Guillaume: Hello everyone, Guillaume Le Tual here, host of the E-commerce Wizards Podcast where I feature top leaders in business and e-commerce. Today, I’m excited about our guest because he can help a lot of people, some of my clients, but a lot of people at large about how to be successful on Amazon, we have a different angle at this.
Today we have Jeff Cohen of Seller Labs, who’s going to be talking to us from a different angle than most other cases that you’ve heard about that we typically hear somebody starting from zero and wants to sell on Amazon. They talk about product research and all that stuff. We’re going to be looking at it from the angle that you’re an established merchant, you already have a catalog, but you’re not yet selling on Amazon, you want to reap this opportunity. How do you go about it? How do you make this a success? So, a little bit before we start, some context here, Amazon is really amazing. There’s like 10 million sellers worldwide, 1.9 million sellers active in 2021. They’re expecting this to go up by another 1.4 million in 2021.
But now in terms of numbers, even though Amazon’s doing over 125 billion a year. You know, there’s only one in 10 seller that will reach $100,000 in sale and only one in 100% of sellers that will reach the $1 million mark. We wanted to discuss with Jeff here, how do you become one of those guys that reaches a $1 million dollar mark and over when you’re an established merchant selling with an e-commerce store and so on.
So just before we get started, here’s our sponsorship message. This episode is brought to you by MageMontreal. If a business wants a powerful e-commerce online store to increase their sales or to move piled up dormant inventory to free up cash reserves or to automate business processes to gain efficiency and reduce human processing errors, our company MageMontreal can do that. We’ve been helping e-commerce stores for over a decade. Here’s the catch, we’re specialized and only work on the Adobe Magento ecommerce platform. We’re among a handful of certified Magento companies in Canada, we do everything Magento support, development, maintenance, debugging, anything they need, we got their back. Email our support team [email protected] or go to magemontreal.com. So thank you for being here today, Jeff.
Jeff: Yeah, appreciate. Thanks for having me on, love talking about Amazon and love talking about how to take your brand or your business that you have already worked on and established and moving it onto the platform to expand your business.
Guillaume: Yeah. And again, just to put a bit of context here. I know you’re an Amazon expert, but for the audience that doesn’t know you, do you want to give a quick intro about yourself?
Jeff: Yeah, so my story started back in 2005, I started a website called textbooks.com. About 50% of our business was occurring on Amazon and eBay and about 50% direct to consumer. I’ve been involved in the Amazon ecosystem ever since then. In 2012, I worked with the founders of Seller Labs to take technology that we had built for our e-commerce business, we were buying products at USPS auction and convert it to being SaaS software for Amazon sellers. Today, we’re one of the top third-party software system providers in the space. We work with 1000s of Amazon sellers across the board, helping them with communication reviews, advertising, and just basically understanding their metrics and how to focus their business on a daily basis.
Guillaume: Awesome. Thank you, Jeff. I made a lengthy introduction here but the question is pretty clear. I have an existing store and I’m selling on any platform, Magento or other and I want to start selling on Amazon, how do I get a homerun?
Jeff: Yeah, a homerun. First, I would say that don’t expect a homerun, look for bass hats as probably the first piece of advice that I would give. There’s kind of a misconception about Amazon. Your consumers are most likely already looking on Amazon, if not for your brand then for your product. The first thing I would do is really try to understand the landscape of Amazon and kind of what currently sold who your competitors are. A lot of times your competitors on Amazon are different than who you may consider your traditional competitors to be. So, understand what that landscape looks like, understand who or what the buyer persona is for the people who are buying your product. Some products are a good fit for Amazon, some are not a good fit for Amazon.
One of the ways to really tell whether your products a good fit for Amazon is to look at who and how your competitors are selling online and what price points they’re selling online. You don’t have to be the cheapest to win on Amazon, I know people who sell $500 waterproof speakers and I know people who sell $25 waterproof speakers, but the competition level for each of those is vastly different. Therefore, the type of product and the type of consumer is different. And you should really understand your buyer persona. And you should understand how your buyer persona is shopping for your product. And that’s going to start to indicate whether Amazon is a channel for you to consider. And how big of a hit, whether it’s a single all the way to a homerun that you can have with your product.
Guillaume: Okay, good. So, a series of base run that accumulates to a homerun, eventually.
Jeff: We should talk hockey analogy, though, right? Because you’re from Montreal.
Guillaume: Yeah, but I’m not that knowledgeable. But yes.
Jeff: I think one of the misconceptions of Amazon is that I’m going to put my product on Amazon and my sales are going to take off. And that’s not the truth.
Guillaume: Exactly, yeah. I’ve heard that. How do you go about this? And should you dump your whole catalogue, so to speak on Amazon as is? Or should you filter it? Should you enhance it before putting it there?
