Why Having Fewer 3rd Party Sellers Will Increase Sales

If your brand relies on 3rd party sellers to sell your products on Amazon, it’s critical to understand how the number of sellers on any given product listing will impact sales, pricing, customer service, and brand equity in general.

Generally speaking, the larger the number of sellers, the less control your brand will have over pricing, content, promotions, advertising, and customer service.

The Negative Impact of Multiple Sellers

Whenever I talk to brands that sell their products on the Amazon marketplace, they are often surprised to learn that having more sellers on each product listing is a bad thing. Many mistakenly assume that having more sellers will somehow increase exposure – and therefore increase sales.

Nothing could be further from the truth.

Consider the following…

Demand is Not a Function of the Number of Sellers

Amazon is nothing more than a consumer product search engine, and as such, the number of sellers of your product has zero impact on the number of times a given search term(s) is typed into Amazon’s search box.

Instead, demand is driven entirely by consumer’s search actions.

number_of_sellers1

So if having more sellers doesn’t increase sales volume, what does it do?

The Race to the Bottom on Price

The more sellers you have competing for the buy box, the faster these sellers are going to start creating a race to the bottom on price, violating MAP pricing policies and pissing off your offline retailer partners in the process.

With just one or two sellers, there is no need to compete for the buy box, and therefore, there is no reason to deviate from MAP pricing – and that means fatter margins for you because they won’t be asking for wholesale discounts in order to compete in the race to the bottom.

Fewer Sellers Leads to Increased Ad Spend

In the image above, you’ll notice that in the pie chart on the left, each slice of the pie is quite small; whereas over on the right, two sellers are splitting the pie 50/50.

In which case do you think sellers have more money available to spend on advertising your product?

Obviously not the one of the left!

If you want to increase your product’s market share, ensure you have as few sellers as possible and ensure that the ones you do have are committed to investing a portion of their profits into advertising your product.

Having too many sellers guarantees that each seller will not have enough profit to justify creating ad campaigns – and your product’s market share will stagnate, or possibly even decrease.

No Listing Ownership / Optimization

How well your Amazon product listings are optimized will influence both how well your products rank in Amazon’s search results as well as how well potential buyers convert once they do find your product pages.

With multiple sellers on any given product listing, no one seller has any ‘ownership’ or incentive to put time and resources into optimizing the product listing to its fullest.

listing-optimization-challenge

To illustrate, consider a very simple example. If each product listing is a pie, and each slice is a seller, why would a seller bother making a larger pie if they are only getting one slice?

Whereas, if the seller’s ‘slice’ is, in fact, the entire pie, the seller has serious incentive to do everything they can to make the biggest pie possible.

listing-optimization-single-seller

In other words, by having just one seller who owns the buy box, that one seller is every bit as motivated as you are to do everything possible to maximize sales.

No Control of Your Promotions

If you have multiple sellers on each product listing, how are you going to control and coordinate all the promotions you’d like to run on Black Friday, Prime day, Valentine’s Day, Mother’s Day, etc…?

With multiple sellers, the reality is that you can’t control what they are all going to do, and in all likelihood they aren’t going to coordinate with each other, thereby resulting in a complete lack of any cohesive promotional strategy.

With just one seller on each of your products listings, product promotions can be strategically planned in advance. Then when it comes time to run the promotion, the mutually created plan is executed and results are measured; thereby giving you the much-needed data to make better decisions about future promotions.

Inconsistent Customer Service Levels

When consumers purchase your products on Amazon and they have a problem or a question, they are going to contact the seller via email.

bad_customer_service

They key thing to remember is that these consumers won’t necessarily realize that they aren’t communicating with your brand, so if the customer service they receive is below expectations, they are going to blame your brand!

With multiple sellers on a product listing, it will be nearly impossible for you to ensure a consistently positive customer experience. Instead, your brand reputation will be the result of the collective experience that thousands of customers have with companies. You have very little control over this experience, and will not be able to build the trusted relationship you would expect to have with just one or two authorized sellers.

With a single trusted seller on each product listing, you can rest assured that customer service levels are going to be exactly where they need to be to build the brand equity you need to maximize the growth of your company.

Conclusion

The more sellers you have on your product listings, the less control you are going to have – which, over the long term, can negatively impact your brand, cause a price war, impair customer service, and aggravate your brick & mortar retail partners.

So instead of letting just anyone sell your products on Amazon, you’d be far better off to find a preferred 3rd party seller, grant them exclusivity – once they have proven themselves worthy, of course – and then work with them to systematically remove all the unauthorized sellers that are currently on your product listings.

You, your brick & mortar retail partners, and your end-customers will all be happier as a result.

About TLK Sourcing

TLK Sourcing a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them - thereby ensuring that our interests are 100% aligned with yours.

Discover how to stop unauthorized online sellers from violating your MAP policy

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Three-Step Approach to Stopping Unauthorized Online Sales

This post originally appeared here and was written by Whitney Gibson, and Jordan Cohen on June 30

Unauthorized sales of products on third-party websites like eBay is significantly impacting many businesses.

Woman using laptop computer, holding credit card, close-up

In short, we recommend a three-step program for addressing these unauthorized sellers as follows, with more details listed below.

First, a company should revise its policies, procedures and agreements to: 1) support legal claims against third-party unauthorized sellers, and 2) differentiate its products from those sold by unauthorized sellers.

Second, a company should implement a graduated enforcement system. The purpose of this system is to eliminate authorized sellers through the integration of monitoring technology, investigation, and enforcement tactics.

