3 Tips to Improving Your Profitability on Amazon

Amazon sellers have come under growing pressure as the marketplace platform adopts to multiple internal and external challenges. Changes to sellers fees, inventory scheduling and new suppliers are putting many retail sellers under immense pressure with margins seemingly evaporating as time goes on.

Many merchants are facing a choice of continuing to sell on the platform or move to other 3rd party marketplaces and we wanted to put together a few tips for those facing profitability challenges that may help get things back to a better place.

Refine Your Ads Strategy

Most brands advertising on Amazon bid on both four key areas:

• Branded product terms and placements
• Generic searches and placements
• Competitor searches and placements
• Remarketing (Amazon.com and external sites)

In most instances, that spend is going to waste and driving significantly higher ACOS numbers. Here’s how to break down where you really need to be spending money:

Branded – If your product has high ratings, especially compared to the competition then I would look at scaling back brand spend … start with 10% then drop in 5% increments. You may even find that spending $0 on branded terms has no impact in sales volume.

Generic Searches – Start by focusing on bid levels for generic searches that are an exact match for your product’s function and then look at searches that describe components of your product/experience and see if those still make sense or can be paused.

Competitor Searches – This is tough because merchants want to be part of the conversation when someone looks at competitors but to be in that set, is a very expensive proposition.

I would advise only going after competitors where you have a clear product or rating advantage and if you don’t then pause ads where consumers would have a harder time seeing the value add in your product.

Remarketing – I’ve never seen this as a placement that provides value. Amazon has so many remarketing levers to pull when someone views a product that doing a top up campaign is really a way of subsidizing Amazon’s own efforts. Unless you’re seeing incredibly low ACoS … I would pause.

Adjust Pricing Intelligently

Sellers are often afraid to raise prices especially if there are many other options for the same product at MAP or lower priced substitute goods that could potentially benefit.

I would say raising prices could actually be to your benefit because you’re not alone in terms of being squeezed by margin pressures and if a competitor has a loss leader product then let them lose more money since Amazon really makes it impossible to build brand loyalty.

If you have a high rating and provide a solid customer experience then I would suggest working to seize back your pricing power. Start with small increases in $0.50 increments and slowly work your way up to a balance of revenue and volume.

Review Your Inputs

There are so many ways to cut down on the cost of the finished product. It can be something simple like cutting down the size or material of packaging, ordering higher quantities (assuming cash flow) and rethinking inserts/messaging that goes into the box.

You may roll your eyes at this but being in constant contact and developing great working relationships with production managers in the past has led me to getting one off deals and price breaks when lines were between runs or when other opportunities would present themselves.

If your brand is struggling to realize a return from your Amazon store, contact AVX today and we’ll do a full review and develop a plan moving forward to grow sales and profitability.