Price Points by Omnia Retail
24.11.2023
Amazon and Meta's 2023 partnership share a common end-goal
Jeff Bezos and Mark Zuckerberg are smiling a little more as the fourth quarter of 2023 plays out, thanks to a striking new deal between Amazon and Meta: Instagram and Facebook users can now shop products directly from...
Jeff Bezos and Mark Zuckerberg are smiling a little more as the fourth quarter of 2023 plays out, thanks to a striking new deal between Amazon and Meta: Instagram and Facebook users can now shop products directly from Amazon ads in their feed without having to exit the app. Shoppers will have the ability to link their two Amazon and Meta accounts “for a more seamless shopping experience,” says Meta in a statement in November. “For the first time, customers will be able to shop Amazon’s Facebook and Instagram ads and check out with Amazon,” said the company too in a statement. Source: Maurice Rahmey, Co-Founder and Co-CEO at Disruptive Digital As retail and e-commerce experience decreasing sales, small businesses and enterprises will be looking at this new partnership intently to see how it may affect their sales strategy. Despite the possibility of some good news for brands and retailers, who may be eager about the news of this collaboration, Omnia sees other factors that may be at play: Is it more about increasing ad sales and consolidating advertising market power, or is it about the end seller? Setting the stage for the Amazon-Meta partnership Over the years, social commerce has matured to rival e-commerce in its sales and reach. The line between a successful e-commerce marketplace or retailer and an in-app storefront on social media is blurring, and no other example than TikTok Shop’s launch in the US in September displays this phenomenon so well. However, despite social commerce’s rise to success with a valuation of $1.2 trillion by 2025, the industry’s largest player, Meta, has still struggled to rebound after Apple’s iOS privacy updates in 2021 largely cut off its ability to mass target customers and collect data from them. Forbes wrote in 2022 that Facebook took a $12 billion knock to ad revenue after the change. As a response, Facebook and Instagram simultaneously increased advertising costs for brands and retailers and squeezed their reach and engagement levels to initiate more ad spending, which created an unprecedented scenario for themselves where advertisers chose other platforms to advertise on. When it comes to Amazon, as it has grown bigger and more brands have chosen to sell their products on the behemoth marketplace, the more saturated each category has become. And as brands - big and small - obviously want to be seen by shoppers on Amazon’s apps, the competition for attention thickens, making for a ripe scene for Amazon to take advantage of this competition. Getting vendors to advertise their products has been the e-commerce giant’s strategy for some time now, with the push to lure in ad expenditure from sellers accruing $12.06 billion at the end of the third quarter. That’s a 26% increase compared to the same time in 2022. Looking ahead, Amazon has ramped up their agenda to boost ad sales, offering enterprise ad agencies the chance to advertise via Amazon Prime Video in 2024, asking for between $50 - 100 million. It may seem out of left field for a retail company to focus so much on building an advertising department, however, this is how Amazon plans to consolidate growth and power in the industry. How will this affect brands, enterprises and other marketplaces? There are pros and cons to this deal that will have ripple effects. For brands who already sell on Amazon wanting to increase sales volume, being able to advertise and convert directly within Facebook and Instagram will be largely beneficial to them. The ease of the process will also be improve the customer’s shopping experience and, in turn, will build a network of return customers. For enterprises, the pros are quite similar, however, a glaring con is that larger enterprises also want to direct traffic to and sales from their own websites using their own pricing strategies that aren’t dictated by Amazon. The Amazon-Meta partnership may send enterprises down a path where they see less sales from their own platforms and find themselves relying more on in-app sales from their Amazon stock. If this takes place, Amazon will be able to indirectly control the price of an enterprise’s product. For marketplaces, especially those in niche categories, this partnership may leave them out in the cold. As the Amazon-Meta coalition grows, more and more vendors will turn toward it to make sales and grow their brand. In turn, more shoppers will go where there is variety with a competitive price and an easier shopping experience. As a result, other marketplaces may feel the effects of consolidation by losing vendors, shoppers and overall sales. A new era within e-commerce This is a surprising partnership for the e-commerce industry and is being described as “the most significant ad product of the year” by Founder and CEO of Disruptive Digital marketing agency Maurice Rahmey. When speaking to CNBC, Rahmey said the partnership shows “these two-walled gardens are kind of coming together.” According to a Duetche Bank report quoted by Fast Company, 75% of Facebook’s billions in revenue comes from small businesses, making Facebook (and Google) the chosen place for small-to-medium businesses to advertise and sell. If Meta has done such a good job in cornering the SMB market, it’s no surprise that Amazon would want in. And if Amazon has done well to expand profits through ad sales, it’s no wonder Meta would want a chance to recover from their $12 billion knock from Apple’s iOS privacy changes. However, these may be short-term goals for the two companies, and it’s all about the long game for both of them: For Meta, this unlikely partnership is a giant leap towards increased ad sales and market penetration through social commerce. For Meta, this collaboration means forging towards a commerce-first platform, beyond the early years of selfies and poking. Combining their resources on tracking, data and user experience, a new era of shopping and marketplace expansion is upon us.
21.11.2023
How to optimise product listings to win the marketplace Buy Box
Marketplaces are one of the best channels for brands and vendors to create a successful e-commerce business. However, considering how many vendors are listed on the many marketplaces, not everyone can be highly...
Marketplaces are one of the best channels for brands and vendors to create a successful e-commerce business. However, considering how many vendors are listed on the many marketplaces, not everyone can be highly successful at making sales. How do some find success and others don’t? A lot of it comes down to the quality of a vendor’s product listings, and whether or not they win the ultra-important Buy Box. In this article, Omnia breaks down the unique aspects of product listings on marketplaces and offers some best practices to win the Buy Box. Why product listings on marketplaces are a special case E-commerce businesses should be treating their marketplace product listings differently than listings on D2C or retail channels. Because there are so many sellers competing for sales on marketplaces – for example, Amazon has 9.7 million sellers globally, with about 2 million active sellers – the listings on these sites must be optimised if the vendor wants to stand a chance against other sellers. The fiercest competition is around who wins the Buy Box, where one listing will be shown with the “Add to Basket” or “Buy Now” button, while offers from other sellers are shown in a secondary position. The example below shows the Buy Box for a Cerave skincare product on Amazon. In a majority of cases, the vendor who wins the Buy Box will win the sale. On Amazon, 82% of sales go through the Buy Box, and the figure is even higher for purchases made on mobile. Some vendors, such as Zalando, claim not to have a Buy Box, likely to avoid consumers seeing their platform as one where prices can change within minutes due to high competition. “We do not want to enable a price war. Therefore, only one vendor offers a product. If more vendors offer the same product, convenience decides who is listed on the platform. This is calculated by an algorithm on the basis of factors such as shipment speed, trustworthiness and return speed. There is no pressure on price to win any kind of Buy Box.” Zalando’s VP of Direct to Consumer Carsten Keller Regardless of how a specific marketplace chooses to word their offerings, for the sake of simplicity, we will refer to the existence of a Buy Box if there is competition among third-party sellers and the marketplace must make decisions about which offer is shown to the end consumer. Best practices to optimise product listings and win the Buy Box In order to even be in the running to win the Buy Box, sellers must have optimised product listings that check all the key boxes. Let’s first run through some best practices for improving product listings for marketplaces in general, then go over some tips for specific marketplaces. General product listing best practices Optimise product titles: Marketplaces may have slightly varied requirements for certain aspects of product titles like character count, but a few things are consistent across sites. Product titles should include relevant keywords and provide the necessary product information without sounding like spam. Keep them concise and descriptive, covering attributes like brand, make, model, size, material or colour (where relevant). Also consider including nouns that customers often search for: “Adidas Stan Smith sneakers” versus “Adidas Stan Smith”. Use high-quality, eye-catching visuals: Each product listing should include high-resolution images from multiple angles to showcase your product. Clear, well-lit photos help build trust and provide customers with a better understanding of what they're purchasing. Videos showcasing the product are an added bonus here. Write detailed product descriptions: Write informative and engaging product descriptions. Highlight key features, benefits and any unique selling points to help potential buyers make informed decisions. Make consistent updates: Product listings shouldn’t be stagnant; continue to update the information and visuals to keep them fresh and ensure they are optimised for current trends. Analyse what’s working and what’s not so you can make changes to improve performance. You’ll also need to keep an eye on marketplace rules; if they change which types of media are allowed, for example, you’ll want to optimise for that. Localise content: If the marketplace services multiple countries or regions with different languages, make sure content is localised. That means listings are translated into the necessary languages, but also that the correct currencies are displayed and the audience you’re speaking to is reflected in the copy. Automate where possible: Especially when selling a high volume of products, it’s important to auto-populate listings when possible, whether for language translation, promotion, or something else. Manual updates will be much trickier as