Third, we recommend implementing a communications strategy that: 1) demonstrates to authorized distributors that the company is protecting them (providing measureable results from the enforcement system); and 2) demonstrates that products sold by unauthorized sellers are unreliable and often do not come with certain services and benefits or do not have the quality controls that the company has established.

Creating a Foundation for Legal Claims Against Third-Party Unauthorized Sellers

Our recommended first step for companies is working with counsel to review existing distributor agreements, procedures and practices.  The goal is to provide the best support possible for the enforcement program, described in step two.

Under what is known as the First Sale Doctrine, once a trademark owner (“the company”) sells a product, the buyer ordinarily can resell the product without infringing the owner’s mark.  However, the First Sale Doctrine does not apply when a reseller sells a trademarked good that is materially different from the company’s genuine goods.

Case law has established a few important principles relating to material differences. This includes that: 1) the threshold of materiality is considered “low”; 2) only a single material difference is necessary to give rise to a trademark infringement claim; and 3) material differences do not have to be “physical” differences.

Courts have also held that trademark owners have the right to control the quality of their products. Thus, unauthorized sellers who do not follow a company’s quality controls can also commit trademark infringement, assuming the quality controls are not “pretextual” and that the company is actually enforcing them.  Quality controls can include certain packaging, tracking codes, pre-sale consultations or storage instructions, among others.

Many companies already have strong policies, procedures and agreements established. It is just a matter of tweaking them to maximize protection against unauthorized sellers on eBay and other websites.

The Graduated Unauthorized Seller Enforcement System

Once a company’s policies, procedures and agreements are adequately in place, it is time to roll out a graduated enforcement system aimed at efficiently and effectively reducing the numbers of unauthorized sellers.

online-seller-enforcement-system-infographic_4c-11x17-0116

Our suggested model begins with a monitoring company finding all unauthorized sellers. Among other things, a monitoring company can rank these sellers from high- to low-volume, based on the number of client products and total products each reseller is selling.

Cease and desist letters are usually sufficient for most unauthorized sellers. However, a more aggressive enforcement approach might be necessary for sellers offering a significant number of products.

After reviewing the data from the initial monitoring report, it is ultimately up to the company who to target through the enforcement system.  But because both eBay allow for the private messaging of their online sellers, this can be a low cost vehicle for sending a large number of cease and desist letters online (“eC&Ds”).

A strongly-worded letter from an outside law firm is often most effective in approaching the highest volume sellers, which might include a detailed explanation of the illegality of the seller’s activity and why the First Sale Doctrine would not apply; an explanation that courts in the company’s state will have jurisdiction over the seller; and relevant case law, including citations to prior cases in which large damages have been awarded against unauthorized sellers.

The company itself might also choose to send additional eC&Ds to low volume sellers.

After the letters are sent, the company and its enforcement team should track which sellers comply with their demands. Then, cyber investigators can investigate the identities of any sellers who do not remove the products from eBay.

Once these identities are obtained, the outside law firm can send actual cease and desist letters to the unauthorized sellers’ physical addresses, effectively communicating that: 1) the company knows who they are and where they are and, 2) should they keep engaging in unauthorized sales, that the company will pursue them legally.

This whole process can be repeated on a monthly basis, incorporating any new sellers that pop up each month.  If necessary, for any sellers still online after the previous month, the attorneys can utilize additional legal tactics to put further pressure on those sellers.

Depending on the situation, this can entail sending draft complaints to the sellers; obtaining temporary restraining orders to freeze online sellers’ PayPal accounts; obtaining injunctions to order online sellers to cease selling the products; obtaining injunctions ordering the transfer of the sellers’ website domains to the client; serving subpoenas to identify still unknown sellers; obtaining court orders that can be used to de-index unauthorized sellers’ e-commerce websites from Google; filing lawsuits and negotiating with the sellers; or preparing and executing settlement agreements.

Above is an illustration of how we often structure our own graduated enforcement program. For more on this program, check out our recent white paper.

Communications Strategy

For some companies, depending on their model and distributor network, it can be effective to communicate to the authorized distributors the impact of the enforcement program.

It is helpful to educate (or remind) distributors that the company has an aggressive enforcement program. Specifically, the company can show them the data reflecting the number of unauthorized sellers eliminated from eBay (or elsewhere) and are no longer harming the business and threatening the authorized distribution channels.

For more information, contact Vorys’ Illegal Online Seller Enforcement team at  877.545.6905. Read more about the practice at http://www.vorys.com/services-648.html and follow Whitney on Twitter (@WhitneyCGibson).

About TLK Sourcing

TLK Sourcing a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them - thereby ensuring that our interests are 100% aligned with yours.

Discover how to stop unauthorized online sellers from violating your MAP policy

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Minimum Advertised Pricing (MAP) Policy Enforcement

This post originally appeared here and was written by Whitney Gibson, Adam Sherman and Jordan Cohen on

Manufacturers implement minimum advertised price (MAP) policies to control the prices at which retailers can advertise their products.

MAP policies are often thought of as memorializing agreements between manufacturers and authorized retailers regarding the lowest prices at which the retailers are permitted to advertise the manufacturers’ products.  However, they are merely policies, not actual agreements.

Property release: Model release: | date created: 2005:07:21

Nonetheless, MAP policies are often necessary for companies, as shoppers generally look for the lowest-priced goods, including for e-retail sales. And many e-commerce websites display products from lowest-to-highest price.