Jeff: I think that’s a great place to start, which of your products should you sell on Amazon? My guess is your catalog follows what’s called the 80/20 Rule or the Pareto Principle, which means that 80% of your sales come from 20% of your skews. I would focus on your top 5% to 10% of your skews that are generating the majority of your sales, and look to get those on Amazon first. Now, depending on the size of your catalog, there could be a little work or a lot of work to get on Amazon. I always say dip your toe in the water before you dive into the deep end.
What you want to do is take some of your top selling products, start getting them on Amazon, start seeing how they perform. Now, when you sell on Amazon, you have two choices, you can either do what’s called merchant fulfilled where the order comes from Amazon, and you’re responsible for shipping the order to your customer. Or you can do Amazon prime, which means you ship the products into an Amazon warehouse and then Amazon is fulfilling the orders. Now the advantage of Amazon prime is that you get the prime badge. Now the prime badge has been proven to increase sales by somewhere times up to 50% to 70%. Why such a wide range of numbers? Because it depends on what type of product and the price of your product.
So if you have a less expensive product, we’ll say under $25, you really want the prime badge because it gives your customers free shipping. If you have a really expensive product, a hard to ship product, the prime badge may not implement or may not skew your sales nearly as much. But these are one of the decision points that you have to make when entering the Amazon system is who is going to fulfill your inventory. And how are you going to interact with your customers? Step one, take a look at your catalog and kind of figure out who exactly or what exactly you want to be selling on Amazon, then you want to start looking at how you want to sell it, are you using Amazon Prime or are you going to be doing a fulfillment by yourself?
Guillaume: They had that in between program for a while, like seller fulfilled prime, but I’m reading on the side that currently they do not accept new sellers in this product.
Jeff: They haven’t accepted seller fulfilled prime sellers now for over two years. So really, if you want the prime badge, you have to ship the products into Amazon. I was even talking to somebody this morning about how to get started on Amazon. And if you’ve never sold on the Amazon platform before, my first recommendation is go start an account. I’ve probably already said my first recommendation four times and you’re probably already confused. But you’ve got to get your feet wet and you have to start figuring out what all is there.
Amazon has purposely made the account setup process more difficult than it was a year or two years ago, because they’re trying to keep bad actors from setting up multiple accounts. You have to have a unique business, a unique business identification number and bank account to set up an Amazon account. And if you already have an Amazon account set up under those business IDs, you have to sell under that one. You can’t just move them and create new accounts because if you think about it, Amazon doesn’t want people jumping around from account to account. They want you having one account for your business. So, get your feet wet and get your account set up. Whether you’re going to do FBA or you’re going to do merchant fulfilled, it doesn’t matter, you have to have an account on Amazon.
Now, once you have an account on Amazon, now you can start loading inventory into create listings. And depending on the size of your brand, you might even want to take a step back and figure out whether somebody else is already selling your product on Amazon. Because what a lot of people find that they didn’t even realize was that their product has momentum, and somebody is already selling their product on Amazon, because Amazon’s a marketplace, and anybody can sell. So, understand how your product is currently being represented.
Another thing that you can do, another little tip, something you can check is go up to the Amazon search bar. And in the search bar, start typing in your brand name, or your product name, or maybe even your product skew. And it’ll give you what’s called a search suggest. And if your name, your brand name, or your product name starts to show up, that means people are already searching for it, so Amazon is suggesting it to people. Go ahead and click on that and see what’s coming up when people are searching for your brand. Because one thing that brands don’t realize is that people are shopping on Amazon, whether your product is there or not. So the question is, what does your product look like when it’s represented on Amazon? And that’s critical for brands to understand when putting their Amazon playbook if you will, together.
Guillaume: Okay, so here you’re talking specifically about a manufacturer or brand owner to go check Amazon.
Jeff: Even if you’re a wholesaler or a drop shipper, who’s looking to potentially start selling those products on Amazon, you should see what the Amazon landscape already looks like before you dive into it.
Guillaume: Right, and let’s say if you go with the FBA, as you’re calling it fulfilled by Amazon, you need to ship your product to Amazon. How much product before it’s a question of cashflow or whatever, would you ship over? Because you don’t even know what kind of sales volume you’ll get? Will that thing even sell?
Jeff: It’s a great question. Amazon has inventory restrictions based on the amount of square footage that you can use inside their warehouse. If you’re a total net new seller and net new brand, meaning that your brand has never been sold on Amazon before, you have no history, you’re going to be limited to probably around 200 units as a maximum that you can send in. For some sellers, 200 units is a month’s worth of inventory, for some sellers, it’s a day’s worth of inventory or less. You have to build your inventory level up over time, which gives you the ability to have more warehouse space.