the volume grows, and if a product listing ends up being outdated, it can hurt your chances at the Buy Box. Use dynamic pricing: Price is one of the major factors that decides if you win the buy box. In some marketplaces, like Amazon, you will have to be priced within the top sellers to stand a chance of winning. For other marketplaces, price is a little less dominant, but you still need to be within a certain range of your competitors. As competitor prices are continuously changing, having the ability to dynamically reprice will ensure you are always still within the range. Dynamic pricing software like Omnia can help with this. There are other factors that have less to do with product listings, but are still known to impact who is shown in the Buy Box. These include: Shipping speed: Offering fast shipping will help in two ways: 1) it’s rewarded by the marketplace itself, and 2) it increases likelihood of positive customer reviews, which also boosts Buy Box prospects. Stock availability: If a seller runs out of inventory, the Buy Box will go to someone else. These levels also need to be consistent. Customer service: Both the marketplace and the customers will take note of sellers that respond quickly to customer questions and issues. Marketplace-specific best practices for product listings Whether they call it a Buy Box or not, marketplaces with third-party vendors selling the same products will have an algorithm to decide which offer is shown. Some marketplaces are clear about what it takes to win their Buy Box, but for most marketplaces, the “secret sauce” of the algorithm is unconfirmed. Many in the industry have studied the Buy Box on different sites to understand what makes a winning product listing. Amazon There is unfortunately no easy shortcut to win the Buy Box on Amazon. However, there are a number of factors that have been shown to impact which offer is shown, and BigCommerce even put together a cheat sheet ranking metrics by their impact on the Buy Box: eBay eBay has its own search engine called Cassini, which prioritises showing products with the highest conversion rates. To convert more searches and win higher placement, keyword choice is crucial, and sellers can use Cassini’s internal keyword research tool to find the right primary and secondary keywords. These should be used in every field in the product listing for best results. Bol.com Bol refers to their Buy Box as the “Buying Block”. Industry experts at Omnia have found that the battle for the Buying Block is won by the seller that has the best offer in terms of price, delivery time, inventory levels and customer service. Service and ratings are used more as a threshold, meaning that if a seller reaches a certain level, their other factors like price determine the Buying Block win. Zalando Omnia ran a pricing analysis on Zalando before, during and after Black Friday 2022. The results indicated that, historically, price was likely not the main driver for winning the Zalando Buy Box; however, during the Black Friday period, pricing became a top factor, sparking lower prices and tougher competition. With Omnia’s data, a price-change ratio of 0% means the price never changes. A ratio of 100% means the price always changed at every 15-minute observation time stamp. A ratio of 1.5% would indicate a price change once per day. As you can see in the chart above, the price-change ratio on Zalando grew to an average of 7% during the Black Friday period, indicating that the price would change once every five hours. Outside of competition scenarios like Black Friday, Omnia found two other factors that influenced the Buy Box: Shipping speed: Omnia data suggests that to win the Buy Box, a seller must have a maximum delivery period of four days; but this goes even lower if there is more vendor competition for a specific product. Stock availability: As the chart below indicates, the Buy Box changes at a rate of 2.1% when all products are available. When products are unavailable for up to 24 hours, however, the rate doubles to 4.09%, indicating the importance of stock availability as a seller on Zalando. Conclusion While much of the industry conversation around Buy Boxes often focuses on price, Omnia data and the other studies quoted above show that product listings and other convenience factors like stock availability, delivery times and even customer response times can also impact who wins the Buy Box. Especially during times of high competition like Black Friday, or when selling products with many competing vendors, each marketplace seller must craft high-quality and compelling product listings, and find the right competitive pricing strategy to set their offers apart.
14.06.2023
Amazon European Expansion Accelerator: What does it mean for sellers?
Amazon Europe is experiencing a shake-up designed to increase the e-commerce giant’s profits and market share, opening its European sellers to nine new markets across the region. On April 18th, Amazon announced a new...
Amazon Europe is experiencing a shake-up designed to increase the e-commerce giant’s profits and market share, opening its European sellers to nine new markets across the region. On April 18th, Amazon announced a new offering called the European Expansion Accelerator (EEA) which is meant to enable sellers to expand to a list of additional EU and UK stores in just “two clicks and in less than three business days”, the announcement said. Amazon European Expansion Accelerator will affect a range of stakeholders Impact on Amazon sellers According to Amazon, businesses must be registered as a professional Selling Partner with at least one active Amazon Europe account in order to use the EEA. They can then choose which market(s) they want to expand into. According to the company, benefits of the program are: Time and resource savings Expanding business reach Automated scalability Diversified revenue streams It’s clear from the announcement that this new solution is aimed especially at small-to-medium businesses (SMBs), as it discusses being able to expand business with little money or effort. However, some key points were left unmentioned and there are definite concerns sellers should be aware of before using the EEA. First, if sellers are going to be able to cover additional costs like storage, shipping, or potential customs charges, they will have to sell sufficient product volume via the marketplace. Although Amazon makes it sound like internationalisation will be simple and sellers will make quick money, it’s important not to underestimate the advertising budget that may be required. Running ads on Amazon can get expensive, especially in the more crowded verticals, with an average cost-per-click (CPC) of €0,75 ($0.81) while the average for advertising elsewhere falls between $0.05 and $10 (€0,04 and €9,24). Additionally, Amazon only mentioned legal provisions like sales tax very briefly in the announcement, while other major areas like customs were not mentioned at all. For sellers who are considering UK expansion, however, customs will be a significant factor. With the changes brought on by Brexit, the “red-tape curtain” has become very expensive, costing businesses an average of 8 - 9% for both exports and imports of goods and services. Other factors like language translation should be considered as well, as the EEA doesn’t include search engine optimisation for translated texts. There are both benefits and challenges presented by the EEA offering, and sellers should consider both sides before making a decision about whether to participate. Impact on consumers There are currently hundreds of millions of monthly visitors across Amazon Europe stores, and the EEA has the potential to show them more shops, vendors and products than ever before. According to Amazon, there were more than 86,000 third-party sellers with Amazon EU marketplace sales of at least $100K in 2020. This number has likely risen and will continue to significantly grow going forward. How this will affect shopping choices and pricing remains to be seen as the program ramps up. We can assume the range of products available will increase, and pricing may become more competitive for sellers, and attractive for shoppers, as vendors from different regions enter EU stores. Impact on other marketplaces Amazon is likely to see an increase in EU sales with the EEA as new sellers gain access to these markets and consumers have access to more product and vendor choices. However, other existing marketplaces with a European presence, such as Zalando or Bol.com, may see a small decline in investment as sellers expand to the Amazon platform. Leon Curling-Hope, Omnia Retail’s Head of Marketing and Insights, says this of the EEA’s impact on other marketplaces: “I believe that this will be short-lived due to the long-term nature of the Amazon business. We need to take a step back and see Amazon as a marketing platform like Google Shopping, where it forms part of the ‘marketing mix’, but not a silver bullet.” As for how those other sites may react to the changes at Amazon, Curling-Hope observed the challenge for local marketplaces to compete with the retail giant. “Local marketplaces face the challenge of competing with Amazon's vast product selection, efficient logistics, and aggressive pricing strategies. We could see them become or attempt to become more efficient here in one or more of these verticals.” What does this mean for pricing on Amazon? From the seller’s point of view, the EEA has some intriguing potential for better pricing strategies across EU markets. Sellers who use dynamic pricing software will be able to remain competitive in local markets and automatically adjust pricing based on local competition and market signals. We can expect to see more offers on the local market due to the opening of the EEA and the opportunity for more sellers to sell across borders. On Amazon’s side, the EEA is likely to increase the company’s power in the EU and the UK. By analysing their vast amount of data on local demand and competitor pricing, Amazon can adjust its prices to offer the best possible value to customers while maximising profits on their own product offerings. With dynamic pricing software, sellers will remain competitive and quickly spot when new entrants join the market, automatically adjusting pricing strategies accordingly. For example, if a new market entrant from another country has a better product offer in terms of price, this doesn't mean that you need to compete with him on price; you will first want to check on a variety of factors: whether this is a relevant competitor or not, vendor reviews, shipping costs, delivery time, stock levels and more. The pricing rules set by the seller in their dynamic pricing software ensures that every relevant factor will be executed automatically. See how Dynamic Pricing from Omnia can help you automate your pricing strategy across Amazon, across countries and all other e-commerce channels.
02.03.2023
Amazon moves to cut distributors to improve profits
In a bid to increase annual profits, Amazon is actively severing its relationships with third-party sellers. From 15 January 2024, as an email from Amazon to third-party sellers suggests, the e-commerce authoritarian...