Of course, MAP policies are not binding on unauthorized retailers. Thus, unauthorized sellers are more likely to violate MAP policies than authorized retailers.

In fact, a recent study revealed 53 percent of unauthorized retailers violate MAP policies. This is in contrast to 15 percent of authorized retailers.

Ayelet Israeli (now a Harvard Business School assistant professor of business administration) and Eric Anderson and Anne Coughlan (Kellogg School of Management marketing professors) also noted that authorized retailers are less likely to violate MAP policies because they have the most to gain by complying with manufacturers’ pricing.

For instance, a manufacturer that becomes aware of an authorized retailer violating its MAP policy, can stop supplying products. Without products, the authorized retailers obviously cannot make money – the whole point of becoming an authorized distributor.

Enforcement

If manufacturers are serious about enforcement (and want to be taken seriously), they must have—and clearly communicate to authorized retailers—policies for addressing MAP violations. Specifically, they must have a system for penalizing or punishing their authorized retailers.

For example, a manufacturer might let an initial MAP policy violator off with a warning – albeit a stern warning that it can legitimately back up with action if necessary.

Subsequent violations, however, can result in suspensions, which should increase in severity.

Manufacturers might suspend authorized retailers for 60 days for their second violation, for example. Third violations could result in six- or 12-month suspensions. After fourth violations, the manufacturers should probably terminate the authorized retailers.

It is critical that manufacturers try to create a deterrent effect and cut off the offenders completely if necessary. Otherwise, they will struggle to stop the authorized distributors and, in turn, lose control of their pricing and brands.

Of course, unauthorized retailers have a higher propensity of violating MAP policies and their pricing violations put pressure on authorized retailers to compete on price. In other words, they pose a greater threat to companies.

Thus, while it is important to take action against authorized retailers, it is arguably more critical to address unauthorized retailers.

Certainly, a company cannot actually enforce its MAP policy against unauthorized retailers, as those sellers are not under any contractual obligation. But a manufacturer can still take enforcement actions against them for engaging in unauthorized sales (e.g. violating the manufacturers’ trademark rights).

Obviously, companies should focus their enforcement efforts on the most serious offenders and then work their way down.

That is not to say that they should ignore one-off sellers. But manufacturers must be smart and prioritize their enforcement efforts.

In our recently published white paper*, entitled “Stopping Unauthorized Online Sales and Product Diversion,” we have identified a new approach to handling unauthorized online sales, which integrates legal, technology and investigation-based techniques into a comprehensive system designed to efficiently and effectively stop unauthorized sales.

For more information, contact Vorys’ Illegal Online Seller Enforcement team at  877.545.6905. Learn more about the practice at http://www.vorys.com/services-648.html and throughhttps://www.youtube.com/watch?v=FwowrsQp1I4, and follow Whitney on Twitter (@WhitneyCGibson).

About TLK Sourcing

TLK Sourcing a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them - thereby ensuring that our interests are 100% aligned with yours.

Discover how to stop unauthorized online sellers from violating your MAP policy

tlkcta

Should We Sell Our Products “To Amazon” as a Vendor or “On Amazon” as a Third Party Seller?

As eCommerce continue to grow it share of retail sales, many brands are realizing that now is the time to re-visit their eCommerce strategy, and, in particular, how Amazon plays a role in that strategy.

In my talks with brands, I’m regularly asked whether it is better to become a vendor to Amazon (called First Party Selling, or 1P), or to simply sell on Amazon as a 3rd party (3P). Here I’ll share the differences, based on my own experience, research, and in talking with dozens of brands.

Becoming an Amazon Vendor (1P)

If you have popular products that sell well, at some point you will likely receive a call from the Amazon to ask you to become a vendor.

For many brands, receiving this call can be quite exciting; particularly because Amazon is going to tell you that they are going to place large orders, promote your products on the market place, etc…

While selling 1P may seem like a no brainer, for those that have gone down that road, the reality is that it is filled with potholes, curves, and various other surprises.

Before we get into the surprises, let’s take a quick look at what becoming a vendor to Amazon entails.

  1. Amazon will buy directly from you
  2. Amazon will tell you they want a large discount (15-25%)
  3. Amazon will not sign a MAP agreement
  4. Amazon’s payment terms are typically 60-90 days
  5. Amazon will handle promotion, sales, and fulfillment

Here’s Amazon’s Vendor Express explainer video:

In this video, Amazon states that when you become a vendor you benefit from the following:

  • You’ll get your product in front of customers in just a few days
  • Amazon takes care of promoting, selling, and shipping your product
  • Fulfillment will be handled by Amazon’s world-class fulfillment centers
  • Amazon will introduce your product to hundreds of millions of customers already shopping on Amazon
  • Your products will become eligible for free 2-day shipping for Prime members
  • Amazon will handle customer service and returns
  • Amazon will handle pricing and sales forecasting
  • Amazon will handle inventory management

All the points made in the video are true when you become a vendor to Amazon…but what they fail to mention is that when you choose to work with a third party seller like TLK, you will receive all of the same benefits, and you will avoid the downsides of becoming an Amazon vendor.

The Downsides of Becoming an Amazon Vendor

In my discussions with dozens of brands who’ve sold to Amazon as a vendor, I’ve learned that most regret the decision – generally for the same few reasons.

Less Profit

Amazon talks a good talk about providing you with reasonable pricing, all the while negotiating you to provide excessive discounts. Then (even if they’ve mentioned no extra fees), you find that between chargebacks, marketing co-op dollars, early pay discounts, etc., you’re getting hit with 15-20+% additional off invoice charges.

