Commerce Spotlight: Unpacking Amazon

Photo: iStock/AdrianHancu

“If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table.” 

— Amazon Founder and CEO Jeff Bezos

Amazon’s self-described vision is to be Earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online. And it appears it hasn’t lost sight of that vision. The Seattle-based juggernaut is the world’s largest internet retailer when measured by revenue and market capitalization. And, the growth has only just begun.

In fact, Amazon recently reported its 11th straight quarter of positive net income — and the largest in its history. But, while opportunity is vast, not everyone is able to make it rain in the Amazon forest. So,     Response hunted for insights from a few top marketers to see what it takes to be king of the jungle.

Discovering Amazon

“There’ll always be serendipity involved in discovery.” 

— Jeff Bezos

Amazon Go
Photo: iStock/sEASTOCK             

If someone were traveling to the actual Amazon, you’d expect they would go into the trip with a solid itinerary. Likewise, why take a product into the world’s largest marketplace? 

“Amazon is a very effective sales channel and has been a great way for us to increase our reach and customer base,” says Tyson Walters, CEO of Los Angeles-based Shed Defender. “With the FBA (Fulfillment By Amazon) service you can have Amazon store, fulfill, ship, and pay for returns, which creates a seamless experience for both the seller and the consumer.”

Though it’s an expansive ecosystem with a lot of big players, Walters has managed to carve out a sweet spot on Amazon for Shed Defender, a product that helps control and contain dog hair.

However, finding success as a newcomer on Amazon doesn’t come without its hurdles. “If you plan to start selling on Amazon and don’t have experience setting up a store, I would suggest working with a third party to help you set everything up,” says Walters. “It is possible to do it yourself, but it’s very time consuming and the process is cumbersome, so it helps to work with an expert who can ensure you’re not making any mistakes along the way.” 

Upon crunching campaign numbers, Andy Latimer, CEO of Florida-based Zahalo, a Bluewater Media company, found that anywhere from 20 to 40 percent of DRTV traffic was going to Amazon.

“We work with clients from big global brands, to As Seen On TV marketers, to independent entrepreneurs,” Latimer says. “You have to have your product on Amazon, but you have to do it the right way. If you put it out there and you sell Amazon retail, they’re buying the product. You’re getting your wholesale cost. That’s a sale just like any other retailer. But the problem many face is that Amazon doesn’t protect your map pricing. And they will go to the lowest price. That can destroy your retail if you’re not managing Amazon right or if you don’t have the right agreements in place. Or you’ll go to sell in a retailer, and the retailer will check it on Amazon and want to be 50 percent of what Amazon’s priced at. So, now your wholesale value even gets degraded. Brands can lose their price protection and damage their overall marketplace for transaction.”

In the U.S. alone, Amazon has more than 150 million monthly unique visitors, according to comScore. It’s evident that opportunity exists, so long as you approach Amazon diligently. 

“It’s important to make sure you know that Amazon will be a profitable channel by understanding what their cut is, including everything from shipping costs to fulfillment. If you are having conversations with a third party or an Amazon expert, they can make sure that you’re considering all fees and costs so you know whether you want to move forward,” says Walters. 

Latimer’s Zahalo is one of those third-party vendors and a top-100 Amazon reseller. “I totally understand why people do Amazon retail — because it’s cash flow,” he says. “And they’re building on the quarter. So if you’re already addicted, it’s really hard to get off it. You have to have smart people who are looking at the numbers and saying, ‘Yeah, we’re getting the wholesale value, but we could be getting the retail value if we were selling to Amazon through either a third-party established reseller or by setting up and managing our own third-party reseller from a vendor side, making sure price protection is there,’” says Latimer.

Amazon: A Snapshot

Expanding Horizons

Now that you’ve packed your bags and you’re ready to go, let’s consider how to best expand your products into Amazon once you’ve arrived.

“Be mindful of the challenges. As Amazon is an open ecosystem, it’s critical that marketers closely monitor their listings and confirm that competing listings are authentic,” says Michael Weinstein, chief marketing officer of Hawthorne, N.Y.-based Allstar Products Group. “Additionally, reviews can make or break a program — think like a customer. While customers are initially drawn in by the uniqueness of your product, they are ultimately more focused on price, delivery, and product reviews.” 

Latimer stresses that price protection is key. “The challenge we’re facing on the direct response side is that we’re running commercials, and we’re driving traffic,” he says. “Typically, what you see is that you lose about 2 percent of your DR web sales, but you gain 20-percent more sales on Amazon. But if you don’t have your price protection set up right and you’re selling Amazon retail, it will erode your price. So consequently, that differential number will be higher, and more people will buy on Amazon if you don’t have the right price protections. Unless people will buy direct from you, you’re losing the retail pop, which is how everyone has been funding media recycling for years.”