In a bid to increase annual profits, Amazon is actively severing its relationships with third-party sellers. From 15 January 2024, as an email from Amazon to third-party sellers suggests, the e-commerce authoritarian will be pursuing partnerships with brands directly, squeezing brand owners out of their relationship with distributors if they want to remain on the online marketplace. Source: Consulterce - LinkedIn Amazon has experienced a downturn in sales and ad revenue from merchants in 2022, compared to the pandemic years of 2020 and 2021. “Amazon is trying to increase profit margins in its retail division at all costs right now,” says Martin Heubal, a strategy consultant who used to work for the tech giant and who helps Amazon vendors achieve growth on the platform. Bloomberg News reports that the platform’s advertising sales growth was shaky all throughout 2022, which affected its profit margins. In addition, Amazon’s sales growth was at its slowest over this period, resulting in new strategies to increase profits. Other game plans to boost profits include the recent layoffs of 18,000 employees, which is the largest in the company’s history. In addition, it was announced in early January that three warehouses in the UK would be closed down as a part of their downsizing procedures. What’s the impact on brands and distributors? Amazon suggests this new procurement strategy is to cut out the middleman and lower costs for consumers, however, this strategy suggests a broadening of the monopoly they have within online retail to force brands to choose between growth and profit with the marketplace or moving with their distributor who is being cut out. In the US, 40% of all online shopping is done on Amazon, which means 40 cents of every dollar a consumer spends is shopped on Amazon. Many brands may find that because of this grasp on consumer spending power, they may have to choose to do business directly with them, leaving their partnerships with distributors null and void. To add salt to an open wound, their business models and distribution strategies will be turned on their heads, while third-party sellers struggle to stay buoyant. In the same email, Amazon said distributors can still sell these products directly to customers on Marketplace, however, this will require price changes that will affect both the distributor and the consumer. Typically, distributors sell in bulk at a lower price, which benefits all parties. By having to move from B2B to D2C, a distributor will have to factor in new costs and strategies. As 15 January 2024 approaches, brands have tough decisions to make As we know, 1P (first-party) brands lose many commercial freedoms when selling on the marketplace such as price setting. As we have seen in the past, once Amazon gains market share within a vertical and control of the client, they can dictate a price. So, is this a good move, long-term, for consumers and brands? Alternatively, if brands have other D2C channels, are they enough to maintain the same profit margins? Omnia’s Founder and CEO, Sander Roose, shared that the larger problem is this decision by Amazon will create many complexities for brands. “All of a sudden, brands will have new things to learn and new decisions to make. For example, how will the working relationship play out with Amazon after years of having longstanding relationships with their distributors? Should they sell 1P or 3P? How, and to what extent, should they use Amazon ads to fuel sales? What will the process be when Amazon starts making changes or demands about prices or inventory? This, I believe, is the main setback for those brands.”
15.09.2022
Complete Guide to Selling on Amazon in 2022
With a massive reach (to the tune of 47% market share in the US and UK and 31% market share in Germany), it’s an incredible outlet to showcase products, earn more sales, and build brand awareness. But Amazon is also an...
With a massive reach (to the tune of 47% market share in the US and UK and 31% market share in Germany), it’s an incredible outlet to showcase products, earn more sales, and build brand awareness. But Amazon is also an overwhelming online platform for Sellers and consumers alike. With so many options for how to shop, sell, advertise, and win on Amazon, it’s no wonder there are lots of questions. In this guide we’ll answer some of the top questions we hear about Amazon and give helpful hints on how to succeed on the platform.
15.07.2022
A Guide to Amazon Marketing in 2022
One of the best ways to use the full power of Amazon is to tap into its advertising capabilities. With such a huge reach into consumer markets, it’s a unique channel for advertising specific products, building your...
One of the best ways to use the full power of Amazon is to tap into its advertising capabilities. With such a huge reach into consumer markets, it’s a unique channel for advertising specific products, building your brand awareness, and more. We cover more about creating a comprehensive strategy for Amazon in our Complete Guide to Selling on Amazon in 2020, but in this article, we’ll focus exclusively on marketing. Keep reading to learn more about marketing and advertising on Amazon and get some helpful tips on how to improve your ROI on your ads. Amazon Marketing Amazon is an incredible platform on all fronts. With an massive reach (to the tune of 47% market share in the US and UK and 31% market share in Germany), it’s an incredible outlet to showcase products, earn more sales, and build brand awareness. Amazon marketing strategy Amazon uses the high runner strategy to market its products. This strategy uses data to uncover which products are in the highest demand in every category. Amazon's pricing algorithm then prices those products competitively and bids heavily on advertisements to pull people to these products. Once a consumer is on the Amazon site, they’re likely to buy accessory products at full price. How to target Amazon sellers on Facebook Search Facebook groups for Amazon Sellers and see if there are any interesting groups to join. You can even try localization efforts and look for Amazon seller groups in your area. Note that many of these groups are intended for Sellers to form a community; as a result, many don’t tolerate any “selling” within the group. Regardless, connecting with others in this community is a great way to get in touch with potential customers and learn more about your target market. You can use this information to run better targeted campaigns on Facebook. You can discover who big names are in the Amazon Seller community, then run ads based on the audiences that like that public figure’s Facebook page. You could even reach out to the public figure and see if they would be interested in marketing your product directly to their audience. What is Amazon’s marketing service? Amazon Marketing Service was Amazon’s first portal for product advertising. It has since been retired and replaced with Amazon Advertising. This new portal is a simplified way for Sellers to control all their media, marketing, and advertising under one unified umbrella. Amazon Advertising is where you’ll find all advertising options available to you. There are currently three different types of paid ads that you can buy. Below is a great 3-minute video about Amazon Marketing Service and how it works. How Amazon uses big data to boost its performance Before getting into the logistics of Amazon’s advertising program, it’s important to understand what makes the platform different from other marketplaces: data. Consumer data may be Amazon’s most valuable asset. And Amazon has a lot of it. As Neel Mehta, Parth Detroja, and Aditya Agashe wrote for Business Insider, [Amazon has] 1.5 billion items listed for sale and 200 million users. Amazon has one billion gigabytes of data on their items and users. If you put all that data on 500-gigabyte hard drives and stacked them up, the pile of hard drives would be over eight times as tall as Mount Everest. Now that's some big data. Amazon’s goal is to learn as much about consumer shopping habits to deliver better experiences to customers. Amazon knows which products are popular, when they purchase it, how much they pay, and more. Amazon uses data to boost its performance through three main measures. First and foremost, it uses data to adjust prices and capture more margin via a high-runner strategy. Second, Amazon uses consumer data to power its advertising business. In 2018, Amazon made $10 billion USD in revenue from advertising alone. This made Amazon the third-largest advertising business that year. For comparison, Facebook made $16 billion on advertising in 2018 and Google sold $135 billion worth of ad space. This is a powerful number, and it makes Amazon nearly impossible to ignore as an advertising space in its operating markets. How does Amazon promote its products? Amazon may also use this consumer data to develop its own brands. The AmazonBasics label has been around since 2012, but in the last few years the label has exploded. Rachel Kraus reported in an October 2019 Mashable article: Amazon launched AmazonBasics, a line of everyday products like batteries and cookware, in 2009. It has been growing its private labels ever since, constructing more than 100 fashion, home, and electronics brands in the last 10 years. In 2017, private label brands accounted for $450 million in sales. And in July 2018, analysts estimated that private labels would account for $7.5 billion in sales in 2018. (Amazon has not yet released its 2018 annual report.) Amazon sells its private label products in its Marketplace, right alongside nearly identical products from independent sellers. Amazon Advertising Advertising on Amazon involves coming up with a strategy, paying for ads, and creating great product pages that drive sales. How do I advertise on Amazon? Setting up an advertisement on Amazon is easy. Just log into your Seller Central account and navigate to the “Advertising” tab. From there you can pick the products you want to promote, set up a strategy with keywords and bids, then launch your first campaign. Amazon advertising in the UK, Netherlands and USA One of the best perks of advertising on Amazon is the ability to reach a global audience. Certain Professional Sellers have the option to display their advertising listings across different marketplaces around the world. The best part? No translations. Amazon will help you get your advertisements in front of the right audiences internationally by targeting relevant customer searches. It also gives you data on these search terms so you can learn more about your audience in the country (and make more sales). To get started with international advertising, log into your Seller Central account, find eligible international marketplaces, and create a campaign for your products in that marketplace. Amazon advertising on my website Marketing your Amazon products doesn’t begin and end on the Amazon platform. You can also connect with Influencers to get your products in front of engaged audiences via the Amazon Affiliate Program. In the Affiliate program, Influencers generate unique links to your Amazon product listings. They can then place these links across all their channels, whether that’s a blog, a Youtube channel, or even Pinterest. While Influencers can pick and choose which items they want to advertise on their channels, it may be worth it to reach out to them directly and offer a partnership: you can provide free product, and the Influencer can promote your products with an affiliate link. Influencers can earn up to 10% of the profits when someone purchases through their Amazon Affiliate link. If the Influencer has a large enough audience, this can easily be a great source of (recurring) revenue for your Amazon products. Amazon a+ page examples Amazon has a premium program called A+ Content that helps you build product pages that are inspiring, informative, and conversion-focused. The program is only available to professional sellers who have been approved as brand owners. A+ Content lets you put more multimedia content on your page through the form of several different types of widgets. You can add rich text, additional images, videos, and more through A+ Content. TheraBreath is a great example of a stellar A+ Amazon page. It includes the standard of four images, a video, and five compelling bullet points. If you scroll further down the page though, you’ll see the A+ Content, pictured below. It includes a table comparing different products to each other, a note about the creator, and some unique graphics that reinforce the benefits of the product. Another nifty feature is that when you click on one of the ASIN products featured in the table, you’ll be automatically redirected to that specific product page. If your product category is especially competitive, A+ Content might be a worthy investment. It can help make your product stand out and can improve sales conversions and increase your visibility in Amazon's search algorithm. How much does Amazon advertising cost? The average cost per click on Amazon is $0.97, but advertising costs depend on a number of factors, including how many competitors are also bidding on that keyword. Amazon cost per click advertising: how much does Amazon charge per click? Amazon ads are auction-based, meaning that you pay 0.01 cent more than the next highest bid, regardless of how high your bid was. For example, if your bid was $5, and the next highest bid was $3, you’ll win the auction and only pay $3.01. What is Amazon DSP? Amazon Demand Side Platform (DSP) is a platform that enables you to programatically buy display and video ads. Launched as a competitor to Google Display Ads, DSP allows you to create advertisements quickly and drive traffic directly to an Amazon listing. Where Google ads send traffic to a website, DSP ads link directly to Amazon. Sellers can place these ads on Amazon, but also on third-party websites. Amazon launched this service to help bring more shoppers directly to the site. As the number of Sellers exploded on Amazon, the company needed a way for Sellers to pull in more shoppers as well. There are four different types of ads that Sellers can purchase through Amazon DSP: Desktop ads: display on a user’s desktop browser Mobile banners: display in a shopper’s mobile browser Mobile interstitial ads: display across mobile and desktop browsers In-stream video ads: run video ads on Amazon’s websites, mobile apps, and the Kindle Fire wake screen Why use Amazon DSP The biggest benefit of Amazon DSP is to get access to Amazon’s exclusive market data. As the world’s largest e-commerce platform, Amazon has incredible amounts of data on consumers. Buying into the DSP platform gives you access to this consumer data and lets you create tailor-made advertisements that match different audiences and different buying intentions. You can not only learn more about the people who are already buying your products, but also learn more about new audiences whose interests overlap with your existing audience. If you give Amazon a sample of your existing audience, it can automatically generate a “lookalike” audience that is similar to yours. Amazon DSP also makes it easy to reach these people. The program automatically generates advertisements based on your audience and its insights and will automatically test the performance of these ads. Learn more about what Amazon DSP can do in the Youtube video below. When to use Amazon DSP Amazon DSP is a sophisticated marketing system that can help you drive more sales, but it’s not the starting point for any Seller on Amazon. Before diving into DSP, make sure the rest of your marketing on the platform runs smoothly. This includes your PPC campaigns, but also your organic efforts through Amazon’s search algorithm. Final thoughts When it comes to marketing on Amazon, it’s really no different than marketing on any other channel. Be interesting, provide value, and think strategically, test consistently, and you’ll be able to see some results.