Ouch.

Lack of Pricing Control (The Race to the Bottom)

The first (and generally biggest) reason most regret becoming a vendor is that when they agreed to do so, they didn’t realize that they were going to lose control of product pricing, and this turned out to be, in some cases, catastrophic for their business.

Here’s what you need to be aware of…if you have a Minimum Advertised Price (MAP) policy that you enforce with your brick & mortar customers, Amazon will invariably end up violating that MAP price.

When they do, your offline customers are not going to hesitate to tell you how much that is hurting their business…and, as was the case with one brand I spoke with, these offline retailers simply stopped buying products.

Depending on how much of your total volume is offline, this can be a pretty big deal with dramatic cash flow implications.

So how and why does Amazon ignore your MAP policy? Because they didn’t sign your MAP agreement (they won’t) – and they don’t really care about your company.

Amazon only cares about the consumer experience, and having low prices is a huge part of ensuring that consumers get the best experience possible.

Below is an example of this. As you can see, Amazon wants to own the buy box, so they ensure their price is always the lowest.

PriceRace

Now here’s an even better example of Amazon’s aggressive pricing strategies. Take a look at Amazon’s price of just $15.98. No other seller’s price is anywhere close to $15.98 (the one seller priced at $15.99 charges $6.93 for shipping), so why does Amazon need to go that low?

JackLinks

If Jack Links wants to be considered a premium brand among sellers of beef jerky, how is such a low price, relative to the other sellers, helping Jack Links to accomplish this goal?

It’s not.

Worse yet, if there were brick and mortar retailers selling this product at a MAP of $19.99, how do you think they would react?

Here’s one final example of how aggressive Amazon can be with the “race to the bottom”. Notice that on June 16th, the retail price for this bag of chips was $25. Just 3 months later, Amazon has driven the price down to $14.99. That is a 40% decrease in price!

price-erosion

 

When you sell to Amazon as a vendor, you have zero control over pricing.

Communication

Amazon is a very large company, and as a result, people are always moving around within the organization.

What this means for you is that you should expect a revolving door of account managers, or worse yet, you may go without an account manager for periods of time.

This can make communicating with Amazon very challenging….and lest you think that this poor communication would be the exception, I can assure you that it was very much the reality for quite a number of brands that I spoke with.

For example, one coffee brand that I’m in talks with right now is having a hell of a time just getting Amazon to update the images on their product listing to images consistent with their new branding.

Payment Terms

payment-terms

Amazon’s terms are most often 90 days. Depending on the size of your company, this can be a large problem. As I’ll explain later, when you sell to a third party partner, you can often expect to be paid in advance.

Chargebacks

Amazon vendors are subject to a wide variety of chargebacks. Some are related to customer payment disputes, while others are related to damaged goods, and a variety of other things.

While I have not been an Amazon vendor, two brands I spoke with at a recent trade show told me that chargebacks (as well as Amazon’s co-op & MDF fees, as well as seemingly endless other small fees) were so significant for them that it was pretty much killing any benefits of being a vendor to Amazon and they were planning to switch back to the the third party selling approach instead.

The Upsides of Becoming an Amazon Vendor

For the brands I spoke with, the reasons above were their major pain points to being an Amazon Vendor.

However, there are some advantages to selling directly to Amazon. Webretailer.com published an excellent article weighing the two options. Here are the highlights (their words, except where italicized):

  • Control over brand. Advantage: EVEN
    (I would disagree with this, per my conversation with the coffee company who were struggling to update brand imaging. Amazon is also at liberty to rewrite your listings if they see fit.)
  • Control over pricing. Advantage: 3P
  • Sales velocity. Advantage: 3P
  • Support from Amazon. Advantage: 3P
  • Costs. Advantage: 3P
  • Tax Nexus. Advantage: Varies (leans 1P)
  • Margins. Advantage: 3P
  • Promotions. Advantage: 1P
    (Disclaimer: As Webretailer notes, a solid 3P marketing strategy has been shown to beat out Amazon’s promotional programs – such as Amazon Vine, which helps build initial reviews. There are additional 3P tools that can provide many of the promotional advantages that Amazon 1P can offer. In addition, Amazon’s promotional programs can come with additional – and sometimes hefty – fees.
    Also, with Amazon’s hundreds of millions of product listings, you can expect that if you are not one of the top 10 or so “strategic brands within a major category,” Amazon is unlikely to pay much attention to you unless you spend significant amounts on promotions.)
  • Staying in Stock. Advantage: 3P
  • Day to Day Involvement. Advantage: Depends on Control Being Sought
  • Getting Paid. Advantage: Clearly 3P
  • Shipping and Accounting. Advantage: EVEN
  • Reporting & Analytics. Advantage: EVEN
  • Customer Service. Advantage: 1P
    (If selling 3P, you will want to be sure your partner has solid customer service systems in place. If selling 1P, Amazon will provide solid, standardized customer service. You will not be able to customize your service, or surprise and delight your customers. Also, Amazon ‘owns’ your customer, and it is definitely more difficult to get feedback from your customers if you are selling 1P.)
  • Multi-Channel Fulfillment. Advantage: 3P
  • Selling into Canada, Mexico, and EU Markets. Advantage: 3P
  • Pay-Per-Click (PPC). Advantage: EVEN
    (I would qualify that this assumes you are using a single dedicated 3P seller, as it can be rather difficult to coordinate a PPC program with multiple sellers.)
  • Cannibalization of Sales from Own Domain. Advantage: EVEN

While some of the 1P benefits may carry enough weight for a given brand to choose to sell direct to Amazon, the overall advantage is clear.

