- Ridgeline Insights
When does it NOT make sense to scale on Amazon?
With over 9.7 million sellers worldwide, Amazon is clearly too big to ignore. It plays an integral part in many brands’ strategies. With that said, Amazon is not a one-size-fits-all marketplace. For quantifiable success, determine whether it actually is the best place to focus your time and energy to scale. Consider these five key factors.
Factor 1: Product Demand. Are people looking for a product like yours? New and creative products are great, noteworthy, and may even solve consumers' problems. But are people looking for that type of product? Amazon is very much based on SEM (search engine marketing). Shoppers come into Amazon with purchase intent for a specific product, so if your product is too different from what they have in mind, it might be hard to convert. Think competitively and develop strong content to explain the benefits of your product versus more traditional offerings so consumers understand why you are the next step up. But if consumers aren’t ready to search for a product like yours, you may be better off spreading awareness and drumming up demand through other avenues off the platform.
Factor 2: Average Sale Price. Is it reasonable? Not all Amazon shoppers only look for price point products with tons of reviews. And while there is plenty of room for more expensive products on Amazon, it may mean you’re playing in a smaller category. Size up your competition and see if you come close to competing in price to drive conversion. If you aren’t willing to play with your ASP, at least during the initial stages to ramp up, then consider waiting until Factor 3 kicks in.
Factor 3: Branded Search. Are people looking for your brand on Amazon? If so, excellent -- you can drive volume through your branded shoppers to support advertising costs while improving ranking on broader category terms, without killing your margin. If not, be ready to spend. Without shoppers coming into Amazon looking specifically for your brand or product, you’ll need to rely on more competitive search terms to drive sales velocity. For that to work, be ready to commit to advertising. Experiment with what terms deliver the volume and ROI you are looking for, and be willing to test and test again. In the beginning, you may rely 100% on ad-driven sales until the algorithm kicks in.
Factor 4: Trusted Quality. Is your product quality up to standard? Negative reviews, returns, and poor customer feedback can crush your momentum on Amazon. These are all key factors in the algorithm. If your product isn’t dialed in and ready to win, then wait to test on Amazon.
Factor 5: Logistics Capabilities. Are you at the point in your business where you can manage your inventory, fulfill orders, and meet Amazon standards when it comes to sending inventory to FBA? If you’re looking to really scale on Amazon, be prepared in your warehouse as well.
Finding the answers to these questions takes significant market research, a category audit, and some honest analysis. If you’re struggling to determine whether your brand is viable and ready to scale, we’re always here to help.