13.07.2022
An Introduction to Amazon Pricing in 2022
It’s no secret that pricing on Amazon is complex, and both Sellers and consumers can get lost quickly in the world of Amazon pricing. To help, we created a short guide that has all the essential information about...
It’s no secret that pricing on Amazon is complex, and both Sellers and consumers can get lost quickly in the world of Amazon pricing. To help, we created a short guide that has all the essential information about pricing on Amazon. In this post, we’ll explain how pricing on Amazon works and give some tips on how to get the most out of the platform. To learn more about how Amazon uses pricing as part of its overall strategy, check out the Complete Guide to Selling on Amazon in 2020. How does Amazon pricing work? Amazon pricing is tricky on all fronts, from how it charges Sellers to how product pricing works on the platform. Amazon Seller pricing There is an Amazon pricing structure for any Seller, regardless of how many products you have in your shop. Whether big or small, you can find an affordable way to sell items through the marketplace. Amazon pricing structure There are two ways to sell on Amazon: as a Professional or as an Individual. The Professional plan lets you sell an unlimited number of products for a $39.99 monthly fee. Individuals can sell on Amazon for $0.99 per item sold. If you plan to sell more than 40 items each month, it makes more sense to purchase the Professional Seller plan. The Professional plan also makes sense if your items have low price points; $1 per product sold is an outrageous fee if you sell a product for $3. The Professional plan also unlocks new categories for sales and has additional features that help you sell more products. Amazon seller fees If you think the costs of different selling plans on Amazon sound inexpensive, you’re not alone. Unfortunately, besides a monthly payment for your store (or payment per product for Individual Sellers), Amazon charges fees per product sold. There are several fees that individuals and professionals must pay per item sold. These include: Referral fees on each item sold: a percentage of the final price of a product sold Shipping fees (which apply regardless of fulfillment method) Closing fees Amazon’s fee structure can get complicated, so it’s worth examining the Selling on Amazon Fee Schedule. If you are an FBA Seller, Amazon will charge you additional storage and fulfillment fees. Amazon also has a calculator that can help you estimate your revenue, even with fees. Just enter the product name, UPC, ASIN, ISBN, or ASIN number and product details and you’ll get an estimate of how much revenue you can expect to earn. Amazon price changes Besides having a complicated pricing structure, Amazon also has a complicated pricing model. The company is a pioneer in dynamic pricing and makes over 250 million price changes every day. The average product’s price will change once every 10 minutes, making it difficult for Sellers and consumers to keep up. Amazon price match Amazon doesn’t have any price-match guarantee. If consumers find a product they’ve bought for a cheaper price online, there’s no way for them to ask Amazon to pay the difference in price. This is mostly for practical reasons. Amazon used to have a policy like this, but as the market became more fluid, the policy became impossible to honor. Amazon recognized that a dynamic market meant price match policies would become obsolete. With this knowledge, the company eliminated the policy in 2016. Amazon price protection 2020 Amazon also doesn’t have any price protection policy. Consumers just have to trust that the company offers the lowest price on the market. Amazon’s reputation for offering lowest prices isn’t unfounded though, and a 2018 study by Profitero found that Amazon was 13% cheaper than other major online retailers in the US. So even without this policy, consumers likely do receive some of the best deals on the platform. Amazon tools Regardless of whether you’re a Seller or a consumer, Amazon becomes overwhelming fast. Luckily, technology can help both Sellers and consumers get a better understanding of Amazon and reap the best benefits of the marketplace. Whether you want to find the best deals or prices, or understand the landscape of Amazon, there’s a tool out there for you. Amazon best Seller tools If you’re a Professional Seller on Amazon, there are several types of tools that will make your job easier. In this section we’ll cover a few of the more important tools to have. Amazon repricer tools Repricing tools are for Amazon Sellers who want their products’ selling prices to update with the flow of the market. In other words, repricer tools are dynamic pricing tools built specifically for Amazon. Since Amazon updates prices so frequently, this tool helps Sellers keep products relevant. A repricer will also help keep products in the Buy Box — the coveted space on any Amazon product listing page that’s responsible for an estimated 82% of Amazon sales. Free repricer tools Amazon doesn’t change prices for third-party sellers, but it has a free proprietary repricer that can adjust prices for you. This tool is called “Automate Pricing.” You can find it under the Pricing tab in your Seller Central account. Automate Pricing is easy to set up in just four steps. All you need to do is define the parameters of a rule, choose the SKUs where the rule applies, set minimum and maximum prices, then start repricing. Amazon’s repricer has both pros and cons. Some pros include: Free as long as you’re a professional seller Helps increase sales (but at the expense of profits) Does a great job of lowering prices, but not the best job at raising prices Easy to use and set up The cons of the repricer far outweigh the benefits, though. According to users, Amazon’s repricer tool is frustrating to use and limited in its capabilities. Some major cons are: Only allows you to set up repricing rules on active SKUs Limited customization on rules Doesn’t account for fees and doesn’t help you calculate for fees Doesn’t increase your price Once you get the Buy Box, it stops repricing The Automate Pricing tool is notoriously fickle. The video below is an honest review of Automate Pricing, and the overall sentiment is that Automate Pricing is more trouble than it’s worth. Paid Amazon repricing tools The best way for serious sellers to keep prices constantly fresh is to invest in a paid repricing tool. Prices for a repricing service depend on several factors, including the number of products to be repriced and how frequently a Seller wants to reprice products. All the rules of what to look for in a dynamic pricing solution apply when looking for repricing tools, and there are some services that are not worth the money. Some reputable market-leading paid repricing tools include: RepricerExpress (prices range from €55 per month for 2,500 listings to €249 per month for 50,000+ listings) Bqool (prices range from $25 per month for 1,000 listings to $100 per month for 10,000 listings and a faster repricing speed of 5 minutes) Repricer (prices range from €69 per month for 2,500 products repriced hourly to €1,049 for 1,000,000 products repriced instantly) Amazon competitive intelligence tools: How to find price drops on Amazon Competitive intelligence is the backbone of any repricing tool because without intelligence your prices have no basis on the market. Competitive intelligence tools gather the prices of your competitors on Amazon, showing you where there are dramatic price drops in the market. It should then deliver this information directly to you. With this information, you can make more thoughtful, data-driven decisions when you choose prices for your products in the store. Many repricers will automatically gather competitive intelligence for you, but it’s worth asking different vendors if this feature is available. Amazon best consumer tools If you’re a consumer who wants to make sure that you always get the lowest price on Amazon, there are several tools you can use. One of the best is CamelCamelCamel.com, which is a free price-watching tool for Amazon. This tool is available for consumers in Australia, Canada, China, France, Germany, Italy, Japan, Spain, the United Kingdom, and the United States. Amazon eBay price comparison software Want to compare prices across the world’s two largest marketplaces? You can easily do that with sites like PricePirates. Search for the product you want to buy, and PricePirates will show you competing prices across platforms. PricePirates is available in the US, Germany, Austria, Switzerland, and the UK. How to hack Amazon pricing For Sellers, creating an Amazon pricing strategy and hacking your way into the Buy Box is no easy feat. But with hard work and effort, you can get your product into the Buy Box and keep it there. There are tons of different strategies you can adopt to reprice on Amazon. One popular one is the high runner strategy, and it’s the approach that Amazon uses itself. In this strategy, you focus your efforts on the products that drive the most traffic (which are usually highly elastic), and offer a competitive price on those items to pull people to your page. Once a consumer is on your product listing, as long as the product is legitimate and matches their need, they will probably purchase it. Additionally, once someone arrives on your listing, you can engage another pricing hack: bundling. Bundling helps increase the perceived value of your products, makes consumers more likely to purchase them, and helps move items through your store faster. If you’re just starting as a Seller though and want to get into the Buy Box, the best strategy is to start small and slowly raise your prices by small increments. The goal is to attract buyers to your listing through a competitive price, earn reviews and good credit in the eyes of Amazon, then raise your price. This is a key part of the pricing-marketing mix. Amazon repricing strategy Developing a strategy comes down to your company goals. Here are 5 tips to build a successful repricing strategy: Define your commercial objective Build a pricing strategy (such as a charm pricing strategy) Choose your pricing method Establish pricing rules Implement, test, and evaluate the strategy Besides thinking of your own store’s strategy, consider Amazon’s strategy. The company strives to be the world’s most customer-centric company, and this philosophy dictates every strategic move the marketplace makes. If you factor this philosophy into your overall Amazon strategy, it will pay off. So in addition to offering a competitive price, you should also work for quality products, fast shipment, and excellent customer service. You should also build a marketing strategy that sets you up for success and optimize your listing for Amazon's search algorithm. Final thoughts Pricing on Amazon is important, but it’s not the end-all-be-all. Prices on Amazon constantly change, and it’s better to think of a product’s price as temporary rather than a fixed feature. For Sellers, this means price is an important part of your overall strategy. It’s not the only thing Amazon considers when determining the winner of the Buy Box, but it’s a good way to tip the scales in your favor.