OVERALL ADVANTAGE: 3P

Third Party Selling on Amazon (3P)

As I mentioned earlier in the post, the second way to sell your products to Amazon’s customer base is using the 3rd party (3P) approach.

With 3P, the first thing you have to do is decide whether your want work with a dedicated partner like TLK, or simply let the forces of capitalism form your 3P strategy (or more accurately, lack a strategy).

Let me start by saying that if you have a MAP policy and keeping control of retail pricing is important to you, simply letting anyone and everyone sell your products on Amazon will definitely contribute to the pricing problems that I described in the section above and I do not recommend it!

Keep Control Of your Pricing

map-protected-resized-600

When it comes to 3P selling on Amazon, the best way to control pricing is to reduce the number of sellers on your product listings. As a matter of fact, I’ve previously written about how having fewer sellers can actually help you to increase sales.

3P vs 1P Benefits

Now let’s revisit the list of benefits that Amazon says are a part of becoming a vendor and see which ones apply if you prefer to go the 3P approach instead.

  • You’ll get your product in front of customers in just a few days: This holds true for 3P sellers as well.
  • Amazon takes care of promoting, selling, and shipping your product: Your 3P seller(s) will handle the promoting, and the Amazon backend will still handle the transaction of shipping.
  • Fulfillment will be handled by Amazon’s world-class fulfillment centers: Same for 3P sellers.
  • Amazon will introduce your product to hundreds of millions of customers already shopping on Amazon: Same for 3P sellers.
  • Your products will become eligible for free 2-day shipping for Prime members: Same for 3P sellers.
  • Amazon will handle customer service and returns: Your dedicated 3P partner will handle this. If you don’t have a dedicated partner, the 3P seller that received the order will have to handle customer service.
  • Amazon will handle pricing and sales forecasting: Your dedicated 3P partner will handle this. If you don’t have a dedicated partner, no one will handle this.
  • Amazon will handle inventory management: Your dedicated 3P partner will handle this. If you don’t have a dedicated partner, each of the 3P sellers will handle inventory management for their own account.

Disadvantages of Having Multiple Sellers

As I’ve written about here, there are a number of negatives that go hand in hand with letting anyone and everyone become a 3P seller for your products.

priceware

In a nutshell, the downside of this approach includes:

  • These sellers will all use price as their primary lever to increase their share of the buy box, and this creates a ‘Race to the Bottom’
  • Listings optimization will suffer from the lack of ‘listing ownership’ that having multiple sellers creates
  • With multiple sellers, you will have zero control of you promotions
  • With multiple sellers, you will have zero control of your customer service (brand experience)

Advantages of Working With a Dedicated Partner for 3P Sales

partners-working-together

There are numerous advantages to working with a dedicated 3P partner and these advantages include:

  • Your partner will sign a MAP agreement, and with just one seller on your product listings, there is no race to the bottom on price
  • Your partner will help you combat un-authorized sellers
  • Your partner will ensure your product listings are fully optimized
  • Your partner will collaborate with you on the planning and execution of product promotions, new product launches, and PPC campaigns to help you significantly increase sales
  • Your partner will handle customer service on your behalf in accordance with your jointly developed SOPs
  • Your partner will handle inventory management
  • Your partner will probably pay faster than Amazon does (TLK pays up front)
  • Your partner will be easier to communicate with

Conclusion

Developing an effective Amazon strategy is a critical part of any brand’s eCommerce strategy. While long, this post was by no means exhaustive in its coverage of the facts.

Instead, my goal was to provide you with enough insight to allow you to ask meaningful questions in your conversations with Amazon and whichever 3P partner you talk to while you are determining the eCommerce strategy most suitable for your organization.

If you have questions about this post, please get in touch with us directly.

About TLK Sourcing

TLK Sourcing a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them - thereby ensuring that our interests are 100% aligned with yours.

Discover how to stop unauthorized online sellers from violating your MAP policy

tlkcta

Case Study: Product Launch & Promotion in an Ultra Competitive Niche – Part 2

Launching a new product in an ultra competitive niche on Amazon is hard work and requires a well crafted marketing strategy.

Get it wrong, and you can easily wasted a lot of money on product development, inventory, and marketing.

Get it right, and you’ll have added another steady cash flow producer to your product line.

In today’s post, I’m going to share with you part 2 of a case study for our top selling pet product, along with all the nitty gritty details of how we’ve used PPC advertising to get our product to where it is today (if you missed it, you can read part one here).

Before we get into all the details, I do want to set the stage with by saying this: the #1 goal of any PPC campaign is to increase sales velocity and drive down the product’s best seller rank (BSR) so that it will move higher in the organic Amazon search results and drive organic sales. 

Using Amazon PPC to Launch

When we launched our bark collar, thanks to a LOT of competition, we were faced with a steep uphill battle to get traction. If our product was to become a long-term success, we knew that we needed to get it to rank on the top half of page one of Amazon’s organic search results. Not an easy task!

Step one was to create an automated campaign and let Amazon’s algorithm choose which keywords that we should target. The first day the campaign ran was July 8th, 2016 and we spent just $6.20 due to our keeping a small limit on the daily budget.

