Practical Ecommerce

Align with Amazon’s strategy for marketplace success

Sometimes it seems that Amazon doesn’t support sellers in its marketplace. Seemingly nonstop restrictions on what can be sold in each category make it difficult for some sellers to list products. Violations and suspensions for minor infractions make sellers believe that Amazon is putting up barriers to success.

Actually, Amazon does want you to succeed. Marketplace sellers are significant to Amazon’s overall growth. Third-party sellers represent about 50 percent of all sales on Amazon.com. Sellers also provide Amazon with its breadth of selection. However, sellers should understand Amazon’s relentless pursuit of customer satisfaction.

The famous Bezos napkin sketch

Jeff Bezos, Amazon’s founder, had a simple vision for the company. A low cost structure would lead to lower prices. Lower prices with a wide range of products would lead to a better customer experience. This creates higher retention of satisfied customers, who return to make further purchases. This retention leads to continually increasing traffic to the website. Increasing traffic will attract more sellers, who will expand the selection. Combined, these factors lead to accelerated growth.

Bezos illustrated this vision in his now-famous napkin sketch.

Jeff Bezos's famous napkin sketch outlined the strategy for Amazon.

Jeff Bezos’s famous napkin sketch outlined the strategy for Amazon.

How has this napkin strategy worked out? Amazon averages over 6.5 million site visits per day. That makes Amazon the 10th largest website in the world by visits and the largest ecommerce site, according to Alexa statistics.

There’s one major item that is absent from Bezos’s napkin sketch: no taking of profits. What this strategy shows, and what most analysts misunderstand, is that reinvesting the profits back into the company creates a stronger brand.

Aligning with Amazon’s strategy

Once sellers understand Amazon’s strategy, they can begin to understand Amazon’s decisions. As a seller, you want Amazon to be diligent in policing the marketplace. It would not be good for consumers if the marketplace had no clear standards. It’s those standards that help sellers.

Providing a compelling and optimized listing will lead to more sales. When the sales of a product increase, that product will rank higher. A higher ranking gives the product a better placement. Better placement leads to more sales. More sales lead to a higher ranking, which provides better placement. And so on.

Seller Labs, which provides excellent tools for Amazon sellers, has created a helpful illustration of how Amazon sellers can offer a compelling customer experience.

SellerLabs' illustration shows how Amazon sellers can offer a compelling customer experience.

SellerLabs’ illustration shows how Amazon sellers can offer a compelling customer experience.

Similar to Google, a quality score is critical to Amazon. Although there is no stated grade as there is with Google, we know what components affect your listings.

Amazon’s algorithm looks for these items:

  • Between six and 10 high-quality images.
  • Product title. Depending on the category, product titles can range from 50 to 250 characters.
  • A strong brand.
  • Optimized bullet points. Shoppers don’t buy features, they buy benefits. State the features and describe the benefits.
  • A keyword-rich product description of at least 1,000 characters
  • Backend keywords. In the admin section of a user’s seller account, provide Amazon with additional information about a listing.
  • Backend target market, intended use, and other attributes.

All of these fields help Amazon deliver the best product result for a search query.

Your seller performance also affects your rankings on Amazon. An unsatisfactory performance rating — i.e., bad reviews, frequent out-of-stock items — will hurt your rankings.

Seller feedback score

The following factors determine a seller’s feedback score on Amazon.

  • Conversion rate. Calculated as (Total Items Ordered) / (Number of Sessions). The higher conversion rate, the more relevant the product.
  • Sales velocity. The number of units sold.
  • Inventory and fulfillment. Ability to keep items in stock; speed of delivery.
  • Historical sales. Sustained sales over time.

Understanding discovery

It’s important to remember that Google is mainly a search engine for answering questions, while Amazon is mainly a search engine for finding products.

Fifty-seven percent of shoppers on Amazon know what they want before they make a purchase. Fourteen percent of shoppers are replenishing products. This leaves twenty-nine percent of shoppers who are browsing on the site, to discover new items. Twenty-nine percent of 6.5 million daily visitors is a large number of prospects.

There are two important takeaways. First, advertising on “Sponsored Products Related To This Item” can help shoppers find your items. This ad is triggered by keywords associated with the product listing on that page. So, knowing your competitor and your competitor’s keyword sets is vital to driving sales from Sponsored Products ads.

Second, what you do off of the Amazon marketplace to promote your products directly correlates to success on Amazon. Driving traffic from social media and from Amazon affiliate sites is something you should always consider, as Amazon monitors inbound traffic to a product as a measure of its popularity.

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  1. Bandini December 14, 2017 Reply

    We are planning to list our product in the Amazon marketplace. This article will really prove beneficial. Recently came across this article: https://www.knowband.com/blog/ecommerce-blog/chicken-and-egg-problem-of-marketplace-startups/. While the chicken and egg problem may affect a seller on a platform like Amazon, but it is definitely a factor for the small marketplace. Can you write a blog for the newer marketplaces like Jet and others? Would really appreciate this effort.

    • Phil Masiello December 14, 2017 Reply

      There are several better articles for you to understand how to best list your products. And here is a free ebook that will provide you with the steps to success. https://www.hounddogdigital.com/expert-amazon-selling/

      Jet, Walmart.com, eBay, Rakuten and the other marketplaces are great outlets as well. But it depends on the type of products you are selling as to which marketplace will work. My advice would be to focus on success on Amazon first and then branch out. As a group, Amazon and eBay are 90% of all marketplace sales. So if you can be successful there, the others are easier.

  2. amazonian December 14, 2017 Reply

    It’s good for sellers to use amazon for selling a proven bestseller product, preferably nicely branded by their own. But other than this scenario sellers are just building up amazons business as repeat business will hardly come your way as third party seller. People receiving their parcels only know that the product came from Amazon and not from a third party seller. Plus if you bulk upload all your products to their marketplace you as a seller are giving away valuable data and have limited analytics overview on this. You are at the mercy of amazon.

    • Phil December 14, 2017 Reply

      Actually, it is the exact opposite. Resellers of national brands have the lowest profit margins. Plus, Amazon has very good analytics and very good information. At the end of the day, 62% of all product searches begin on Amazon. 6.5 million site visits per day in the U.S. That is where the customer is. Smart and informed sellers understand how to use Amazon as a customer acquisition tool. Understanding how Amazon works and how to sell on it is what leads to success.

      • amazonian December 17, 2017 Reply

        When i say third party sellers I mean the resellers that carry brands of others and haven’t got their own product with branding. In your case you say national brands have the lowest profit margin, then you can also assume that margin will cut even lower on amazon platform.

        In both cases you as a 3rd party seller will never be able to establish customer relationships, digitally or offline as you don’t have access to that. So your not building up your own name.

        As 3rd party seller you’re at amazons mercy.

        Amazon is good though to sell of surplus stock or introduce your own branded stock preferably fully patented.

        • Phil December 18, 2017

          I’m not sure why you insist that Amazon will cut your margin or that you are at Amazon’s mercy. If you are a third party FBA/FBM seller, then you are in control of your business. One company I work with moved from fulfilling their products to allowing Amazon to fulfill their orders and improved their margin by 42%. I have been in e-commerce since 1998 selling everything from food to fashion to personal care and beauty products. I have run my own warehouses and I could never fulfill products as low as Amazon can. As far as owning the customer, again, there are ways to merchandise to find out who those customers are. But it takes work, effort and a knowledge of Amazon’s terms and conditions. You can look at Amazon as the enemy or as a huge opportunity to acquire customers and scale your business in a lower cost manner. We all choose our viewpoints.