Chapter 14 The 4 Secrets of Long-Term Amazon Success [including FBA]
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Long-term success on Amazon comes down to four key processes: competitive review, SKU strategy, inclusion in FBA and repricing. For brands already selling on Amazon, mastering these four areas will allow you to continually improve your rankings, your product offering and your revenue from Amazon as a channel.
Here’s how to think through each aspect and bring your brand to world-class status on Amazon.
Be a Strategic Purchaser
As you expand your inventory of ASINs (Amazon Standard Identification Number), you’ll want to make sure that each purchase was made thoughtfully and logically.
It’s key to conduct research into potential merchandise ahead of buying, lest you end up with non-competitive, unreliable or otherwise problematic stock that you’ll be forced to liquidate earlier than planned.
Below are key elements to consider when making purchasing decisions:
1. Sales rank
There are two types of ASINs you should be on the lookout for 1) those with an extremely high ranking and 2) those with no ranking at all.
A high ranking ASIN will allow you to sell an item that’s already popular with buyers, making it a safe bet, while a very low (or non-existent) ranking could open up new markets and establish you as the dominant seller.
2. Product reviews
A lot of great customer reviews are a good sign about an ASIN. Pay attention to them. On the other hand, don’t let one or two negative reviews spoil the whole bunch.
Often, outliers may be irrelevant to the product, such as when the product description wasn’t read carefully.
3. FBA status
A product without FBA offerings presents a perfect window of opportunity if you are an FBA seller. But be careful.
Ask yourself why that ASIN isn’t already being sold through FBA. In some cases, it could be deemed hazardous and forbidden for FBA.
4. Price fluctuations
Check out the ASIN’s history. A history of dramatic leaps and plummets may indicate price wars, which you would be wise to avoid.
5. The competition
It’s important to consider how many sellers are sitting on an ASIN, which Amazon refers to as “offer depth.”
Purchasing an ASIN that lacks offer depth is an easy way to establish yourself as the main seller, but an ASIN with dozens of sellers can indicate that there is enough demand for that product that you could still stand a chance of getting a piece of that pie.
6. Amazon search placement
A high-ranking ASIN allows you to capitalize on the profitability of an ASIN whose success is already proven. And a low-ranking ASIN provides the opportunity to expand into new territory as the main seller.
7. Item categories
You’re probably already thinking in terms of item categories. Maybe you specialize in one particular area, and it’s working well so far. Don’t be afraid to venture into other categories, as long as you can back up your reasons for expanding. It may be easier to start by expanding into a related category at the beginning.
Apply a Unique Strategy for Each ASIN
Your company is growing rapidly, and it’s now harder than ever to strategize for each ASIN individually. At the same time, you understand that applying a one-size-fits-all solution is not the answer.
The most efficient and effective way to handle this is by focusing your efforts on your best selling items.
Here’s our recommended four-step process.
1. Choose a profit margin strategy
Are you operating a high- or low-profit margin business? Do you expect this to change or stay the same? Understanding your big picture outlook is vital for all subsequent decisions.
2. Understand replenishment
What is the sales cycle for the item? Is it a perennial best-seller that requires constant replenishment, or a seasonal success that functions on a different cycle?
3. Assess the ASIN’s seasonality
Is this ASIN meant to sell out in a short cycle, or a longer one? This is related to the previous point about replenishment.
4. Be aware of liquidation needs
If you’re an FBA seller, you need to take into account that Amazon charges extra fees for items held in storage for over six months. Start the liquidation process ahead of time so you don’t get hit with these fees. If an item’s not selling, you may need to lower the price or have it returned to you.
Fulfillment Methods: FBA and SFP
There are two great fulfillment options for sellers wanting to scale their business: Fulfillment by Amazon (FBA) and Seller-Fulfilled Prime (SFP).
Each has its own unique features and benefits.
Scaling with FBA
Fulfillment by Amazon (FBA) allows third-party Amazon sellers to delegate their packing, shipping and customer service process to Amazon’s fulfillment centers, rather than handle logistics from their own home or office.
This method offers numerous benefits.
First, it frees up your time, allowing you to focus on expanding your business and strategizing on items. You won’t have to spread yourself thin or take on more employees — Amazon has its own well-oiled machine to handle the day-to-day aspects of running a business for you. In fact, FBA sellers received 33% less negative feedback than Fulfillment by Merchant (FBM) sellers.
Second, as an FBA seller, your products are automatically Prime eligible. When you consider the fact that almost half of American households are Prime customers, this means you’ll gain access to a wider range of buyers than you would have otherwise.
Seller-Fulfilled Prime (SFP)
SFP is a relatively new option that will allow you to fulfill orders yourself, while still receiving the same benefits of Amazon Prime that FBA sellers have access to. Only top-performing, highly reliable sellers are eligible for this method. It’s ideal for businesses who carry a lot of heavy items, who would otherwise be subject to FBA’s overweight fees.
Choose the Right Repricer
As your business expands, the question is not whether you need to invest in a repricer — after all, 60% of high-grossing Amazon sellers (with a revenue of $2.5M- $10M) use one, which is a good indicator of their importance. The question now becomes, which repricer is the right fit for you?
1. Manual repricing
Manual repricing isn’t really a repricer since all it means is manually adjusting the prices on your ASINs yourself, one by one. The most basic form of setting prices, this method is best left to smaller sellers who have a manageable inventory, and limited funds to spend on technological solutions. Since you are trying to build a multimillion dollar business, you’re ready to move on from manually setting your prices, if you haven’t already.
2. Rule-based repricing
Rule-based repricing in the most common repricing tool used by Amazon sellers. You set a price-related rule — say, to be in the lowest 10% of sellers — and the software reprices according to your competition.
One of the biggest problems with this type of repricer is that it feeds price wars, ultimately eroding your profit. And it’s especially short-sighted for sellers with high customer satisfaction ratings, who can often price higher than the competition and still win the Buy Box.
3. Algorithmic repricing
Like rule-based repricing, algorithmic repricing is a tool that aims to automate your repricing process. But the similarities end there. Algorithmic repricing, unlike rule-based, evaluates a whole host of seller performance metrics that go into winning the Buy Box using Big Data.
This allows for highly accurate and profit-maximizing results. You won’t have to worry about being priced down or leaving money on the table. As you grow, investing in an algorithmic repricer — which comes with a higher upfront cost — will earn you more than you could have otherwise.