOne on Wednesday, May 2-4 in Chicago, IL.

We are looking forward to a fantastic educational and networking event created for multichannel retailers, a comprehensive agenda and highly experienced keynote speakers sharing insights on how to stay on top of emerging digital and to direct the best strategies to thrive in a competitive landscape.

Our founder and CEO Kiri Masters and our Operations Manager Julie Spear, will be attending and speaking at this event and we are excited to announce that you and your team can join them as our guests. Furthermore, registration is free for retailers and merchants.

 

ABOUT THE SUMMIT

This year’s theme is Integrated: The Smarter Path to Profitability. Strategies for synchronizing print, digital and social media for maximum impact.

The Summit will focus on three concerns of today’s direct marketer:

• Delivering Cohesive, Data-Driven Marketing
Success depends on a "road map" that integrates catalogues and direct mail with digital media. Learn how to turn print, digital, and social media into powerful and unified marketing programs.

• Integrate Web Behaviour to Drive Marketing
Learn how intent marketing can make one-on-one marketing a reality by converting visitors into browsers, and buyers into loyal fans, and coordinating this with other marketing efforts. Triggered postcard programs are changing the direct-to-consumer landscape.

• Respond to Disruptive Marketing Forces
From merchandise to marketing, there are many disruptive forces that are impacting general marketing issues to include digital ad blocks and the heavy presence of Amazon.

 

OUR CONTRIBUTION – THE AMAZON TRACK

Kiri and Julie will take you through a very insightful agenda, presenting you the imperatives for actively engaging with Amazon, helping you understand the rules of the Amazon game and sharing some actionable strategies relevant for retailers of all levels. Here is an overview of the topics they will approach.

•    Introduction. The Imperative
•    Hard Truths About Amazon
•    Amazon Foundations: Operational Excellence & Brand Protection
•    Generate Momentum: Organic Marketing & Growth Strategies
•    Scale Up: Paid Advertising on Amazon
•    Case Studies and Q&A

 

KEYNOTE SPEAKERS

•    Rand Fishkin, Founder and Former CEO, MOZ
•    Beth Horn, Industry Manager, Specialty Retail, Facebook
•    Michelle Farabaugh, Chief Marketing Officer, Harry & David
•    Larry Kavanagh, Chief Executive Officer, Navistone
•    Sheryl Clark, President and CMO, Beyond Proper
 

This Summit is an absolute must-attend event for merchant companies desiring to integrate print and digital media to drive maximum sales. In addition, you can participate in three pre-conference workshops on catalog marketing, digital marketing and Amazon strategies.
 
We think you will find the Summit to be the most educational conference of the year and a great opportunity to network with other professionals and meet with the best vendors in the industry.

register.jpg

If this sounds interesting to you, feel free to join us. To access more information about this event and see what are the free perks you can enjoy, you can download the brochure or visit cohereone.com/summit
 
We are looking forward to seeing you there!