28.01.2021
Business Guide to Predatory Pricing
In 2010, Diapers.com gained momentum with its combination of e-commerce and pricing. Rumours report that Amazon previously tried to buy the diaper supplier but was denied. Afterward, Amazon aggressively lowered prices...
In 2010, Diapers.com gained momentum with its combination of e-commerce and pricing. Rumours report that Amazon previously tried to buy the diaper supplier but was denied. Afterward, Amazon aggressively lowered prices on diapers and related products. Such tales are related to predatory pricing, a pricing strategy waged by suppliers to gain an edge on competitors. In this guide, you’ll learn: What’s predatory pricing? Is predatory pricing illegal? What are the advantages and disadvantages of predatory pricing? Ways to compete against predatory pricing and gain e-commerce sales What Is Predatory Pricing? Predatory pricing seeks to undercut the competition as part of a larger pricing strategy. While the pricing decision creates short-term losses, the main agenda is to debilitate the competition. Ultimately, a brand introducing predatory pricing makes rivals economically vulnerable, so it gets increasingly difficult for smaller businesses to compete and ultimately exist. A newfound market share makes the initiator of predatory pricing in an economic position to recoup the losses sacrificed. So, predatory pricing is recognised as a two-part process, beginning with a predation phase then leads to a period of economic recovery and eventual dominance. Predation Economic scholars recognise predatory pricing’s first stage of predation as when a brand initially offers a good or service at a below-cost rate. A small-scale strategy by a startup will not influence market price. However, a big supplier can effectively influence market costs with its pricing strategy. Predatory pricing works for large firms because such suppliers can sustain the losses long enough to change the market price (and behaviour of consumers), ultimately depressing the competition’s ability to keep-up or compete at all. Recoupment In the second stage, the dominant brand reaches a state of equilibrium, readjusting prices now that a larger share of the market is taken or a rival is no longer able to compete. The recoupment phase is where economists make the distinction between predatory pricing and competitive pricing. Predatory Pricing vs Competitive Pricing Regardless of intention, all brands seek profits, but predatory pricing differs from competitive pricing. Predatory pricing does not reach equilibrium once market share is gained and the competition defeated. While competitive pricing can benefit the consumer, in the long run predatory pricing only serves to benefit the perpetrator. Once dominance is reached, predatory pricing takes effect and a monopoly becomes a reality. Predatory pricing only benefits the seller - the reason why it is illegal under many laws. However, in practice, it’s somewhat opaque to distinguish competitive from predatory pricing - even in courts of law. Examples of Predatory Pricing In 2010, Amazon, a growing giant of ecommerce, engaged in a price war with Diapers.com, a niche competitor that quickly gained popularity and revenue. Rumours circulate that Amazon tried to acquire Diapers.com but was denied. Afterward, Amazon aggressively lowered prices on diapers and related products. Furthermore, Amazon introduced more ways for customers to save on related products; it launched Amazon Mom, featuring cashback, free shipping, and more discounts. However, predatory tactics do not always prove successful. In a bromine price war, American-based Dow Chemical gained presence within the European market. An established Euro-brand sought to “punish” Dow by offering bromine at below-cost prices to Americans, hoping to ruin Dow’s chances of making profits within its home market. Unfortunately for the European brand, Dow took advantage of that lower cost, bought low, then sold it back to the European market at a profit. Another tale of predatory pricing gone awry involves the New York Central Railroad. In an attempt to outdo Erie Railroad, the NYCR charged a mere dollar per car for cattle transportation. However, the newfangled trend benefitted the Erie Railroad too, for it also began hauling cattle. Is Predatory Pricing Illegal? True predatory pricing is seen as a means to a monopoly. The United States has a history of recognising and punishing predatory pricing. Antitrust laws seek to foster healthy competition while thwarting opportunity for monopolistic business practices. According to American antitrust laws, most “forms” of predatory pricing are illegal. Predatory practices are recognised as instruments of corruption and greed. However, where does greed stop and the need for competition begin within a system that ultimately seeks profits? The Federal Trade Commission seeks to fully analyse any claims of predatory pricing. Moreover, the US Department of Justice recognises predatory pricing as a problem, growing increasingly aware of the unscrupulous pricing strategy. It can be difficult for plaintiffs to make objective claims that hold in court. Successful antitrust suits are based on a plaintiff clearly establishing that a competitor’s pricing will condemn rivals as well as cause a direct and negative impact throughout the market as a whole. Furthermore, US courts define predatory pricing as that “set below a seller’s cost.” However, it is not against the law for a seller to set prices in such a manner if the reason is justifiable and not perpetrated to directly eliminate competition or ultimately monopolise the market. If pricing is set below cost for legitimate purposes, such as to attract a larger portion of the market, it is not predatory pricing. “Catching” a brand waging a potentially unscrupulous pricing strategy is delicate practice. For example, penetration pricing could look and feel like predatory pricing to a rival. However, if the pricing strategy is short-lived and not a long-term plan, it is not illegal and deemed “fair play” within the world of business. The Effects of Predatory Pricing While unlawful conduct is a black-and-white issue, pricing strategy remains somewhat of a murky area. One’s interpretation of “predatory” could be another’s version of “smart business.” Economic theories see possible advantages to predatory pricing. For one, predatory pricing may become a “survival of the fittest” regarding the brands within a given market. While buyers may initially be interested in price points, some argue that price alone will not condemn inferior products and services. Therefore, predatory pricing is merely a speedier means to an end of greater selection for consumers. Furthermore, some see the exit of particular brands as an invite for new and innovative brands to enter the marketplace, challenging behemoth competitors in new ways that ultimately serve the greater good of the market and consumers. Lastly, in regards to seasonal items or perishable goods, predatory pricing may help a brand in a short-term predicament of needing to clear shelves for more stock or to sell items before selling them at all is no longer an option. On the other hand, taking competitive pricing too far becomes illegal depending on government jurisdiction. Therefore, any brand willing to wager a predatory pricing strategy runs the risk of legal repercussions and attracting legal suit. Furthermore, predatory pricing does not escape the perception of consumers. In some cases, aligning your brand with “cheap” prices could have a negative effect. An overall impression of frugality may turn some consumers away. In worse scenarios, consumers view your brand as a selfish, predatory entity, ultimately existing to gain the most profit regardless of what’s best for the market or its consumers. Advantages of Predatory Pricing Provides an opportunity to overcome barriers in entering a new market. For those already with market share, it may prevent rivals from entering a market. It exposes rivals to economic vulnerabilities. A competitor that is unevenly regarding economic risk, invites the possibility of greater devastation if they cannot amass market share. Predatory pricing invites the potential for total market dominance once it effectively changes consumer perception and behaviour. Disadvantages of Predatory Pricing It attracts potential lawsuits or deemed illegal, depending on jurisdiction Brands using predatory pricing run the risk of ultimately losing money if the minds of consumers are not affected or monies lost in the initial phase are not compensated in the recoupment stage. In some cases, a predatory pricing brand may be sowing the seeds for a rival’s eventual return to market, for at times, defunct resources can be renewed. For example, the Washington Post went bankrupt in 1933 only to later become the biggest newspaper in Washington. Predatory Pricing in the Present - A Look at Amazon It’s difficult to pinpoint how dominant Amazon is regarding ecommerce, but it’s estimated that it accounts for 40% of US retail sales (Some believe the market share is somewhere closer to 50%.) Many smaller brands find it undeniably necessary to access Amazon’s Marketplace, with some estimating the marketplace is the sole source of income for a whopping 37% of its third-party suppliers. Moreover, Amazon’s marketplace is not the only place the company reaps profit. Amazon Web Services, offering cloud resources, also adds to its coffer. Amazon’s share within the infrastructure market amounted to 33% for the second quarter of 2020. That’s equal to the combined share of three of its largest competitors. As with goods purchased on the Web, the pandemic has not had a negative impact on Amazon’s ability to sell. Cloud infrastructure service revenues eclipsed $30 billion in the second quarter of 2020. There’s no debating that Amazon can easily afford to cut prices in the short-term in exchange for ultimate dominance. Amazon can influence prices, consumer behaviour, and the existence of the competition. Many businesses understand that you don’t beat Amazon. You join them. However, a number of strategies help smaller brands compete in niches and make headway in particular ecommerce markets. Here’s how they are keeping up with ‘the Amazons’ of the business world. Ways Businesses Compete with Predatory Pricing Many entrepreneurs and small business owners want to make money, but they want to do it by building a reputable and longstanding business model. While no brand is going to be sad about debilitating the competition, most find legitimate and law-abiding ways to success. Branding Starbucks coffee isn’t cheap but that doesn’t stop its penetration of the coffee market, reaching a net revenue of $26.5 billion in 2019. It sees year-over-year increases for the last decade. There was once a time when consumers would certainly balk at Starbucks price point. Now, they