There’s something critical, I use the word warehouse, Amazon does not want to actually be a warehouse. We call it a warehouse but they don’t want to be a warehouse, they want to be a logistics center. And I’m using semantics here but you have to understand how Amazon wants to play the game. It’s really critical to understand what are called Amazon first principles so that you can specifically know what Amazon finds important.
One, is Amazon believes the customer’s always right and the customer experience is first and foremost. Therefore, if you misrepresent your product, your listing will get shut down. If you have bad images, your product will not sell. You’ll need reviews to get momentum behind your product. If your product is selling, and it’s getting bad reviews, it’s not going to sell. These are all things that Amazon has built into the algorithm so that it’s putting the best product out there for people to buy. The second thing you have to understand about Amazon is that Amazon considers itself a logistics company, not a warehouse company. They don’t want you to just take all of your inventory and ship it to Amazon and have it set. If your inventory sits at Amazon for over six months, you start to incur additional fees, and then all of your space at Amazon starts to become more expensive.
What Amazon wants to see what the ideal Amazon picture looks like, is inventory that’s turning four to five times per year. They want you carrying about 30 days-worth of inventory. So, make a guess as to how much you think you’re going to sell within the first 30 days and have that be your first shipment then. If you have an alternative way to ship products by filling them yourself. And since we’re talking about starting from your website and growing from there, my guess is you already do have that center set up. Then what you do is take 30 units or whatever you estimate and ship it in, get it into Amazon, understand the system, understand the process, understand the fees. And then once that happens, if those sell out quickly, you can ship another 100, 30, 60, 90, whatever number you suggest, and you can back it up with your merchant fulfilled orders.
So, you have kind of an advantage in that you can start to build that up so that you’re building it based on the velocity of your sales, and that you’re giving Amazon what it wants to see, which is those quick inventory turns that when your product is low, you’re shipping new product in and that the velocity and sales of your product continues over time.
Guillaume: And do you see any additional liabilities or risk for a business to start or to open that additional channel?
Jeff: Well, I don’t see any additional liability or risk than you would have in just selling on your own. You should definitely have insurance but hopefully you already have that from running your own business, Amazon requires it. Amazon is starting to ask for you to send them the proof of that insurance. I do see that as a potential liability, you have the liability that your products go to Amazon and they take too long to get to process, you used to be able to ship a product and have it for sale within a week, it’s now taking two to three weeks. It does take a little bit longer to get there. You potentially have the liability that as your sales grow on Amazon, you become too dependent on one channel over another. That’s a potential liability. But other than that, I think most of the liabilities are the general liabilities you have in running a business, whether you’re selling on Amazon or your own website.
Guillaume: Okay, and you touched something important here regarding timeline. When you ship your inventory to Amazon, can you expect a few weeks of delay for them to put you online?
Jeff: Yeah, I’d say like today, as of this recording, your products go. As soon as you create your listing, and you publish it, if you have merchant fulfilled options set up, maybe you’re tied in, you don’t even need to be tied in with like a ship station. You can buy your shipping from Amazon, so you don’t have to tie it into any third party system. But as that starts to grow, and you ship your products into Amazon, it can take anywhere up to a week for your product to get to Amazon. And then once your product gets to Amazon, Amazon is then going to disperse your product to multiple warehouses across the country. So, you might ship your product into one warehouse. But Amazon is going to start spreading that out to a whole bunch of other warehouses. That can take some time, and your inventory shows as reserved, which means that it can’t be sold until it hits its final destination.
Now, you made me think about one additional liability that I didn’t mention. And that is a big one for e-commerce sellers, which is the tax liability that incurs as you start to expand your business. When you have a simple operation, you’re an e-commerce site, you’re selling, you have a warehouse in one city, you have your operation in that same city, your Nexus is pretty well defined. Your Nexus is a tax terminology that you have to use and it’s pretty well defined. If you have two warehouses in two different cities, your Nexus is in both of those states or counties depending on how your tax is set up in those areas.
When you move to a marketplace, you move into a little bit of a gray area. And tax becomes a little bit more complicated. Primarily because the majority of tax at a marketplace is actually required to be collected and submitted by the marketplace. It’s called the marketplace facilitator law, which facilitates how marketplaces have to collect and distribute tax on behalf of the sellers on the marketplace. What’s not completely understood is if I have my location in New York, and my inventory, hits an Amazon warehouse, does that create a tax Nexus for my e-commerce website? Amazon’s going to take care of what that means for shipping and selling on Amazon because it knows that I have products in that warehouse. But what happens to your actual e-commerce. Do you need to start collecting tax for California?