In order for a marketer to protect its price, brand registry is essential. Latimer explained that if you have a smaller shop that orders 100 units of your product and it doesn’t sell through, they’ll move it over to Amazon and drop the price — suddenly becoming the lowest price — but not as an authorized Amazon seller. “What we can do if we have brand registry is we can have those non-authorized sellers removed to protect the price, the retail platform, and the direct response platform,” he says.

Once your presence is legitimately established on Amazon, it often makes sense to allocate a portion of your marketing mix toward getting consumers to Amazon on your behalf. This is especially true if you’re a burgeoning brand. 

“Sometimes consumers are hesitant to make a transaction on the website of a new or smaller brand,” says Walters. “Shed Defender ran into this issue when we first launched because we have such a unique product that nobody had heard of. By creating an Amazon store, we gave consumers the option to purchase our product through a trusted platform backed by Amazon’s A-to-Z Guarantee.” 

Amazon ranks No. 1 in reputation of visible companies in the U.S., according to a Nielsen survey. So, it’s clear that consumers are going to Amazon as their trusted e-commerce destination.

“Once our Amazon store was launched, we created ads on Facebook and Instagram that drove consumers to the store so that we could ignite sales and start to build a steady stream of reviews. We made sure we were diligent in responding to customer’s questions in the Q&A section to ensure we provided people with the information they needed to make a purchase,” says Walters.

Yet, advertising with Amazon itself can be an entirely different animal. “From an advertising standpoint, it can be tough to get your product indexed or searchable. It’s important to choose keywords that are relevant to consumer searches related to your product and input them on the back end and use them within the copy on your page,” says Walters.

The Amazon Effect

“In the old world, you devoted 30 percent of your time to building a great service and 70 percent of your time to shouting about it. In the new world, that inverts.” 

— Jeff Bezos

Certain marketers think of Amazon as a supplemental sideshow to their business they drive from retail, TV, and their own e-commerce site. But, Amazon may be more critical than they realize. “Measuring sales on Amazon as it relates to direct response campaigns is often critical to providing true visibility into product demand and response. Such visibility allows us to maximize the advertising budgets we put behind each campaign in order to most effectively drive retail sell-through,” says Weinstein.

It’s imperative to have tools and people in place measuring, monitoring, and attributing the Amazon effect in conjunction with evaluating a product or campaign’s success.

“There’s a great deal of nuance in the algorithms and the methodologies that Amazon is changing on a daily basis,” Latimer says. “The benefit we get from the thousands of SKUs we manage is that not only are we seeing what’s going on with the category, but there are hazmat issues on some products, there are shipping concerns with others, and some products can only be fulfilled by third-party vendors. Is your fulfillment house Amazon-approved? Even the logistics can be daunting if you’re not familiar with doing it on a regular basis.”

Latimer continues, “The marketing side of it is the other interesting part. We’ve seen products where we know television is driving the traffic. A particular product we work with, in a fairly conservative media spend, was selling to Amazon retail, and in essence placing ads through Amazon Marketing Services to drive the connection. That means when someone was coming to Amazon to search for their product, they click through and drive them right away. We saw a direct correlation from when we were on TV and Amazon’s ‘ask-for’ increased spend. So, although TV was driving the response, they were increasing spend on Amazon in line with the television — and actually outspent television on Amazon by more than 2-to-1. But when we turned the TV media off, sales dropped. After a hiatus of a couple weeks, we turned the TV media back on to prove where the spike was. TV was driving Amazon sales regardless of the Amazon advertising, meaning this marketer was overspending. They could have transferred and tripled the budget on TV and got triple the response that they were getting in sales, because they were looking at it and thinking the Amazon spend was having an effect, when television was driving it all.”

Latimer also insists that by taking Amazon into account, Zahalo is actually getting a true media efficiency ratio (MER). “If marketers today aren’t crediting Amazon sales back to the television campaigns, they are living in a world that just isn’t real,” he says. “A lot of people still try to judge their DR campaigns based of the initial response, but that’s just measure one. Yes, you want to see what the response is to the website and the call center, but if you’re not coupling your Amazon results immediately into your TV results, you’re missing it.”

Inevitable Cannibal 

What do marketers need to know to avoid cannibalizing sales when it comes to Amazon?

“You don’t worry about it. If you’re losing 2 percent of your DR sales coming to your transactional page, but you’re going to gain 20 to 40 percent on Amazon? Don’t worry about it. If you’re established from a third-party side, you’re not just getting wholesale. The cannibalization side happens when you sell Amazon retail and you’re running TV. Don’t do it,” warns Latimer.