can’t seem to resist taking out their wallets regardless of the attached price. Retention What’s the economic benefit of retaining existing customers versus taking the marketing risk at attracting new ones? According to research, 58% of customers switch brands. For many, retaining customers is less costly than acquiring new ones. Do what you can to express appreciation to existing customers, for there’s a 70% chance of selling to a repeat customer. However, those odds drop as low as 5% when attempting to sell to a new one. Ecomm SEO Search engine optimisation is no secret weapon. It’s an undeniable component of digital marketing strategy. Ensure your site’s pages are optimised for targeted keywords. This requires strategic keyword research, effective product descriptions, as well as paying attention to user experience and site architecture. The first organic result aligned with a Google search has an average click-through rate of 28.5%. And, the average CTR falls dramatically after position one. A study found the second result to get a 15% CTR, and the third, 11%. By the time a user gets to the tenth result or estimated bottom of the first page of results, the CTR drops to 2.5%. Sales Funnel How are your website visitors behaving? An analysis of analytics can reveal insights related to the sales funnel. A study finds that about half of ecommerce visitors look at product pages but only about 15% add items to site shopping carts. However, a mere 3% actually go ahead with the finalisation of purchase. Target troublesome areas of the sales funnel, identifying needs for improvement and finding why some consumers are not buying from you. As mentioned, only 3% buy what’s loaded in their cart. What’s the reason for your shopping cart abandonment? Shipping We live in a world of online shopping and online shoppers don’t like added costs. Therefore, added costs, such as cost of shipping, remains a top reason for shopping cart abandonment. An additional percentage of customers abandon carts after finding the delivery will take too long. 9 out of 10 customers agree that free shipping is a premier incentive. 93% of online buyers will buy more if free shipping is an option. Moreover, 58% add more items to a cart to qualify for free shipping. Pricing A consumer survey reveals that 82% identify price as a very important reason for making a purchase. Low shipping costs come in second as 70% of respondents find it important. Therefore, there is no denying that pricing is a main concern for smaller ecommerce brands that compete with online competitors like Amazon as well as need to combat the ROPO effect (researching online but purchasing offline). Yes, there is no denying the importance of pricing. However, implementing a pricing strategy proves difficult for many suppliers who lack the resources and time for proper devotion. Yet, some have adopted dynamic pricing software, an automated way to set prices and stay competitive. Predatory Pricing vs Dynamic Pricing Automated pricing software allows for a dynamic way to go about cost strategy. What if a business could apply a dynamic pricing strategy at scale, regardless of offered goods and services? Agile Pricing Dynamic pricing’s algorithm provides an agile way to implement pricing. Gather data and enjoy the freedom of setting prices at a rate that works best for your company’s short and long-term goals. Set Rules Automated pricing software allows for your company to set pricing standards. Implement your own “pricing rules” and get as general or as granular as you would like regarding every product or service offered. Price Sensitivity Automated pricing software accounts for each product and service offered, so the price of each item appropriately compensates for sales volume, number of items, time of day, etc. Every product is considered and automatically assorted according to optimal price. Total Automation Total automation allows for complete pricing analysis of the market, including competitor pricing. Dynamic pricing software gathers competitor data, internal metrics, market prices, consumer behaviours, and then provides optimised price suggestions. Market Awareness Dynamic pricing software does not work in isolation, making pricing suggestions based on mysterious precedents. The software provides reasoning for price suggestions, so users can grow market awareness as well as manually override when they see fit. Conclusion Predatory pricing is an illegal practice but it would be naive for smaller and burgeoning ecommerce businesses to deny predatory-like behaviours exist. Given the growing popularity of ecommerce and its explosion over the last decade, established and new brands need the knowledge and tools to compete with Amazon, Target, and Walmart as well as local vendors. In the short-term, predatory practices and giant competitors, like Amazon, are not going away. If you’re not going to beat them, then you must find a way to join-in and “match” competitors. Solutions such as dynamic pricing software level the field of competition and help small ecommerce brands succeed regardless of the size of rivals and aligned pricing strategies. Other Pricing Articles: What is Value Based Pricing? What Is Penetration Pricing? What Is Cost Based Pricing? What Is Odd Even Pricing? What Is Charm Pricing? What Is Psychological Pricing? What Is Bundle Pricing?
30.12.2020
Amazon is closing in on Dutch competitors
In short: Web giant Amazon is putting Dutch web stores under pressure with rock bottom prices. Thousands of popular products are 7% to almost 18% cheaper at Amazon than at competitors such as Bol.com and Coolblue. At...
In short: Web giant Amazon is putting Dutch web stores under pressure with rock bottom prices. Thousands of popular products are 7% to almost 18% cheaper at Amazon than at competitors such as Bol.com and Coolblue. At the level of the individual articles, large Dutch web shops regularly compete with Amazon. There are several indications that Amazon's market share is growing. You can find a link to the original Dutch articles below this translation. Who will enter the prize fight? Thanks to competitive prices, Amazon has managed to conquer market share and significantly reduced its gap with established rivals such as Bol.com and Coolblue. In the past three months, the American web giant was often the cheapest on a variety of products, according to an analysis that we did for the Dutch news channels BNR and the FD. In 2019, web giant Amazon opened their Dutch web store, after years of speculating. After that it became quiet around the Americans, but nine months later the Amazon effect is clearly visible, says Sander Roose of Omnia Retail. His analysis of thousands of frequently sold products shows that Amazon.nl is on average considerably cheaper than large Dutch web stores. "For example, Amazon tries to build an aggressive price image and steal market share." In the past three months, Amazon's most popular products - including many electronics and toys - cost an average of 7% to 9% less than the same products at Bol.com and Mediamarkt. The price gap with Wehkamp and Coolblue was completely large: Amazon.nl was respectively 15% to almost 18% cheaper in recent months. At the level of individual articles, it can be seen that large Dutch web stores regularly enter the battle. If Amazon.nl is pricing an iPhone on the market very cheaply, they will temporarily go just as low. 'Amazon is the cheapest, but Bol.com in particular is really playing the game', says Bart Zoetmulder of DPG Technology, which keeps track of prices via the Tweakers and Hardware.info websites. In the weeks before Saint Nicholas (Sinterklaas), the prices of consumer electronics on Bol.com and Amazon.nl crept towards each other, says Zoetmulder. "In October the price difference was about 6%, but only 0.9% at the end of November." Gain market share There is not a major price war yet. No major Dutch web store has structurally lowered its prices to the level of Amazon.nl, according to the analysis by Omnia Retail. On the contrary: in the course of the year the difference with the Americans increased. 'This year the corona effect was greater than the Amazon effect,' says Roose. "Online sales have taken off since corona." As a result, there is little need to lower prices. 'But after corona these differences can start to hurt.' Moreover, web stores can hardly keep up with orders, experts say. Earlier this year, Coolblue had to increase prices due to the massive run on office chairs and keyboards to prevent shortages. It still maintains relatively high price tags (about 8% more than usual). Whether the bottom prices of the American shopping platform will have the desired effect cannot be said with certainty. Market shares of web shops are unknown. Yet, there are indications that the gap with Bol.com is closing. On price comparison sites, consumers click through to Amazon.nl as often as to Bol.com, says Roose of Omnia Retail. "That is a signal that they are gaining market share." In addition, the number of visitors to Amazon has doubled in recent months, research firm Vinex noted. Last November, Amazon's reach was 7.3 million Dutch people. That is more than Coolblue, Mediamarkt and Wehkamp, but not as much as Bol.com. The well-known web shop subsidiary of Ahold was visited by 11.6 million Dutch people in November. That is roughly every Dutch person with an internet connection. More products, lower prices In terms of assortment, Amazon.nl is much larger: since March the number of products has doubled to 200 million. Bol.com now sells 30 million articles. In a response, Bol.com says it barely notices anything from 'another web store', and studies show that price is not everything. Service, quality and a wide range of delivery options are also important, says the Ahold division. Coolblue and Amazon did not respond to questions from the newspaper. Dutch web department stores can now afford even higher prices, says Onno Oldeman of price consultancy Simon-Kucher: "Margins were above average this year, and people buy products under € 50 at the trusted Bol.com. Amazon is quite a bit abroad. The tipping point is at a price difference of 10%". At the same time, you should not underestimate the Americans, the price advisor warns. "Amazon is diligently trying to get a foot in the door here. The Netherlands is difficult for them to enter. But if Amazon really manages to make a name for itself as the cheapest, you know they have the longest breath, the deepest pockets, and the greatest buying power. It could take years, but eventually they will win. " The original articles: Financieele Dagblad BNR
29.07.2020
What 3 Months of Amazon NL can Teach Us About Dutch E-Commerce
In the beginning of 2020, we at Omnia believed the news story of the year would be the arrival of Amazon NL. We couldn’t have been more wrong about the biggest story of the year, but that doesn’t mean that Amazon NL...
