The 5 Biggest Mistakes Businesses Make on Amazon

It’s no secret that Amazon is a huge force that has taken over e-commerce. We recently went to the LPX Connect hosted by Logical Position and left feeling extremely excited to keep learning about this topic.

For now, here are the main takeaways. A huge thank you to Micah and Logistical Pro for sharing their slides for this recap.

Did you know?

$0.51 of every dollar is spent on Amazon
There are over 300 million users and 95 million Amazon Prime members
83% of purchases made in the last month were on Amazon
Amazon is the third largest digital ad platform
80% of consumers use Amazon to discover new products and brands

With these staggering statistics, it almost seems impossible to not get involved with Amazon.

WHY NOT? Reasons To Avoid Amazon

Lost Margins
Customer Data Loss
Lack of Brand Experience
Supply Chain Management
Will resellers be upset?

Five Biggest Mistakes Businesses Make on Amazon

MISTAKE #1: NO PRICING OR FULFILLMENT STRATEGY

Winning the “Buy Box”

The “Buy Box” is the upper right hand corner in Amazon
90% of Amazon Sales go to the seller winning the “Buy Box”

Pricing Strategy:

There are three types of pricing strategies that you can use in Amazon ads.

1. Manual Pricing

- Manual pricing is good if you do not have much competition in your market.

2. Rule-Based Pricing

- Rule-based pricing allows you to set a price above or below who is winning the buy box.
- This pricing strategy will change the seller’s item price in response to his or her competitors. (Rubin, 2016)
- Pros: Allows you to gain the most competitive price
- Cons:
  - Only competitor prices are considered
  - Prone to human bias
  - Marketing conditions are constantly changing

3. Algorithmic Pricing:

- This kind of pricing applies computer algorithms that will set an “ideal price based on all known market conditions.”

Cons
- Algorithmic pricing is much more expensive than other options
- It’s not typically suitable for small business with a limited budget and small inventory
- The user has less control over prices

What type of seller are you? Knowing the answer to this question will help you determine what type of pricing strategy to follow.

A manufacturer/brand with no resellers
A manufacturer/brand with resellers
The exclusive reseller of a brand or product
One of many resellers of a brand or product

Fulfillment Strategy:

1. Fulfillment by Amazon (FBA)

- Amazon holds your item and ships it for you

2. Seller-Fulfilled Prime (SFP)

- The seller delivers directly to the domestic Prime customer from his or her own warehouse

3. Fulfilled by Merchant (FBM):

- The sellers ship their own products directly from their own homes, business, or warehouses after receiving orders through Amazon
- This fulfillment strategy does not include Amazon Prime status

MISTAKE #2: NO LISTING STRATEGY

How to combat this mistake: Optimize Your Product Information

For the Amazon Algorithm
- Fill out as much product information as possible
- Ensure that your keywords are relevant
- Include enhanced brand content
For the Consumer
- Use clear and concise titles
- Include unique value propositions and product features in the description
- All images and videos must be high-quality

MISTAKE #3 NOT ADVERTISING

There is an immense amount of untapped potential when advertising on Amazon

Conversion rates are exceptional
Advertising directly affects organic performance
Missing out on potential market share
First-mover advantage

MISTAKE #4: ADVERTISING INCORRECTLY

There are five major mistakes that businesses make when advertising on Amazon.

1. Poor Account Structure: Add more structure into your account

Segment by:
- Campaign Types
- ™ & Non ™
  - Single Keyword Ad Groups (SKAG) and Single Product Ad Groups (SPAG)
- Targeting Types
- Product Lines and Categories

2. Not Utilizing All Ad Types