Tips For Brands Transitioning To Amazon
Amazon is the leading e-retailer in the United States with close to 386 billion dollars in sales in 2020¹, and a projected 148.6 million Prime Members by the end of this year². After another successful Prime Day³ this year, many retailers are wondering how they can use Amazon to reach new customers and re-engage existing customers in new ways. Keep reading for Amazon FAQs, advertising options, and what brands should consider before advertising or selling on Amazon.
Fast FAQs: What Questions Are Our Clients Asking About Amazon?
If thinking about Amazon prompts quite a few questions for your brand, you are not alone. Our clients often wonder if adding a marketplace opportunity like Amazon would be beneficial for their marketing strategy and if so, how it would impact the rest of their media mix and improve business overall. Here are some frequently asked questions we have heard from our clients:
SELLING ON AMAZON
- Why are brands selling on Amazon? Brand are often trying to achieve two things by selling on Amazon: 1) increase their customer reach and 2) own their brand presence. Amazon is the most visible marketplace in existence, and many of your customers may be trying to find you there. If you do not sell your products on Amazon, a third party seller often will and may not create your desired brand image or experience.
- What sales model options exist? Amazon allows brands to sell as a Vendor (first party) or Seller (third party), and there are advantages and disadvantages to both. Keep reading below to determine which is the best fit for your brand.
ADVERTISING ON AMAZON
- Do I need to sell on Amazon to advertise on Amazon? Technically, no. Brands can use the Amazon demand-side platform (DSP) where they can programmatically buy display, video, and audio ads on Amazon. Ads created and managed through the DSP can also appear across websites, social media platforms, mobile apps, and/or online video channels. Amazon’s DSP is the only way to access advertising inventory exclusively available on Amazon’s collection of owned properties and devices like Kindle, Fire TV, and IMDb.⁴
- How should I measure performance? Amazon’s tools for measurement are limited, and their data is siloed. However, brands can find comfort in knowing that everyone else is in the same boat. With enough patience and persistence, you can pull valuable insights from your Amazon data. Ovative’s approach to measurement of Amazon is always evolving with current industry trends, so contact us if you are looking for a partner to help.
Deep Dive: What Advertising And Selling Options Exist On Amazon Today?
SELLING ON AMAZON
Each of the two sales models available on Amazon, have advantages and disadvantages for brands. Depending on your ability to fulfill product and provide customer service, and your desire to control your own pricing, you can decide which is the best fit for your brand.
- Vendor Model (1P): In this model, brands sell their products to Amazon, and then Amazon sells the brand’s products to customers. Since Amazon acts as the retailer, they handle fulfillment and customer service, and maintain pricing control on products.
- Pros: In the vendor model, brands typically receive regular purchasing orders from Amazon, which ensure good planning, scalability, and stability in fulfillment.
- Cons: Since the vendor model prohibits brands from intervening in pricing, it can be a disadvantage for those who want to maintain a consistent pricing strategy between Amazon and its own online store.⁴
- Seller Model (3P): In this model, brands act as the retailer, using Amazon as a marketplace. Brands are therefore responsible for fulfillment, customer service, returns, and are able to set their own prices.
- Pros: Sellers have much more control over the pricing of their products, as long as if falls within price ranges defined by Amazon, and they can even set limited-time offer prices.⁴
- Cons: Sellers are responsible for forecasting in order to meet fulfillment requirements, which can be difficult to predict, and items that don’t sell fast enough can cause sellers to incur additional storage fees.⁴
ADVERTISING ON AMAZON
When considering your Amazon advertising options, it is helpful to consider whether your brand would like to advertise product on Amazon, or off of Amazon – for example, on your own website.
