Surviving and thriving on Amazon in today's world

Our Fulfilment By Amazon (FBA) team recently hosted a virtual roundtable on the challenges that have emerged over the last year and opportunities for growth and international scale. Amazon is a fast-changing platform and the barriers to entry are constantly changing. Our participants, including Simon Staines of TEAO marketplace optimisation and Venkatesh Sivaraman of Ansio Ltd, discussed some of the challenges in using Amazon as a sales channel and their shared experiences of retailing on and dealing with Amazon.

This is a summary of those insightful discussions.

Challenges with Amazon account managers

Amazon account managers will have different aims to your business objectives. Amazon rotate staff so that Amazon account managers will generally only stay in a role for three to six months. Their primary aim is to generate revenue for Amazon. This can be very challenging for brands to deal with given the constant change of key contacts.

The Amazon Selling Partner (ASP) 360 program offers an advisor that can potentially help you increase sales and optimise your Amazon business.

Simon Staines, who sold his FBA paddleboard business to an Amazon aggregator recently and now runs TEAO marketplace optimisation explained further: “If you use an Amazon vendor and have a vendor account manager, you will get very similar optimisation as the selling partner 360 program. When launching a product or when you are taken on by Amazon Vendor initially, account managers are tasked with listing as many products as they can from your brand. They will be helpful in optimising those listings. However, they will then aim to introduce you to additional chargeable Amazon services to enhance your brand such as on exclusive advertising. We use Amazon Vendor to help optimise our listings but don’t do it until you have all your assets available to build your listings as it will only be the initial three months that you get the help from Amazon’s account managers.”

Developments in the FBA market

The dynamic in the market has changed in the last 18 months. At the end of the pandemic large aggregators were coming onto the market who had deep pockets and cash to spend but were under pressure from their lenders to show results. These aggregators were driven by a race to scale. Many of the aggregators have had challenges in absorbing the businesses they acquired and are now focussing on operations.

Aggregators are using pay-per-click (PPC) advertising as a tool to boost sales and Amazon is taking advantage of that by increasing advertising costs. The number of places to advertise on the platform has increased.

Amazon lists products as sponsored, organic, highly rated and highly recommended. A lot of customer reviews are from the Amazon Vine program. Amazon will prioritise you in the highly recommended section if you participate in the program.

Venkatesh Sivaraman, Ansio Ltd, "Advertisement spend will see a sharp uptick, one of Amazon’s biggest revenues. There is a balance between these costs, supply chain issues and operational activities, but they need to be continuously monitored."

Amazon are giving aggregators full time account managers as there is a large opportunity to earn from them.

Challenges with Amazon Vendor Central

Amazon Vendor Central members sell and supply products to Amazon. Amazon then resells their products under its own name while Amazon Seller Central members sell their products directly to the customer or through programs like FBA.

There is less control over your pricing with Vendor Central as once the wholesale price is agreed, Amazon sets the sale price of products. In some cases, Amazon may sell stock through the Amazon Vendor channel below the wholesale cost which can cause problems with other distributors. There is also a lack of control or consistency over your stock and order numbers with Vendor Central. They can submit varying sized orders which are hard to fulfil but if they do not sell on time, they can send back all the goods.

An alternative is drop ship vendor. You only take an order when an order is placed on Amazon. Amazon send you a label and the Amazon couriers pick up and deliver.

Simon Staines, TEAO marketplace optimisation, "We used Vendor to influence the price of our products and help optimise listings. If you are sitting on a lot of stock and competing on marketplace, you can reduce the price on marketplace and Vendor will match it. This is a good way to try to prevent the return of stock from Amazon. You can also dictate how much stock you wish to send them but there are penalties if you get this wrong."

Scaling your business on Amazon

Amazon’s PAN EU program helps FBA sellers to sell their goods to Amazon customers across the EU and help them expand their businesses.

As an Amazon Seller, it is a requirement to be VAT registered in all countries in which stock is stored, this can involve a lot of duties and paperwork and the process can be slow.

Deciding which marketplace to target first can also be a challenge. For instance, Germany has the largest buying market with similar processes to the UK. It is important to focus on quality, market and language differences and you can use local translators for help with listings.

However, other EU countries may have advantages such as faster, easier registration and importation processes and lower fulfilment and storage fees. It is clear that the effects of inflation, supply chain issues and Amazon’s rising fees are taking their toll on vendors, however, there are lots of tactics you can use to navigate the platforms pitfalls and reap the benefits.

Read our last FBA roundtable write up or if you would like to join one of our roundtable events in the future, please subscribe now.