In the beginning of 2020, we at Omnia believed the news story of the year would be the arrival of Amazon NL. We couldn’t have been more wrong about the biggest story of the year, but that doesn’t mean that Amazon NL isn’t an important player we should ignore or forget about. Three months after Amazon NL’s debut, what has happened to the market? We did a short analysis to see how Amazon compares against other major Dutch retailers and what that means for its market position. Amazon is dominating out-clicks In a monthly report we receive, Omnia’s CEO Sander Roose noticed that Amazon NL was dominating the out-click shares from a major local comparison shopping engine in May and June. In fact, the number of out-clicks was double the out-click share of the second retailer, bol.com. Amazon’s pricing strategy is notoriously dynamic. The company is well-known for extremely frequent price changes and an ethos of providing the best customer experience in the world — which often coincides with rock-bottom prices. We were curious what was driving this high number of out-clicks. So, we did what we do best — dove into the data to see what was happening in the market. We used the top 2000 products on Amazon as a baseline, then looked at a couple of key factors in comparison to the rest of the market. High frequency price changes The first thing our consultant analyzed was the frequency of price changes on Amazon.nl, and what he found was not altogether surprising. Amazon’s top sellers change prices frequently — in line with Amazon’s pricing strategy. In the graphic above, you see the number of price changes from Amazon compared to other major market competitors like Coolblue, Mediamarkt, BCC, and more. The blue columns represent the number of price changes on Amazon.nl, while the green columns represent the average number of price changes from the rest of the market. From March to June, the percentage of Amazon’s assortment that experienced a daily price change was more than double the percentage of the rest of the market. You can see the full figures in the table below. However, what’s particularly interesting to look at is the month of April, where 77% of the products in the sample of Amazon’s assortment experienced a daily price change. There are two likely contributing factors to this. The first is that April was the first full month that Amazon was a full webshop in the Netherlands, and the company had likely set a more aggressive pricing strategy during this time. It’s impossible to say for certain though that the company’s strategy was the reason behind this increased frequency of price changes. April was also the first month of a strict lockdown against the coronavirus in the Netherlands, which drove a huge increase in e-commerce. Lowest price on the market Amazon NL doesn’t only change its prices more frequently than other Dutch online retailers. It also has the lowest price consistently, according to our data. At Omnia, one of the metrics we look at when evaluating price position on the market is called price ratio. It’s a measurement of how the price of a product varies from one seller to the next. Say, for example, you sell headphones online for €90, but your competitor sells the same headphones for €100. While you know that you have the better price, it may be useful to know how much better your price is. That’s where the price ratio comes in: it shows the relationship between two prices. To calculate price ratio in the above example, all you need to do is divide 90 by 100, giving you a price ratio of 0.90. In other words, as long as your price ratio is below 1.0, your products will be cheaper than the competitor you’re comparing yourself to. We took this calculation and applied it to Amazon’s top 2000 products, as seen in the graphic below. We compared the price for these products to the market average price of other relevant retailers in the Netherlands. This average market price was calculated as the average price of several of the largest retailers and e-commerce stores in the Netherlands, including Bol, MediaMarkt, Coolblue, BCC, and others. What we found wasn’t altogether shocking: Amazon has a lower price ratio, ranging from 0.92-0.94 across the last few months.This means that Amazon’s product prices were, on average, 6%-8% lower than the market average price. What does this mean for Dutch retailers? When Amazon made its debut in the Netherlands, we made a couple of predictions: Amazon would price aggressively in the Netherlands and drive market prices down Amazon would make the market more dynamic with its extreme number of price changes Amazon would drive brand loyalty with the Prime program Our data shows that the first two predictions have come true. Amazon is, on average, the lowest price on the market, and the number of price changes every day has skyrocketed. There’s also good reason to believe that Amazon’s Prime initiative is also working. Even though Amazon doesn’t publicly disclose the number of Prime members, Emerce reported that Amazon Prime Video had one million viewers in the Netherlands in April. The data also shows that Amazon is sticking to its localization strategy. The company is keeping prices close enough to Dutch retailers to be seen as the cheaper alternative to the existing e-commerce space, but isn’t going for rock-bottom prices or trying to match its German webshop prices. Instead, Amazon appears to be hovering just below other Dutch retailers. “Amazon is not holding back when it comes to its pricing, and I wouldn’t be surprised if they’ve already passed two million Prime members,” commented Sander Roose, CEO of Omnia Retail. “Now, more than ever, Dutch retailers and brands need to adopt technology to help them follow market prices.” The reality is that Amazon will always price lower than you, so resist the urge to drop your prices further. Amazon will simply follow the market, and you could trigger a race to the bottom. Instead of dropping your prices, it’s important to look at your commercial strategy. You can expect Amazon to have a lower price than you, but what can you offer your customers that Amazon simply can’t? Now is a great time to revisit your commercial strategy and pricing promises and evaluate how you can best serve your customers.
01.04.2020
Amazon NL's Launch and the Coronavirus: How COVID-19 is Influencing the World's Largest Online Marketplace
A few weeks ago we released a complete data analysis of what happened when Amazon entered the Dutch market. It made quite some news, but as the coronavirus reached the Netherlands, the coverage of the topic was quickly...
A few weeks ago we released a complete data analysis of what happened when Amazon entered the Dutch market. It made quite some news, but as the coronavirus reached the Netherlands, the coverage of the topic was quickly overshadowed by the virus. Coverage of the coronavirus obviously comes first. But Amazon’s entry into the Dutch market is not something to ignore, especially if you look at how Amazon is responding to the pandemic. Below we’ve linked several articles about Amazon’s launch in the Netherlands so you can get the full picture of how it is changing the market. Amazon NL launch Amazon’s initial launch in the Netherlands was disappointing. Omnia’s analysis found that products were 7% more expensive on Amazon.nl than they were on Amazon.de, and on launch day Amazon.de’s assortment was at least ⅓ larger than Amazon.nl. Our CEO Sander Roose spoke with several news outlets about the analysis. Below are links to the news articles. Please note that these articles are in Dutch, unless specified. Amazon in the Netherlands: great for consumers, but supply is disappointing (RTLZ) Amazon.nl is more expensive than Amazon.de (Retail News) Amazon.de is 7% less expensive than Amazon.nl (Emerce) Amazon suffers from startup problems: many products are missing (BNR) Amazon.nl offers are disappointing after start up (BNR) You can also see Sander's commentary on RTL news (beginning at 17 minutes). Amazon and the coronavirus For the last few weeks, the coronavirus has dominated the news cycle. As the world’s largest webshop, Amazon was forced to respond. The story began as a success. To accommodate for the high volume of online orders that came as a result of the coronavirus, Amazon announced it would hire nearly 100,000 temporary workers to fill orders. Amazon NL also extended its return policy to reduce pressure on the already overburdened postal system. In recent days though, Amazon has gained bad press in the United States as workers stage walkouts in protest of the company’s worker health protection policies. The protests in the US mirror earlier protests in Spain and Italy, and even the US government has written to the company to express concerns over employee safety. Amazon has a responsibility to protect its employees (and the broader world, as a result) from the coronavirus. But like every other e-commerce company in the world, Amazon is under intense pressure at the moment. The Wall Street Journal reported that Amazon is receiving anywhere from 10%-40% more product orders now than it did at this time last year, and Amazon is under high pressure to deliver quality service. The future of Amazon and the coronavirus The coronavirus will change retail permanently, and no company — not even Amazon — is immune to its effects. The virus has opened up a completely new set of problems, and every company is struggling to navigate its way through the uncharted territory. It's unclear how the virus will affect Amazon NL's performance, but it will certainly be a unique business opportunity across the world.
10.03.2020
What Happened on Day One of Amazon NL?
It finally happened — Amazon.nl made its debut on March 10, 2020. The much-anticipated moment certainly brings a new era to Dutch e-commerce. But unlike many other markets Amazon has entered, the Netherlands already has...