For Walters, it’s all about the front-end strategy. “If you are the only seller of your product on Amazon and control your own store, you don’t have to worry about Amazon stealing sales because it should still be profitable for you and may help you build a larger customer base, generate awareness, and it’s a seamless sales channel,” says Walters.

But, it’s certainly a delicate balance to make sure you’re the hunter and not the hunted. “The reality is that Amazon will cannibalize sales. However, marketers need to be where the customer wants to shop. If you aren’t on Amazon, someone else will be,” says Weinstein. 

Amazon Awareness

So what lessons have marketers learned while exploring in the Amazon? “Be sure to implement leading practices when generating your product listings — headlines, descriptions, copy, images, etc. — as changing a listing once it’s live can impact your rankings and related organic search results within Amazon,” says Weinstein.

Walters contends that reviews are a pivotal piece of the Amazon puzzle. “You will get backlash if you don’t provide extremely clear and detailed information about your product on your page. It’s better to oversimplify and provide more than enough information about your product to ease concerns. Once a review is published there is no way to communicate with the customer and convince them to change their review — for privacy rights and review manipulation countermeasures. But it also can be difficult if you have people writing reviews before they buy or try the product. The best thing you can do is to comment on the review and rectify any negative situations — and even thank customers for leaving a review,” he says.

Latimer also stresses listings and keywords as huge success factors.

“We’re always studying what the competitors are doing,” he says. “The tools we use on the backside analyze against those keywords about who else is arriving, and we find that competitors are often sitting on all your keywords and they’re scraping your sales. So, not only must you protect your keywords, but you must understand the market share you have and how you’re affecting it,” says Latimer.

Walters adds, “The one lesson we’ve learned is that because Amazon is such a customer-first platform, they always side with the customer on disputed claims and returns. Also, Amazon sometimes does a poor job checking the quality on returned items. We had customers complaining that Amazon sent them dirty, hairy Shed Defenders because they were returned items that were not washed or put through any quality control process. We learned that it would be best to do all the returns ourselves so that we could eliminate these problems.”

Surviving Amazon

Establishing a successful presence on Amazon is great, but how do you ensure continued success? 

“While there is no magic bullet to guarantee continued success on Amazon, taking advantage of any number of available third-party tracking tools, as well as advertising vehicles offered by Amazon Marketing Services and Amazon Media Group could be greatly beneficial,” says Weinstein.

Walter’s long-game strategy involves making sure he’s the only one of his kind in the e-commerce ecosystem. “One tip for success if you have your own brand, or unique product, is to enter it into Amazon’s brand registry. This helps ensure that you will be the only seller of the product and can help detect red flags when dealing with knockoffs or someone who shouldn’t be selling your product on Amazon. We are the only seller of our product on Amazon, and that’s because we don’t allow other wholesalers to sell on the Amazon platform. It can drive down the price and create unnecessary competition,” argues Walters. 

Creative seems to be another factor where DR marketers often misstep. “A lot of people will take their short-form commercial, cut off the offer and throw it up on Amazon,” Latimer says. “That’s nice, but not as effective as video that’s properly tailored for the Amazon audience. That consumer is already there to buy. You don’t have to sell them. You’re not trying to drive a response, you’re trying to close the sale. At that point, you’re about validating, educating, and confirming their interest — and giving them the rest of the pieces you need. You’re pushing them over the line. The video should be a deeper dive to convert.”

The Everything Store

“You can have the best technology, you can have the best business model, but if the storytelling isn’t amazing, it won’t matter. Nobody will watch.” 

— Jeff Bezos

“Every product is different. First you need to understand the competitive landscape. Second, make sure you have price protection, and the best way to do that is going to a third-party Amazon reseller,” Latimer says. “If your media or creative agency doesn’t understand the intricacies of what’s going on with Amazon, you’re messing with 20 to 40 percent of your direct sales. It’s the difference between campaign success and failure. On a daily basis, as you start to go through it, make sure you have documentation for your trademark, and make sure you have the copyright on the images you’re going to place on Amazon. What may happen is someone will steal your image, make a listing, and start selling a product that they’re bringing in from another manufacturer. If you’re not establishing and protecting your brand, you will not survive on Amazon. You will be cannibalized, you will be knocked off, your images will be stolen, and you will have no protection.”

He continues, “But, you cannot run away from Amazon. You have to run to it. And you have to manage it the right way. Someone is going to get those sales. They’re going to go to Amazon, because people buy where they want to buy. You do not have control over that or over consumer purchasing. You only have control over consumer interest.”