Between July 8th and July 30th 2016, we received a total of 105 orders from a PPC spend of $1,242.11, which resulted in a loss of $339.80. During this time, our average CPC was $1.49 and our Advertising Cost of Sales (ACOS) was 54.92%.

july-ppc-performance

As you can see in the image below, during this same period, we sold 177 total units, which means that after subtracting the 105 PPC sales we also made 72 organic sales. Of those, 20 were a part of the promotion I wrote about in part one of this case study.

And finally, during this time frame, our product listing had a 22.75% conversion rate (shown as unit session % in the blue box on the right of the image).

bark-collar-stats

In case you are looking at the data above and asking yourself, “what’s the point?”, remember that the goal of the initial advertising is to ‘buy data’, and as we bought data, we uncovered the main keywords that were responsible for conversions.

The secondary goal of the launch phase of our advertising was to increase our Best Seller Rank (BSR), and we did make substantial progress in this regard as well. Our BSR started at around 24,000 in the Pet Supplies category, and by the end of July, it had dropped to just under 15,000 (the reason for the spike in BSR on July 24 is that we ran out of stock for a few days).

shock-collar-initial-bsr

Now that we’d ‘bought some data’ and made some sales, it was time to begin to optimize our advertising on an ongoing basis.

Using Amazon PPC for Ongoing Promotion

When we run advertising campaigns for sustained promotion, we generally run two types of campaigns.

Sales Rank Campaigns: in a sales rank campaign, the goal is to “buy your way to the front of the line.” The way to do this to buy enough sales velocity to get Amazon’s algorithm to rank your product on the first page for your chosen keyword(s). Depending on the level of competition and the number of keywords targeted, achieving a first page ranking can require a significant investment over time.

ROI Campaign: as the name suggests, the goal of the ROI campaign is to produce an immediate ROI on the ad spend. This is generally achieved by “harvesting” appropriate long-tail keywords from the campaigns created during the Launch Project and then creating a bid structure to more precisely target these keywords – ideally at a lower CPC.

In the case of our dog collar, we took a hybrid approach and created a manual campaign where we target a large volume of long-tail keywords, plus from the initial campaign we were able to identify the top converting keywords that we’d ultimately like to achieve an organic ranking for – because if we could, our product would become highly profitable.

Automatic Campaign Results

During this period, we let our automatic campaign run ‘as-is’, and as you can see below, between July 31st and August 18th, 2016, we received a total of 160 orders from a PPC spend of $2,367.15, which resulted in a loss of $911.72. During this time, our average CPC was $1.64 and our Advertising Cost of Sales (ACOS) was 71.08%.

During most of this period, our daily budget varied from $150 to $200 and our default bid ranged from $2.70 to $2.85 per click. As you’ll see later on in this case study, it needed to be higher.

auto-campaign-731to818

Manual Campaign Results

During this same period, we had a small daily budget allocated to our manual campaign. It should have been much higher, but from July 29th to August 15th, I was away on a business trip followed immediately by a vacation for 10 days, so I wasn’t paying as much attention to the manual campaign as I normally would have – which means, the results weren’t much to brag about.

During the period from July 31st and August 18th, 2016, with a daily budget of just $20, we received a total of 8 orders from a PPC spend of $227.96, which resulted in a loss of $172.12. During this time, our average CPC was $1.69 and our Advertising Cost of Sales (ACOS) was 155.17%.

Because of the low bids, most days during this period, we didn’t exhaust our daily budget.

manual-campaign_731to818

As with the previous period, we saw a fair number of organic sales that went along with the sales that were the direct result of our advertising.

As you can see below, total units sold were 230. So if we subtract the 168 units sold from advertising, we can determine that organic sales during this period totaled 62 units.

Total revenue from organic sales + sales from advertising was $3,848.70, with an overall loss of $1,064.87.

shock-collar-stats-segment2

Increasing Bids on Top Keywords

On August 18th, I increased my bid to $3 on about a half dozen of the most important keywords that we wanted to achieve a first page organic ranking for, and as I write this on August 24th, the $3 bids are still active. I also increased the daily budget for this campaign to $50.

So far, as you can see below,the results have been ok. We have received 10 orders.

high-bid-results

Analyzing Our Results To Date

In the last week, we’ve started to see some positive results from our sustained investment in advertising for this product.

Remember, our #1 goal is to achieve an organic ranking on the top half of page one of the Amazon search results, and the key to doing that is to drive down our BSR.

As you can see below, from August 19th to August 22nd, we have received a total of 29 orders from both the manual and automatic campaigns combined with a total PPC spend of $559.84.

Product_Performance_stats

During this same period, our total revenue for this product was $1,135.33 and we sold a total of 67 units. That means that 38 of the orders were from organic sales.

total-collar-sales-aug19-22

Conclusion

I’ve given you a lot of detail here, and hopefully you didn’t get lost in the weeds.

Remember, the goal of PPC advertising on Amazon is to decrease your BSR enough to get your product ranked on the top half of page one of the search results for a given keyword that is relevant to your product.

In other words, the goal of PPC advertising is to invest in decreasing your BSR, which will have the result of increasing your organic sales – which will increase overall profitability.

With that in mind, let’s look at two final charts and draw some conclusions.