I am not a tax expert by any means, but when you talk about a potential liability and the growth of your business, it is one of the things that you do need to consider as you start to grow. And I say, as you start to grow, because a lot of the tax liabilities are based on sales thresholds, which means they don’t start immediately until you get to a certain sales level.
Guillaume: Okay, understood. Will your main e-commerce site become liable in a way to taxes of other counties and states because you now have business through Amazon at that place?
Guillaume: And then you might need a service like Avalara, or TaxJar and so on?
Jeff: Exactly, that’s who we recommend as well.
Guillaume: Yeah, Avalara is really great. My favorite so far, never any issues, by the way on Magento stores with Avalara about that. And you mentioned something interesting here, you said to buy your shipping from Amazon, and you were talking about merchant fulfilled shipping. If I understood that correctly, I would not use my own USPS or post account, I’ll use my Amazon account when I go to the post office to get the thing shipped.
Jeff: What I would say is that, that’s a business decision that you have to make. Sometimes the contracted price with Amazon is better than the contracted price that you have, depending on the size of your operation, you might have a better contracted price. But it’s definitely something that you want to look into and it’s one of the decision points as you’re building your playbook. It’s one of the decision points you want to look at and understand and realize. I think, in general, we could say fees is something that you need to consider when selling on the marketplace. You have to kind of calculate what your profitability is, to understand the profitability of the marketplace. I’m not a believer that you should not sell on Amazon, because it’s not as profitable. It’s more profitable for me to sell my brand on my website and ship it, I can just make more money. That doesn’t mean I don’t want to be on Amazon, because of the amount of traffic that Amazon can also bring me. I might make up for it in volume, what I might lose in gross margin.
Guillaume: At Costco and Walmart’s the same.
Jeff: You just have to understand it. That’s the thing, it’s like if you watch Shark Tank, what do they say to everybody? Know your numbers. So just know your numbers and understand the profitability of the particular channel, because it might dictate your pricing, it might dictate your promotional calendar, it might dictate special deals you want to run on your website. We run free shipping on our website certain times of the year, I don’t have to do that on Amazon. But I also know when I charge $8 for shipping on my website, it’s like pure profit because my pricing between Amazon and my website are the same. On Amazon, that covers shipping and on my website, you pay additional for shipping. You just have to understand the unit economics in determining what you’re trying to do and how you’re trying to promote it.
Guillaume: Yeah, exactly. I know another brand owner that’s just selling in the Costco stores only one line of product and that’s $50 million a year. So, the margins are not great but the volume game is a game that totally makes sense when your numbers align, I totally get that part. That’s interesting. Let’s say you go baby steps. Go from base one to next base, and so on, what would be the key things to reach that first 100,000 in sale, because I’ve seen a few merchants who put their product on Amazon and exactly like you said, it’s not doing much, there’s maybe one per week that’s sold.
Jeff: The thing I would ask you is do you have an audience? And if you have an audience, there’s kind of this misnomer that I’m going to put my products on Amazon and they’re going to sell. But you have to be willing to use your audience. Use your email list, to promote yourself on Amazon, because Amazon is a flywheel. And if you’re not familiar with a flywheel, it means that as you put things into it, and you create motion, the motion starts to generate itself faster and faster, and then you get greater reward from it.
The basic process on Amazon, we’ve all been consumers on Amazon. As we go to the search bar and we type in a term that’s called a search term. The search term gives me results. The results are my search results. To get on page one for the search results means that I have to be relevant for the search term, Amazon has to equate the term that I searched to the product that I’m buying. This is why when you type Apple into the search bar at Amazon, you don’t see red apples and green apples, you see Apple watches and Apple AirPods and Apple computers. Because Amazon knows that people most likely searching for Apple on Amazon are looking for the brand Apple. If I’m looking for a red delicious apple, then I’m going to type in red delicious apple. If I’m looking for an apple slicer to cut an apple, I’m going to look up an apple slicer, I’m not just going to type in the word apple.
So that’s why it’s important to kind of understand how consumers shop for your product on Amazon. Because what Amazon wants to see is the search term that leads to a product detail, to a search results page, which then leads you to a product detail page where you’re learning about the specific product. And we could talk a little bit about what makes a good product detail page to the add to cart which is the conversion, to a review. Now the review is saying that when somebody searched for the term, they bought this product, and they either liked it or didn’t like it and that’s the conclusion of the flywheel.
