Sizing Up Your Amazon Potential: Six Simpactful Steps

Fifteen years ago, Amazon’s significance in the CPG eCommerce world was still uncertain. Today, it’s undeniable. Amazon now represents 40% of eCommerce sales, 80% of Marketplace sales, and 4% of US Retail sales, according to a 2023 Marketplace Pulse report. While Walmart still dominates total retail, it accounts for only 7.4% of US e-commerce sales, now Amazon accounts for 40%, according to eMarketer. Consumer Product companies have accepted Amazon’s importance in their channel and demand creation strategies, given the sustained growth of the eCommerce channel. However, many brands still struggle to right-size their investment, resourcing, and/or profitability on the platform. Here are six steps to help you maximize your Amazon potential:

Step 1 – Understand your category development and growth on Amazon. We saw significant shifts in demand on the platform during and after the pandemic. It is important to understand the scale and health of your category on Amazon. This can give you insights into whether it is a priority for the Buyer.

Step 2 – Assess your brand’s relative share development on Amazon and barriers to growth. We have helped many clients assess their brand’s potential by going deep on their brand’s share on the platform, importance to Amazon, the structure of the category (dominated by 3-4 brands or a dozen), recent momentum, and brand penetration versus other channels. Our assessment process also evaluates what is required to win based on the competitive environment. All of this must also factor in evolving category shopping behavior trends and the status of Annual Vendor Negotiations.

Step 3 – Operational and Executional Excellence. Amazon.com leverages the company’s proprietary A10 search algorithm, which uses a complex AI-based system to determine which products to serve within the organic search rankings. Amazon’s automated supply chain rewards brands that have best designed their offerings and operations to win within Amazon’s systems. It is critical that any defects, like labeling, that cause items not to be received are systemically corrected to minimize shortages and chargebacks. For instance, Simpactful’s team of experts have come across small issues like Detail Page set-up mistakes that have significantly hampered growth. Simpactful Partner Lindsay McShane emphasizes, “Ensuring you have resources who can quickly assess and fix any outages that are impacting your ability to supply Amazon is critical. For example, it is not good enough just to send an EDI ASN, the data, structure, timing and formatting of that ASN must meet Amazon’s specific requirements.  Many brands have increased their growth and profitability on Amazon by rectifying issues with supply, demand forecasting for new items, labeling, pricing, assortment or even titles and descriptions.”

Step 4 – Media and Merchandising Investment. Investment to drive demand can impact both the A10 automated algorithm as well as your relationship with your Category Buyer who can influence brands that are prioritized within the platform. Simpactful Senior Partner Heather Burgess spent several years with Amazon, including Amazon Advertising. She adds, “It is critical to invest not only in sufficient levels in an effective Sponsored Ads strategy but also in to drive demand through deals, merchandising events (like Prime Day or Category events) and targeted performance media. Depending on the category, you may also need to invest in upper funnel tools and tactics like OTT to win the favor of both your buyer and the A10 algorithm.”

Step 5 – Consider whether you are maximizing your brand’s potential to win with Amazon tools like Amazon Business, Subscribe & Save, Registry, and more. Simpactful Consultant Mike Kernish spent over a decade in executive leadership roles at Amazon and sees Amazon Business as a gap in many brands’ Amazon strategies. “Amazon Business is one of the biggest new growth opportunities for brands on Amazon and can offer tremendous potential to brands who choose to play there. Amazon Business is Amazon’s big bet in the B2B Procurement space, serving over 5 million business customers from sole proprietors and small businesses to large enterprise procurement across the Fortune 500, Education, Government, and Nonprofit sectors. Winning with Amazon Business requires brands to think differently around assortment, pricing, supply chain, and negotiation. Getting these right can unlock significant untapped value, driving both top and bottom-line growth.”

Step 6 – Continually reevaluate your selling, fulfillment, and agency support models to identify profitability opportunities. With Amazon, it’s not enough to set it and forget it. No one knows that better than Simpactful Consultant Cheryl Stark, who spent the latter part of her career managing Amazon logistics at Mondelez. Since then, she has helped dozens of clients identify opportunities to improve the effectiveness and profitability of their Amazon operations. “Amazon is continually reinventing the game and turning cost centers into new profit centers. Right now, Amazon is bringing new warehousing, distribution, and fulfillment services online. This can fundamentally change the relative financial picture for 1P, 3P or 3P Direct and create the flexibility for new agency support service models. It is important that leaders continue to assess options.”

Importantly, the lessons learned on Amazon can help to inform strategies and plans on other Retailer.com sites across the channel.

Interested in understanding where you have room to build the scope or profitability of your Amazon business? Simpactful can help! Our team of experts has a diverse set of resources, including Amazon and functional experts who can help uncover Amazon’s upside opportunities. Contact our team today at contact@simpactful.com or 925-234-6394. Visit www.simpactful.com