Practical Ecommerce

Playing The Amazon Game

Sooner or latter every online retailer will consider selling on Amazon, or are already doing so. Amazon is a huge market, and it would be unwise not to consider it. There are other blogs covering the pros and cons, but none really cover what to do if you decide to take the gamble, and enter the Amazon jungle.

You have to recognise that this is Amazon’s playground and they set the rules. There is simply no point in ranting about the unfairness of their feedback system, the customer centric decisions, the errors in their catalogue that will come back and bite you, or moan about the other sellers who dare to undercut you. This is the playground you have entered. So to succeed, indeed to even survive, you have to play the game to your advantage.

You must learn Amazon’s performance metrics. You must monitor your performance against these metrics (because Amazon certainly is), and you should take steps to ensure that you do not break them. The main metrics are all percentages; A-Z claims, negative feedback, refund rates, pre shipping cancel rate, and too much money too quickly.

Police your feedback on Amazon. If it is neutral or negative, and is a review of the product, Amazon will remove it IF YOU ASK. Always respond to poor feedback politely and apologetically. Put your case in a businesslike manner. Respond to the good feedback too, thank them. Try and tailor your responses to each comment and do not just give a standard reply to all. When you get the really annoying “1/5 Excellent” or “3/5 …” e-mail the customer and ask them to remove it. Sometimes they do! Finally, and most importantly, learn from your mistakes. I have noticed a improvement in good feedback rates after we have responded professionally to unfair feedback.

Research your main competitors. Review their feedback and see where they are going wrong. Do not repeat their mistakes. See if you can work out their pricing strategy, and their stock levels. Amazon tells you when stocks are low.

Reply to all customer e-mails as soon as possible. The quicker you can respond, and perhaps even fix the problem, the less likely you are to get a negative. The absolute worst feedback you can get, in my opinion, is “they never reply to their e-mails”.

No matter how much care you take, some customers just cannot be satisfied. You will get negative feedback. If you have only sent out 50 orders and got 10 feedbacks, then this one negative will severely impact your business. New starts especially have to send out as many orders as possible, get as much positive feedback as they can, before the first negative arrives. One way to beat this is to have one or two fast moving items. Something that is cheap to stock, easy to ship, and is in constant demand. It does not matter if you only take a few pence profit on it. What matters is that every sale you make increases your order count and makes you less vulnerable to the negative.

Then there is price. Many people will tell you selling on Amazon is all about gaining the blue buy it now box, and that you have to be cheapest to win the blue box. This is wrong. Its all about making a profit. It is too easy to get caught up in the chase to get the blue box. To keep on reducing prices until you “win”. Whilst you may have gained the blue box, have you really won? How much money are you actually making from that sale? Work it out. For every product you sell on Amazon, you should know to the cent exactly how much it costs you to source, pick, pack and ship. You should also know to the cent exactly how much you get, after taxes and Amazon commission, if you sell the product at $X.

Amazon keeps secret the exact method of how to win the blue box. What is certain is that price is not the only factor. Amazon like to share the box between similar sellers. For example I have noticed that if you were the cheapest on every item on your inventory, you would only have the blue box on about half. I don’t know about you, but if I had to pick which half, I would go for those items where I make more money. This means you must pick your battles.

So as a thought, if instead of trying to be cheapest, you always tried to be 2nd, would you make more money? Try to be pro-active with your pricing. Do not try and beat the new launch who in any case cannot get the blue box; do not try and beat the merchant who only has a couple of that item left; if something is fast moving, let the cheaper merchants burn through their stock at give away prices and sell yours when they sell out. Try and be the last seller on a popular item, not the first.

You can make money on Amazon, so long as you play their game to your advantage.


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