As you can see below, since investing in advertising this product, our BSR has steadily declined and it continues to do so. Will we get to the top half of the first page? Yes, I believe we will (and I’ll update this case study accordingly).

final-bsr-stats

To achieve this decrease in BSR (increase in organic sales, we’ve invested a total of $4,042.75 from July 1 to August 22 and generated 293 orders as a result of the ad spend.

ppc-investment-as-of-augg22

In addition to sales from PPC, we have also achieved a fair number of organic sales. As you can see, since embarking on this experiment, we’ve sold 496 units (PPC + organic), generated sales of $8,336.04, and incurred a loss of $1,803.10. Our current BSR can be seen highlighted in blue.

shock-collar-dashboard

What I can’t predict is how much more we’ll need to invest in PPC to achieve our goal of ranking on the top half of page one of the Amazon search results, and as we get closer to that goal, I will continue to provide further updates.

About TLK Sourcing

TLK Sourcing a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them - thereby ensuring that our interests are 100% aligned with yours.

Discover how to stop unauthorized online sellers from violating your MAP policy

tlkcta

Case Study: Product Launch & Promotion in an Ultra Competitive Niche – Part 1

Launching a new product in an ultra competitive niche on Amazon is hard work and requires a well crafted marketing strategy.

Get it wrong, and you can easily wasted a lot of money on product development, inventory, and marketing.

Get it right, and you’ll have added another steady cash flow producer to your product line.

In today’s post, I’m going to share with you a case study for our top selling pet product, along with all the nitty gritty details of what it’s taken to get our product to where it is today.

Market Research

The key to creating a highly successful product listing on Amazon is to find a product that is already in demand, and understanding demand starts with a study of what is already selling well.

Being as we owned a dog that loved to bark (which drove me nuts), the idea of an anti-bark collar was something that I’d already been considering.

When we first decided that we wanted to create our own electric dog training collar, the very first thing we did was to perform some market research.

Ideally, we were looking for a product that:

  • Had significant existing demand
  • Was relatively easy to manufacture
  • Didn’t have an overwhelming level of competition (as measured by product reviews)
  • Wasn’t seasonal
  • Had a long shelf life

Assess Demand

In the image below are the Amazon search results for the term “bark collar” and as you can see, 8 of the top 17 products are generating at least $40,000 per month in revenue.

bark-collar-report

Based on this report, it was fairly safe to assume that there is plenty of demand for this type of product.

Just as important as demand is breadth of sales. What we like to see are sales that are not concentrated in just the top few listings. Instead, we prefer to see plenty of sales across the top ten search results, and as you can see above, that is precisely the case for this product.

Assess Seasonality

When looking at demand, it’s important to determine if the data you are looking at is showing a seasonal trend.

In our case, we looked at one of our competitor’s products that had a large number of reviews (plenty of reviews is a barometer for product age) and were able to confirm that sales have been relatively steady throughout the year.

bark-collar-seasonality

You will note the graph spikes up in May. A spike up in sales rank like this is generally the result of a vendor running out of stock, so we checked a few other competitors to confirm this spike was limited to this one product, and not the category as a whole. (Note: when sales rank is high, sales are low, so downward trend in the green line is desirable)

Assess Competition

When we assess the level of competition, there are a number of things that we consider, including:

Number of reviews: we like to see at least one of the top 5 listings with under 200 reviews. In this case, two of the top 5 listings are under 200.

bark-collar-reviews

Number of average stars: As important as the number of competitor reviews is the average rating. As you can see, two of the top 5 products are 3.5 stars or less. This is another good barometer for demand because if a product with just 3 stars can still sell well, people must really want/need it.

Number of competitive product listings: The number of total product listings is not nearly as important as the reviews and average rating, but it was something that we considered, just the same.

If there are too few competitors, that could be a sign of a lack of demand or market breadth. If there are too many, achieving a high enough rank in the organic search results could prove to be rather expensive. (There was lots of competition in this case, and we were still able to rank… more on how we did that in part 2.)

Product Launch

Successfully launching a product on Amazon requires that you follow a proven process that consists of:

  1. Creating an optimized product listing
  2. Getting product reviews
  3. Running PPC advertising campaigns

Optimized Product Listing

Creating an optimized product listing is simple to explain, but not as easy to do if you don’t know what you are doing. With that said, there are a few key factors that you must get right.

Keyword Optimized Headline: If you have been thorough in your keyword research, you will know which keyword you should be sure to include in your product headline. In our case, we chose to include the phrase ‘bark collar’ in our product headline because keyword research told us that this phrase is searched for approximately 83,500 times per month on Amazon.

High Quality Images: Amazon lets sellers include up to 9 product images in each product listing, and I strongly recommend you use as many of them as you can. Even more important than the number of images, however, is the quality of your images. Nothing will kill your conversion rate faster than lousy images.

Descriptive Sales Copy: Every product listing allows up to 5 bullet points, plus an additional product description. These are both areas where you want to write for humans, while still doing your best to add in additional keywords that you are targeting.

Keyword Targeting: Within the administrator portion of every product listing, Amazon allows sellers to enter up to 1000 characters for the keywords that they hope to rank for. Filling as many of these 1000 characters with relevant keywords is absolutely critical to the long term increase in sales that you are shooting for.

Getting Product Reviews

Product reviews are the social proof you need to convince buyers that your product is worthy of their attention (and money).

When launching a new product, it’s critical that you run a promotion to generate product reviews. It’s also critical to the health of your seller account that you don’t run afoul of Amazon’s terms of service in the process.

As of late, Amazon has been ultra-vigilant with outright review manipulation and they have gone as far as filing lawsuits against sellers that have taken things too far.

So, what is acceptable, and what is too far, you ask?

