As we have seen in the previous article, pricing varies between competitors on the same platform of Amazon. Selling on Amazon can seem easy at first however it is becoming increasingly complex all offering different benefits to the seller. Once upon a time it would be considered best practice to adopt a single method. Increasingly, it may be worth considering having a blended model that takes advantage of the different services available from Amazon.
There are different ways of working with Amazon. First, there is a fulfillment – Fulfilled by Amazon (FBA), Fulfilled by Merchant (FBM). Secondly, you can choose from different ways of marketing – Seller Central, Vendor Central and Vendor Express.
Fulfillment Requirements:
Fulfilled by Amazon (FBA): Yes, Amazon fulfills needs of both the seller and the customer. Amazon takes responsibility of sending your product to the customer in time.
Fulfilled by Merchant (FBM): As a Merchant, you do everything. You place your product on Amazon product listing and you ship the product to the customer after receiving an order. You’re responsible for every delay or damage in the package.
Marketing Ways:
Vendor Central: You are the first-party vendor. This is generally for big brands, where Amazon becomes your first customer. Amazon orders from you, keeps your products in their inventory and sells it to individual orders from different customers. (Can you do FBM with Vendor Central too? E.g. FireKing?)
Vendor Express: This is for young brands who want to make a mark in the market. Amazon supports your budding business becoming your partner. You can sell in bulk to Amazon and it markets your product in its own style and you grow your business.
Seller Central: You will be a third-party vendor. Here, you can choose either FBA where Amazon processes packs and ships your orders or ship the product on your own. Seller Central is beneficial when you launch a new product.
More than 50% of the sales happen through a third-party vendor. This is because the seller has full control over product pricing. Also, it could be a way of developing traction for your products before moving to a closer direct working relationship with Amazon. Importantly, you can use a Seller Central account to help drive more competitive pricing for products listed under Vendor Central: Remember, Amazon is a price follower.
A few important points which effect Pricing-
- Competitive pricing: Every customer will lookathe price and also the shipping cost. So, manage either the product price or the shipping cost.
- Offers: Discounts, offers, cash on delivery, free products, etc. will attract more customers.
- Reviews: This is crucial. Consumers will look at the reviews and feedback on a product before placing an order. It’s important to have great seller reviews too. This leads to further positive brand exposure. All of this will help make a positive impression in Amazon’smarket place.
- Less-popular product: List a product which has less competition. So, buyers will buy only from you leading to better credibility. That’s an easy trick, isn’t it?
- Highly popular product: As you gain the credibility, offer a very good competitive price for your product to gain more attention.
Where possible, become a Prime seller. It’s a great way to raise customer demand, gain confidence and trust of the consumer, increase loyalty and ensure your product is delivered nice and quickly.
Lastly, a Seller Central account is a great place to launch new products quickly and within your control, or perhaps liquidate those products that didn’t quite work out.
Amazon is turning in to be a leader in the retail segment both online and offline, becoming a single stop solution for both vendor and the customer. In the chart below (source: MKM Partners) we clearly see how Amazon is taking a major chunk of the retail industry.
Simply put, go ahead, invest in taking a space in Amazon and see your brand grow with more sales and reach! But remember, there is not cookie cutter solution. Think ‘broad’ when considering your Amazon strategy. And, when you’re considering your whole eComm strategy you should think even broader. We’ll tackle that in our next blog.