The review doesn’t have to occur on every purchase, just like everybody that searches for a term doesn’t click on the same product. And everybody that clicks on the product doesn’t add it to their cart, and everyone that adds it to their cart doesn’t buy it, but it becomes a funnel. It’s a sales funnel of search impression, to product detail page, to add to cart, to sale, to review. And that gives Amazon the information that it needs to create a flywheel to say when somebody is looking for a microphone. This is the best microphone to sell because when I offer this microphone, people buy it. That’s how Amazon’s thinking on the back end. So, you have to create listings for your products that tell Amazon who you are, what you do, and who would be the buyer of your product.
As you get more sales, Amazon has you show up for more terms. So now if you have traffic, if I have a blog, or I have an email list, or I have a Facebook group, and I can actually like run an announcement, we’re now listed on Amazon, may be throw in a 10% promo code, my loyal customers are going to go and they’re going to buy that product on Amazon and they’re going to start to send the signals to Amazon about how my product is. And all of a sudden, I’m going to start showing up for more organic sales. It’s the same if you’re trying to drive Google traffic to your website. You have organic listings that you don’t pay for and then you have paid listings that you paid for.
So Amazon kind of works in the same regard. And I think one mistake that a lot of people that have a brand, or have a website fail to realize is they believe, “Oh, I can go on Amazon and my Amazon traffic’s my Amazon traffic and my web traffic’s my web traffic. And the companies that do the best are the ones that are constantly using their traffic, as a way to drive action that they want driven. Maybe it’s at a particular product, maybe it’s on a particular channel, maybe it’s for a particular sale, and understanding which of those levers you want to pull, you have the opportunity to pull those and Amazon gives you an additional lever to be able to pool with your consumers. Because remember, on Prime Day, your customers are looking on Amazon to buy things. And whether you want them to come to your site or not, they’re looking on Amazon to buy things. So maybe you run a 10% promo, you don’t do 40%, you do a 10% promo, but you email all of your email list on Prime Day, that says XYZ Prime Day Sale, go to Amazon save 10%.
Guillaume: That makes sense. Would you go even as far as paying Google ads to send traffic to some Amazon listing?
Jeff: I would say that maybe down the road, you could consider that but you got to be pretty sophisticated to understand what the return on investment is. I’ve seen some sellers be successful in doing that. The ones that can do it are the ones that are really good at driving Google Ad traffic. Remember, your pages will rank for Google SEO on Amazon. And there’s a good chance that Amazon might even if you get enough brand recognition, Amazon will start buying ads to drive people to Amazon for your brand. So, you just have to kind of figure out whether that makes sense or not, I would probably use my organic traffic before I started driving paid traffic.
Guillaume: And they’ve stopped Prime Days in Canada with COVID-19. They’ll resume that eventually but for those who don’t know, could you explain it a little bit?
Jeff: Yeah, I’ll call Prime Day a hallmark holiday. The holidays that have been made up where Amazon lists a bunch of products at a discount over a short period of time to drive a lot of additional traffic to the website. Other Hallmark holidays, I’ll throw myself under the bus and say Father’s Day. Yes, it’s great to celebrate Father’s Day, but it’s really designed to drive sales and drive product. Valentine’s Day will throw the brother ladies under the bus. If you buy the flowers the week after, they’re a lot cheaper but don’t tell my wife I said that.
Guillaume: No, you’ve missed the event otherwise.
Jeff: In Amazon terminology, we call them tent post events. A tent post event is anything that brings additional traffic to the site, Valentine’s Day, Easter, Mother’s Day, National holidays, yours are different in Canada than we have down here but national holidays. Prime Day is a tent post event that Amazon has created. And I would assume that they’re going to redo it in the US for 2021. And I’m sure that they’ll bring it back to Canada when it makes sense. But it’s really what we call the kickoff to Q4 because it’s usually in like mid to late summer. Following that is back to school, another tent post event. Following that is Halloween, another tent post event. And then following that is Black Friday, Cyber Monday, which starts on Thanksgiving and runs for a five-day time period. And then the next tent post event is the last shipping day for Christmas. And all of those are our tent post events that occur, that drive additional promotion and traffic to the Amazon channel.
Guillaume: Right and let’s say now if we’re talking about the product detail page, obviously you already have a store already selling on your own website. So you already have listings, but what makes a great Amazon listing and what do I need to tweak from let’s say my website versus on Amazon?
Jeff: Yeah, the first thing within your listing is for you to understand that Amazon has different rules than your website. On your website, you can pretty much do whatever you want within your own brand guidelines and no one’s going to stop you but on Amazon that’s not necessarily true. We’ll start with what I think is the most critical, which is your photos. I believe consumers in general are lazy and they won’t read, they’re going to look at photos to tell them the story. So, your main photo has to be 1001 pixels by 1001 pixels. While Jeff that’s really specific, Amazon actually says it needs to be 1000 by 1000. But I recommend you go higher than that, I would even recommend you go 1500 by 1500. And your main picture needs to be of your product with a white background, you cannot have the fancy first photo.
