How efficient is your Amazon Business?
3 questions to consider
A+ content won’t make a difference unless you have an A+ inventory to back it up.
When starting to sell on Amazon, a lot of brands all seem to think the same thing: “I’ll just put my product on Amazon and it will sell.” Now, Amazon will certainly grow your revenue, but even the most powerful online marketplace will struggle to turn you into a digital sales guru overnight.
But let’s say, hypothetically, that your expectations ring true, and within days of selling on Amazon your order numbers have gone through the roof. All’s going well, isn’t it? Yes – but only if you have the inventory in place to support those orders.
Take the PlayStation 5 as a recent example. Back in November 2020, Sony doubled its US TV ad spend (a measly $26.2 million) in the run up to the console’s release. The result? More people googled “where to buy PS5” than “where to buy toilet paper”, “face masks” or “hand sanitiser” in 2020.
But how many people do you know who actually have one? Sony may have created a great deal of hype, but the subsequent shortage in PS5s suggests the infrastructure was never there to support it during the midst of a global pandemic.
Now, this isn’t the end of the world for a company like Sony, which has cultivated enough brand loyalty to stop gamers from looking elsewhere. But what about small, independent sellers on Amazon? If your products can’t keep up with the demand, what’s to stop potential customers from just purchasing a similar product from the next seller in the list?
There’s no point investing in your brand store, A+ content and Amazon ads if you haven’t got the stock to back it up. You simply won’t have anything to sell.
That’s why, before you optimise your front of shop, you need to get everything in order behind the scenes first.
If you’re new to Amazon, or even if you’ve been selling on there for years, these are the three questions you need to be asking yourself to ensure you’re running as efficiently as possible:
1 – Are you using the right fulfilment method?
Let’s start with the basics. Currently, there are three main ways you can fulfill orders through Amazon:
- Fulfilled by Merchant (FBM): you sell your products through Amazon but you store and ship them from your own warehouse using your preferred delivery method.
- Fulfilment by Amazon (FBA): you send your products to fulfilment centres where Amazon picks, packs and delivers them for you.
- Seller Fulfilled Prime (SFP): you store your products in your own warehouse but Amazon couriers oversee the delivery process, giving you access to Prime delivery.
There’s also Multi-Channel Fulfillment (MCF), but that’s a story for another time…
As 53% of UK households are Prime members, our preference is FBA or SFP, which both give you access to Prime customers. Make no mistake, the Prime badge is worth its weight in gold. Think about it… the first thing most Prime members do when searching for a product is click ‘filter by Prime’. If you aren’t Prime eligible, then you’ve immediately lost out on this significant customer base.
That being said, Prime isn’t always the be all and end all, and your chosen fulfillment method should ultimately depend on the type of products you’re selling. If you sell large items like sofas and washing machines (basically anything you can’t fit onto a pallet), or if you sell expensive items like Rolex watches (basically anything you wouldn’t want lying around in a warehouse you don’t own), then FBM will give you a little more control over these items.
2 – Are you managing your stock correctly?
Sensible stock management is the backbone of any successful Amazon seller strategy. As such, there are a number of steps you can take to ensure you’re always keeping up with demand.
If you are using FBM or SFP, then the main thing you need to consider is whether you’re updating your stock manually or sending an automatic feed into Amazon? This is important because failing to update your Amazon stock within the appropriate time frames could have huge implications, especially if you’re selling that stock over multiple platforms.
For example, if you have 100 wine glasses to sell, and both Amazon and your ecommerce site are showing that you have 100 in stock, then what happens if two white wine aficionados come along and each order 100 wine glasses for themselves? You can only fulfil one of those orders, which means you’re going to have one very satisfied customer, and one very thirsty wine lover – the kind of person who will leave a negative review too.
Poor customer service is never good, but on Amazon it can easily lead to account suspensions and a considerable drop in revenue. Having the right buffers in place to prevent any stock errors from occurring is therefore vital to your success on Amazon.
Now, letting Amazon manage your stock by using FBA means you can worry less about these kinds of issues, but that isn’t to say you should send them every piece of stock you own. Remember, Amazon doesn’t buy stock from you; Amazon holds your stock in their warehouses until it sells, at which point the sale is attributed to your account. If you send 1000 units to Amazon without the forecasts to know how much you’re likely to sell, then you could end up with some fairly hefty long-term storage costs or stock removal fees.
The best practice is to keep your stock as fresh as possible, which is why we recommend sending units little and often at first. By sending 10 or 20 or 50 items, you can start to grow that figure in a sustainable manner once you have the forecasts to show how much stock you’re likely to sell. On top of that, by working to a three-month stock cycle, you can avoid the prospect of long-term storage fees while also being able to react quickly if there is a spike in demand.
3 – Are you shipping efficiently?
Shipping is a necessary cost to any business selling on Amazon, but there are a number of ways in which you can reduce those overheads.
If you’re sending products to Amazon and your only method of shipping is a pallet, are you filling that pallet and getting the maximum return on investment? Always be mindful to maximise the size and weight of the pallet when you’re shipping goods, otherwise you’ll be met with additional costs.
Things get a little trickier when it comes to SFP, which is quite strict in terms of its collection deadlines. At the minute, Amazon has a 2pm cut off point, but this is soon moving to 4.30pm. That means any order you receive before 4.30pm needs to be processed and ready for collection that very same evening. In theory, a relatively small company could receive 500 orders just before the deadline and then simply not have the capacity to package and label the items in time for collection.
So, although SFP does give you more control over the stock you have, it’s worth questioning whether you have the capacity to do the Prime badge justice.
Ultimately, your answers to those three questions will depend on the size and nature of your business, as well as any internal processes already in place. At Shift Marketplace, it’s our job to embed ourselves into these existing processes, so that no matter what system or category of product you’re selling, we can liaise directly with your internal teams to make sure your efforts on Amazon become second nature.
Amazon is constantly evolving, and every improvement behind the scenes has direct results on your overall performance. Keeping up with these latest changes is a time consuming and intensive process, which is why Shift Marketplace is here to take that burden off your hands. If you want any more information on what you could be doing better, please do get in touch.