Advertising Options For Products On Amazon:
- Sponsored Products: Native sponsored placements that show up in search and browse placements across Amazon
- Sponsored Brands: Banners that show up at the top of Amazon search results and while browsing on Amazon
- Sponsored Display: Visual placements that can target Amazon shopper audiences, people who’ve already viewed your product pages (retargeting), and people who are viewing your competitor’s products (unlike Sponsored Products and Sponsored Brands, these ads show up both on and off of Amazon – on their broader advertising network)
- Dynamic Display (Amazon DSP): Product ads that are dynamically served across Amazon’s broader advertising network, both on and off of Amazon, including on Amazon’s owned properties and devices
- Audio and Video (Amazon DSP): Audio and video ads that are dynamically served across Amazon’s advertising network
- External Paid Media: Amazon just announced their Brand Referral Bonus Program for sellers.⁵ This is an effort to sweeten the deal for brands considering driving traffic directly to Amazon. The bonus averages 10% of sales and varies by category. This option is a bit “outside the box” and won’t be the right fit for all brands, but it’s an option worth considering if you’re trying to accelerate your presence on Amazon and drive more Direct To Consumer sales.
Advertising Products Not For Sale On Amazon:
- The majority of Amazon’s DSP products, including Display, Audio, and Video ads, are built for driving impact outside of products for sale on Amazon. They have a number of flexible targeting options to advertise across their growing ad network.
What Other Factors Should Brands Consider Before Advertising Or Selling On Amazon?
- Market opportunity: Search for your own brand on Amazon to find whether third parties are selling your products, if the listings reflect well on your brand, and which of your competitors are showing up. If you find that third party sellers are capitalizing on sales of your product with listings that do not meet your brand standards, or that competitors are dominating the channel, these are indicators that there are opportunities for your brand on Amazon.
- Logistical requirements: Consider whether your team can meet the staffing requirements to stand-up an Amazon strategy. Whether you are planning to use a Vendor or Seller model, both can take significant time to plan and you will want a team that can handle planning, fulfillment, distribution, customer service, and pricing.
- Difference in margin: While Amazon can help get your brand in front of new customers, your margins on Amazon will be lower than selling direct to consumer.
- Limited new customer acquisition: Amazon explicitly prohibits reaching out to any newly acquired customers outside of Amazon, so it is not easy to determine the true value that Amazon is driving in terms of new customers.
Ovative Results: This Direct-To-Consumer Brand is Seeing Success on Amazon!
A direct-to-consumer home appliance company with high growth potential on Amazon wanted to test media tactics to increase their visibility across Amazon’s media offerings, and had a goal of driving sales at a positive ROI. Ovative helped them to implement a full-funnel, full catalog account structure and always-on maintenance strategy designed to learn from historical performance and improve Amazon performance over time.
Ovative launched full catalog support and roll-based campaigns to improve visibility to different tactics, intent, and conversion funnel phases along with our proprietary campaign structure and graduation process to harvest and weed out products and search terms based on performance. The team scaled non-traditional Amazon tactics to drive incremental revenue, and implemented always-on bidding technology to driver performance at scale.
Within 90 days of launch, Ovative’s savvy approach helped the client scale revenue by 3x while improving overall ROAS by 59%, and increasing impressions by 17x.
Amazon continues to play an important role in the sales and marketing strategies of many major brands. As marketers consider if, when, and how their brand will approach Amazon, they should consider these frequently asked questions and selling and advertising options to build a successful strategy. Ovative’s Marketplace team can serve as a strategic partner to help you achieve your goals. Connect with us today to learn more about our Marketplace services.
Ovative is a digital-first media and measurement firm seeking to transform the measure of marketing success. At Ovative, we help brands move the needle. We are curious. We value your brand. We want to see you succeed. Connect with us to learn more!
1 | Statista, Annual net revenue of Amazon from 2004 to 2020, February 2021
2 | Statista, Number of Amazon Prime users in the United States from 2017 to 2022, December 2020
3 | Ovative Group, A Look Back At Prime Day 2021, June 2021
4 | Remazing, Vendor vs. Seller Update: The big comparison, March 2021
5 | Amazon News, Launch of Brand Referral Bonus program, July 2021