Amazon just wants uniformity on the on the search results page. Now, once you go into the product detail page, and you have, I think seven to nine additional photos, you can add, you can really do whatever you want. And so you can start to use lifestyle photos to show your product in use. You can use infographics to tell the story of the features and the benefits of your product. And you can use video to actually show your product in use and highlight the features of your product. And I recommend you do all of that. As a minimum, you want five photos. But I really think best practice is as many photos as Amazon lets you upload, that’s how many you want.
Now you need to work on your title. Most character limits on Amazon are 200 or less. Each category has slightly different rules around characters of the title. But 200 is the max, the ideal is about 70 to 100. Why do I come up with 70 to 100? I think 72 is the max for the mobile device. And you got to remember the mobile device because it’s pretty critical. Your title should start off with your brand name. Whether your brand name is recognized or not, Amazon has started forcing the brand name into the title description. So your first keywords are your brand name, then talk about maybe your product name, and then talk about key features of your product.
Guillaume: That’s a pretty good description.
Jeff: Then you get bullet points. And each of your bullet points has a character limit, going off the top of my head, I want to say it’s 1000 characters, and you get five bullet points, but it could be 500 characters don’t quote me. What you do is each one of those bullet points, you want to go through feature benefits. Now, one of the best ways to kind of learn feature benefits of your product, if you’re not familiar with it is to read your competitors’ products. On Amazon, they have what’s called a Q & A. And you can actually see what people are asking your competitors about their products. Sometimes it’s about size, sometimes it’s about quantity, sometimes it’s about usage. And any of those Q and A’s that are showing up on your competitors’ listings, you want to make sure to include in yours, because you want to address the concern before it gets there.
Then you want to think and act in the mind of the consumer. I actually had a great example at one point in time. I was on the phone with a customer of ours who is selling vacuum cleaner parts. And I looked at the guy and I said so what’s a 400 CFS FC G, micro HEPA filter clean air? And he goes, “Oh, well, it’s the top of the line air filter for purification during the vacuuming process”. And I was like, “Say that!” He was trying to give me all these technical industry terms about his product. But that’s what I care about as a consumer. I care that as a vacuum cleaner, this is going to filter and keep more dust particles out of the air or out of my carpet, whatever it is, I don’t know about vacuum cleaners. But it goes to show that we don’t want to write technical listings, maybe if you have a highly technical product you do, but if you haven’t, you want to tell the consumer what does it mean for them? What is 300 CFS mean versus 600? And do I care? And I find a lot of brands mess that up on Amazon and they publish a lot of information that our buyers just don’t care about.
Guillaume: So, let’s say the merchant respects the parameters you just laid there. The nice picture high resolution 1500 by 1500. The right description, they have video and the whole thing, but they don’t see a lot of sales volume. Perhaps if there’s a software to sort of analyze sales volume of other merchants. I don’t know if you have recommendations there. But they don’t seem to be able to move up the ladder, so to speak of becoming the selected source from Amazon, especially if they’re a new seller, what would you tell them do?
Jeff: The thing that I would share with everybody is that all of the tools out there, and we have one as well at seller labs, all the tools out there use algorithms to calculate sales volume. Nobody actually knows what the sales volume is. Now, I can tell you, because I’m part of the team that’s been involved with our tool, they’re fairly accurate, but they’re not exact. So, you have to think of it in terms of relative. If it’s telling you 1000 versus 100, you know that it’s a higher volume than in something that maybe is 10. It doesn’t mean literally, it’s 100 sales per month, it could mean that it’s 130 or it could mean that it’s 90. The higher the volume of the product, the harder it is to actually calculate, because there’s not as many data points.
If you think of an X, Y axis, Amazon uses a term called Best Seller ranking and your best seller ranking, 1 is the best and the data points between 1 and 10 are only 10 data points. The jump between a sales for a seller, that’s 1 and 100 could be exponentially large, the difference between a million and million 100,000 could be one unit a day. And so if you think about it from like an X Y axis as you get to the higher volume selling products, it doesn’t necessarily mean that those numbers are as accurate. Now, what does it mean for you? I gave the disclaimer of data. But what does it mean for you, it means that you have a relative sense of what you need to do to be successful.