At the last conference I attended in August of 2016, one of the speakers was Rachel Greer of Think Cascadia. Rachel is an ex-Amazonian, and she shared that Amazon will let you get away with a small amount of review manipulation for about 3 weeks after you launch your product. She also informed us that Amazon’s own research concluded that anything more than 17 product reviews added no significant lift to conversions.

In other words, in your first three weeks, your goal should be to get 17 reviews via a promotion and then stop.

After these first 3 weeks (and 17-ish reviews), Amazon expects that just 2-3% of purchasers are going to leave a review, so if you continue to bring in a number that is higher than that, you are getting on a radar screen that you don’t want to be on.

So what did we do after getting our first 17-ish reviews? We set up an email auto-responder system that asks every ‘regular’ buyer to leave a review. Using this system, our product, which was launched on May 24, 2016, accumulated a total of 28 customer reviews as of August 23rd, 2016, with an average rating of 4.5 stars.

bark-collar-review-count

Running Advertising Campaigns

Advertising campaigns are a crucial part of both the product launch as well as the ongoing promotion of your product, and when it comes to running campaigns, there are a lot of details to get right.

This blog post is already long enough, so be sure and check out part 2, where I will go into detail on how we used advertising campaigns within the Amazon platform to launch and promote our dog collar on an ongoing basis.

About TLK Sourcing

TLK Sourcing a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them - thereby ensuring that our interests are 100% aligned with yours.

Discover how to stop unauthorized online sellers from violating your MAP policy

tlkcta

How to Increase MAP Compliance on Amazon

Does your company sell to brick & mortar retailers? Are your company’s products also for sale on Amazon – often at prices that are below MAP?

If you’re a brand selling to bricks & mortar retailers and you’re struggling to enforce MAP pricing on Amazon, you are undoubtedly aware of two major issues:

  1. When your products are available on Amazon below MAP, your brick & mortar retailers tend get pretty upset
  2. Controlling MAP on Amazon can be a huge challenge

The Challenge of Managing MAP on Amazon

If MAP pricing is important to your brand, managing it on Amazon is an ongoing challenge that you are going to have to deal with.

If you don’t actively manage it, you are essentially giving up control of your product(s) on Amazon – which over the long term, will negatively impact both your relationships with your retail partners, as well as your brand equity overall.

While there is no ‘silver bullet’ for MAP pricing management, there are definitely a number of steps that you can take to keep control of your product listings on Amazon.

Steps to Managing MAP Pricing On Amazon

The first of these steps is to sign an exclusive agreement with a single third party seller and then work with them, and Amazon, to systematically remove all of the other 3rd party sellers on a given product listing.

To hear how this has worked for Kim Goldsworthy, GM of Sales & Marketing at Heyrex Ltd from New Zealand, watch the video below.

Once you have decided to work with a single 3rd party seller, ensure that any distributors that sell your products know that in order for any retailer to get an approved wholesale account, these retailers must have a verified physical location, and they aren’t going to be permitted to sell the product on Amazon.com.

The next step is going to be to contact each of the other sellers on your product listing and find out where they got their product from. As a part of this conversation, you should also inform them that they are in violation of your MAP policy, plus they aren’t authorized to sell your products on Amazon. If they don’t agree to remove their listing, you should check how much inventory they have, and then, if necessary, have your attorney send a cease and desist letter.

To check how much inventory they have, simply try to add 999 items to cart and Amazon will tell you how many they have left in the warehouse. If they have a sufficient quantity to justify the effort, then go ahead and have your attorney send the letter.

remaininginventory

In addition to sending the letter to the seller, you should also inform Amazon that you have an exclusive agreement with just one seller, you have a MAP policy, and that this seller is in violation of both.

How to Keep Control of Your Amazon Presence

The easiest way to keep control of your product’s presence on Amazon is to work with only one seller in an exclusive relationship. That way, you will have more control over things like:

  • MAP pricing
  • Promotions
  • Inventory levels
  • Customer service levels
  • Product listing quality
  • Sponsored products (PPC advertising)

Working with a single seller will not decrease your sales. In fact, if you select the right 3rd party selling partner, you should expect them to actually help increase sales.

How to Remove Unauthorized Sellers From Your Product Listing

The following information came to me from Cynthia Stine, and when it comes to Amazon’s policies, she is one of the experts I trust. She provided this update (in italics) on August 24, 2016.

Yesterday Amazon rolled out brand-level un-gating with no fanfare or warning. While we still have many unanswered questions, I wanted to share what we’ve observed and let you know that we are doing our best to find answers to your questions.

WHAT HAPPENED?

There are some brands where you now need to get approved in order to sell them.

  • Must have invoices or a letter from the manufacturer to get approved
  • Some brands also require a fee ranging from $500-$5000 in order to sell
  • For some brands you now need: 1) category ungating, 2) brand ungating and 3) permission for specific ASINs. So, if you’ve sold a particular item in the past with no troubles you may easily get permission to sell the ASIN, but you will still need to get permission to sell the brand.
  • We can’t see the pattern of brands yet and don’t know if it is because it is rolling out over time or some other reason.

So what does this mean for your brand? While I cannot say for sure at this point, I would suggest that if you want to regain control of your product listing(s) that you contact Amazon directly and ask about getting your brand gated.

About TLK Sourcing

TLK Sourcing a digital retail agency with significant expertise in the Amazon marketplace and unlike typical marketing agencies who will charge you thousands of dollars in fees, we earn our income by purchasing your products wholesale and then reselling them - thereby ensuring that our interests are 100% aligned with yours.

Discover how to stop unauthorized online sellers from violating your MAP policy

tlkcta