What are your choices? Drive traffic via Amazon advertising, drive traffic from your external list, or run marketing and promotion coupons, Lightning Deals, things like that with within Amazon. It’s called the cold start. When you list your products initially on Amazon, you get what’s called the honeymoon period. The honeymoon period is the initial listing period on Amazon, where Amazon’s giving you what’s called the benefit of the doubt. And they’re giving you this opportunity to collect a bunch of data in a short period of time, but they don’t really know how you’re going to perform. So they kind of give you the benefit of the doubt and assume you’re going to perform well. And then once you start to get data, and they know where to put you compared to other products that are similar to you. What you want to do is be ready to hit the ground running. And when you put your products up for sale on Amazon, and you’re in your honeymoon period, and you’re getting the benefit of the doubt, that’s when you want to drive your sales in from the external source. And that’s the easiest time. If you’re sending your external traffic in from your own website, those customers are usually more loyal to you, which means they’re going to turn around and give you a review and give you a good review at that.
Guillaume: Do you know how long that honeymoon period lasts?
Jeff: Nobody knows for sure. But my guess says it’s a couple of weeks. Amazon’s given you a couple of weeks to kind of prove yourself out. The only way to restart the honeymoon period is to literally relaunch your product. You don’t want to do that, you want to take advantage of it during its initial launch.
Guillaume: So that honeymoon period is per product, not for your whole account?
Jeff: It’s per product that you launch.
Guillaume: Okay. You could always delist it, I guess change a bit the skew in description, relist that.
Jeff: You can but remember that if you ship products into Amazon, you have to pull all your products out of Amazon and relabel them.
Guillaume: Right, I know about about that stuff.
Jeff: I’m working with a client right now who has a product and she co brands it with another product and she’s switching who she co brands the product with. And she either has to sell all of her inventory at Amazon, or she has to pull her inventory from Amazon back. Because after a certain date, she can’t sell it with her old partner. Those are things you just have to think about and it’s also inventory management. I would say one of the underlying success factors of Amazon is your ability to do inventory management because it can reduce your fees, it can improve your profitability, it can improve your sales by being an FBA. And it’s something that two years ago, you didn’t have to be good at, but today you do.
Guillaume: And you can always ship the inventory back to you from Amazon, I guess as a fee?
Jeff: You can. Usually once or twice a year, they’ll reduce the fee to where you just pay shipping. But there are penalties. Meaning that if you ship inventory back, there’s a waiting period before you can send more inventory in because Amazon’s saying, “Hey, you are overstocked on this, I’m going to let you take that inventory back. But I don’t want to have you just ship more products in.” So, there is kind of a risk of doing that, too. And when it comes down to it, it’s all math and calculations, because you know what your fees are. And you can calculate what your increase of your fees will be. And then your choice is, “Do I discount my products and accelerate my sales? Or do I get hit by bigger fees”?
Guillaume: And back to that flywheel thing. Of course, ideally, we want real leverage and that your external listing drives real traffic and real sales and that this thing lifts off correctly. But have you heard or do you even think it’s worded that maybe you sort of stimulate reviews? Or even maybe buy back yourself a few of the product and leave great reviews, just to try to get the wheels spinning at first for merchandise?
Jeff: Yeah. I always like to make sure I don’t lead people astray, of what will get them in trouble. Buying your own products and writing reviews will get you suspended and you might say, “How would Amazon catch me?’ I don’t know, but they do. I don’t recommend that you do that. I know that’s a tactic that people do in retail. But Amazon strictly prohibits that. Amazon does not prohibit you from having your friends and family buy your product, but they do say that your friends and family should not write reviews. So, generating sales and sales velocity, you can ask people you know and offer them discount codes for doing that. Reviews get a little more strict in how Amazon manages that system and I would just be careful
Guillaume: Good point, anything that people should know about the ads and how to optimize that?
Jeff: Well, we could probably do another whole hour just on ad management. In my mind, most ads fail because people don’t set up their ad structure correctly the campaign structure. The second is that they don’t typically offer enough budget based on the number of keywords or the price of the keywords that they have. And then third is that they don’t optimize their ads correctly. So that’s kind of like the three biggest reasons why ads fail.
With advertising, you have three options. One, you can do ads yourself. Two, you can use a software to do ads, Seller Labs has a software that helps you manage ads, and there’s other ones that are out there as well. Three, is you can hire an agency to run your ads for you. I think this also goes back to how big is your e-commerce business? And what is your expectation for growth on Amazon? That would tell you how hard you need to go into the Amazon channel and whether you want to come in with a partner that’s going to help you manage your ads.
Now, I’ll put a little disclaimer out there. If you’re already working with an ad management company, that ad management company is probably going to try to sell you on the idea that they can also manage your Amazon ads. If it is not in their core competency to manage Amazon ads, they’re probably okay but they’re not great. Amazon is a beast in and of itself. And even some of the larger agencies who have gotten into Amazon advertising have built different divisions because you have to treat Amazon different than you treat Facebook, Instagram, Google.
Guillaume: Would there be any sort of final secret sauce that you think they should focus as key efforts to grow from that first 100k that work all the way to the first million top 1%?
Jeff: If you’ve listened to this podcast up to this point, you’ve been waiting for this your whole time. You’ve been waiting for the secret sauce, you’ve been waiting for me to tell you the one thing that you can do that’s going to make you better than everybody else. Come closer. Come closer, turn up your volume. This is the money shot, ready? There is no secret sauce. There are plenty of gurus that are out there that will try to sell you on what the secret sauce is.
The way I describe Amazon is, if you think of a string. When you go to pull up a string what happens? The sides that you’re pulling up, also come up. So, if you think of the points of the string that you pull up as the levers that you’re pulling on Amazon, creating your listing, running ads, inventory, discount coupons, external traffic, and I could keep going on. Each one of those are little points of the string that you’re pulling up. As you pull those up, you start to actually levitate the string. And it’s not all equal at the same time, there’s different parts of the string coming up higher and dropping lower at different points.
The problem with Amazon is there’s no secret sauce, there’s no one thing that pulls up and creates a hockey stick effect. You have to be able to pull those different levers at different times to get the desired result. And even more important, and this is probably more important than anything, is that what you heard somebody else do that made them successful won’t work for you and your brand. Because they might be telling you one thing that made them successful, but you don’t understand all the underlying things that went into that. From the research they did to maybe the agency that they use to maybe the pricing model that they use. And without understanding the whole picture, you’re just trying to implement their strategy with what I call a hope strategy. I heard them and I hope I do as well.
I think that the key to success on Amazon is don’t have analysis paralysis. Don’t stare at data trying to make decisions, use the data that you have to make the best decision possible. And then as you get new data, make new decisions. The second is, do not fall in love with anything except profit. Don’t fall in love with it, except profit. Too many people make emotional decisions about their product, and the success they want their product to have. But the only thing that matters is whether your product is actually making you money. And what’s really interesting, and we’ve seen this with numerous brands, is that what actually might sell on Amazon might be different than what sells on your website.
There’s a company that we work with that sells flats, they’re like dance shoes. The colors they sell on Etsy is totally different than their top selling color that they sell on Amazon. If they had gone in with the attitude of this is what works because of Etsy, and I’m going to send all this inventory in, they would be overstocked in the wrong colors. But because they sent in a baseline of their colors to understand the Amazon market and how the Amazon market was going to work, they now are actually shipping more of one color into Amazon and they fulfill another color more heavily on Etsy. Let the data tell you what’s happening, not yourself in your gut. Those are the things that I see people do all the time that are wrong, they fall in love with a product, or they sit there and they stare at data afraid to make a decision. And I think when you talk about the secret sauce, that’s the secret sauce, the secret sauce is knowing what your data is telling you and being able to take action on that data.
Guillaume: Right, then accumulative effort.
Jeff: For sure. It’s totally a cumulative effort.
Guillaume: It’s pretty much solid business fundamentals in a way. It’s just like running a business, but it’s on Amazon and get through customer service right, answer all the reviews and negative ones that have your product listed right, make sure you have stocked correctly inventory, your pricing is good. It’s classic business.
Jeff: Yeah, it’s a long checklist, we’ve covered a lot in a short period of time and I think the challenge with that is that some people are good at some parts, and some people are good at others. So, if you’re not good at photography, use a photography service. If you’re not good at writing your listings, use a listing service. Almost every single piece of this that I’ve mentioned along the way, there are companies that can do that for you specifically for the Amazon channel. So, you can have a logistics company that’s managing your inventory and shipping it into Amazon when needed and doing your merchant fulfilled when you don’t. It’s about the size and scale of your business and the size and scale that you’re trying to grow your business that’s going to determine how much of this you try to do on your own and how much of this you outsource to other services.
Guillaume: Correct, we did cover a lot of topics. Is there any last topic you’d like to cover to conclude?
Jeff: I think we’ve covered a lot, people’s heads are probably spinning right now with all this information. I would just say take it and digest. Maybe go back and listen to this, but not on fast speed, just normal speed, take some notes. Most importantly, figure out where you are in this process and figure out the next two to three things you need to do to take action. It’s the biggest failure we all have. If you’ve listened to this point, what are your action points? What are you going to write down as the next thing that you’re going to do? Maybe it’s connect you and I on LinkedIn and say, Hi, maybe it’s open the Amazon account. Maybe it’s research advertising, but you have to have your action items in what’s going to drive your business forward to understand where you should be investing your most valuable resource, which is your time.
Guillaume: Alright, I think this totally covers the topic for a high-level view for a new merchant trying to sell on Amazon. Thank you, Jeff for being here today.
Jeff: Appreciate thanks for having me on.