It finally happened — Amazon.nl made its debut on March 10, 2020. The much-anticipated moment certainly brings a new era to Dutch e-commerce. But unlike many other markets Amazon has entered, the Netherlands already has a highly-developed e-commerce sector. Amazon doesn’t have the first move advantage in our country, and this makes a huge difference on its impact on the market. We were curious about how Amazon’s debut would influence the market, so we did what we do best: crunched some numbers. Amazon’s early influence on the Dutch market: what happened on Day One? Day One is an Amazon philosophy that founder Jeff Bezos pushes relentlessly. The idea is that in order to succeed, Amazon can never stagnate. He stresses that everyone in the company should maintain a “Day One” mentality — a mindset that’s customer obsessed, agile, inventive, and innovative. So what happened on Day One of Amazon's launch in the Netherlands? On Amazon’s first day in the Netherlands, we analyzed the top 10,000 products in the electronics category (according to popularity). We evaluated how many were present in Amazon’s product offering and the top four Dutch retailers in this category. The retailers we analyzed (aside from Amazon) were: Bol.com Coolblue Mediamarkt Wehkamp We were also curious about how Amazon.nl differed from Amazon.de, which had previously been available to Dutch consumers. To evaluate this, we took a snapshot of the Dutch market on March 9th, 2020 (the day before Amazon.nl’s launch). We refer to this throughout this piece as Day Zero, and used it as a baseline for what happened in the Dutch market the day Amazon launched Amazon.nl (which we refer to as “Day One”). In the end, we looked at all this data through three major lenses that echo Amazon’s proposition: Assortment size (measured by the number of EANs offered) Price (measured by price comparison) Strategy (more specifically Amazon Prime) Number of EANs offered: Day Zero vs. Day One On Day Zero, Amazon.de had 5,885 of the top 10,000 products (in the electronics category) in its assortment (59% coverage). By comparison, Bol.com offered 7,003 (70%). Bol was followed by Coolblue (42% coverage), MediaMarkt (26%), and Wehkamp (20%). In total, the five webshops combined (Amazon.de, Bol.com, Coolblue, Mediamarkt, and Wehkamp) had 8,931 of the top 10,000 EANs. Day Zero: Amazon.de compared to top 4 Dutch retailers Webshop Number of top 10,000 products offered Percentage of top 10,000 (rounded) Amazon.de 5,885 59% Bol.com 7,003 70% Coolblue.nl 4,223 42% Mediamarkt.nl 2,599 26% Wehkamp.nl 1,994 20% This data tells a clear story. While Amazon.de had great coverage of products on Day Zero, the Dutch market was able to fight this giant marketplace. In fact, Bol had significantly more product coverage than Amazon.de. But how does that compare to Day One of Amazon.nl? On Day One, the five webshops combined had 8,805 of the top 10,000 EANs. Amazon.nl only offered 4,560 of the top 10,000 products (46% coverage), a full 1,000 products fewer than Amazon.de offered the day before. Day One: Amazon.nl compared to top 4 Dutch retailers Webshop Number of top 10,000 products offered Percentage of top 10,000 (rounded) Amazon.de 4,560 46% Bol.com 7,143 71% Coolblue.nl 4,305 43% Mediamarkt.nl 2,628 26% Wehkamp.nl 2,019 20% This number is not surprising, and Amazon NL even stated that it takes time to build an assortment. This number is likely to rise as more Dutch companies begin to sell on the platform. It is important to note that Wehkamp’s performance in this analysis appears lower than the company’s actual performance. The reality is that Wehkamp is a fashion-focused company. Wehkamp does have some electronics items, but unlike the other companies in this analysis, electronics are not a major part of its commercial strategy. Price comparison: Day Zero vs. Day One According to Simon Kucher & Partners, 44% of Dutch consumers will only buy from Amazon if the price is 10% lower (or more) than their favorite local hero. If Amazon can make market prices more attractive (which it most likely can) consumers will understandably use the platform. We wanted to know if Amazon could reach that 10% mark, and wondered how Amazon.nl’s prices compared to Amazon.de’s. On Day Zero, and on the products that Amazon.de offered that Dutch retailers also offered, Amazon.de had a lower price for a whopping 73% of the overlapping EANs (3,645 of the shared 4,942 EANs). Day Zero: Amazon.de vs. Dutch retailers Amazon.DE vs... Number of EANs offered by both Number of EANs where Amazon offers a lower price Number of EANs where NL retailer offers a lower price Number of EANs where NL retailer and Amazon.de offer same price Bol.com 4,307 3,228 998 81 Coolblue.nl 2,980 2,459 480 41 Mediamarkt.nl 1,650 1,239 373 38 Wehkamp.nl 1,214 913 286 15 Top 4 Dutch retailers combined 4,943 3,645 1,190 108 To contrast, at least one of the Dutch retailers offered a lower price on 24% of these shared EANs (1,190 of the total shared 4,942 EANs). In some cases, Amazon and another company may have offered the same price on a product, and that price was the lowest on the market. In this situation, this EAN was separated into its own category: “Number of EANs where NL retailer and Amazon.de offer the same price”. This only occurred on 2% of EANs that the companies shared (108 EANs in total), which is likely the result of a localized pricing strategy. After looking at the Day Zero data, we compared this to what happened on Day One with the launch of Amazon.nl. Day One: Amazon.nl vs. Dutch retailers Amazon.nl vs... Number of EANs offered by both Number of EANs where Amazon offers a lower price Number of EANs where NL retailer offers a lower price Number of EANs where NL retailer and Amazon.de offer same price Bol.com 3,447 2,257 899 291 Coolblue.nl 2,203 1,684 361 158 Mediamarkt.nl 1,146 770 255 121 Wehkamp.nl 794 532 168 94 Top 4 Dutch retailers combined 3,852 2,416 1,061 375 Again, the overall numbers were lower, and so were the percentages. Of the 3,852 shared EANs across the entire market, Amazon offered a lower price on 2,416 (64%) of these products. Dutch retailers offered a lower price on 27% of the shared EANs, a slightly higher number than compared to the German counterpart of Amazon. It is worth noting though that, at least for Bol.com, the price difference wasn’t that large. Our analysis showed that Amazon’s products were only 3% lower on average than Bol’s prices. The close proximity of price is only one piece of evidence that shows Amazon is clearly taking a localized pricing strategy. More evidence? Look at the number of products that were the same price on Amazon.nl and across the top 4 Dutch retailers. It’s nearly more than double the number of products that Amazon.de and Dutch retailers shared on Day Zero. Even more evidence? Take a look at the screenshot below. You can see there is a large price difference for the same product on Amazon.de and Amazon.nl. Overall, Amazon is pricing itself much more aggressively in the German market, and prices in Germany are roughly 7% lower than the Amazon.nl store. Lowest price on the market After establishing how prices compared across retailers, we wanted to know who offered the lowest price on the market for products. Day Zero: Amazon has lowest price on 42% of products On Day Zero, of the 10,000 popular products we analyzed, either Amazon or one of the top four Dutch retailers carried 8,931 of these products. For 7,809 products, at least two retailers offered the same EANs in their stores, meaning there was inherent competition on price. For 1,122 products though, only one retailer offered that EAN in their store, making that store the lowest price by default. We looked at the 7,809 products to see who had the lowest price point: Amazon.de or a Dutch retailer. Of those 7,802 products, Amazon.de had the lowest price on 42%. This far outpaces the next most price-competitive retailer (Bol.com), which had the lowest price on 22% of the products. However, what’s more interesting is the percentage of each store’s offers that were the lowest. Looking back, on Day Zero Amazon 5,885 EANs in its electronics assortment. Of those 5,885, it was the lowest price for 3,753. This means that Amazon was the lowest price point for 64% of the entire section of its assortment that we analyzed. Day Zero: who had the lowest price on the market? Retailer Number of EANs in top 10,000 Number of EANs that were lowest on the market Percent of EANs offered that were also the lowest price point Amazon.de 5,885 3,753 64% Bol.com 7,003 1,957 28% Coolblue.nl 4,223 757 18% MediaMarkt.nl 2,599 778 30% Wehkamp.nl 1,994 557 28% For Day One, 6,295 products had inherent price competition. Again though, it’s more interesting to compare what percentage of each shop’s assortment was actually the lowest price on the market. Day One: who had the lowest price on the market? Retailer Number of EANs in top 10,000 Number of EANs that were lowest on the market Percent of EANs offered that were also the lowest price point Amazon.nl 4,560 2,791 61% Bol.com 7,143 2,801 39% Coolblue.nl 4,305 946 22% MediaMarkt.nl 2,628 1,024 39% Wehkamp.nl 2,019 678 34% In this second data set, both Bol and Mediamarkt’s numbers look much higher, but this is influenced by the elimination of Amazon.de data on the Day One analysis. Amazon’s Day One strategy: Amazon Prime There were several indications of Amazon’s strategy on Day One. The most notable is Amazon Prime. Amazon Prime is, in many ways, the key to Amazon’s strategic success. The project was so important that Jeff Bezos pulled team members from other high-value projects during the busiest time of the year back in the Winter of 2004. In fact, it was so important that Bezos announced it at a Saturday morning meeting in his boat house with the starting team — it couldn’t even wait until Monday. Prime was a gamble, and many in Amazon didn’t see how the economics of Prime could work, but Bezos pushed forward with the initiative. And it paid off. According to a recent survey by Consumer Intelligence Research Partners (CIRP), more than 100 million people in the United States have an Amazon Prime account, and Prime members spend double the amount of non-Prime members — an average of $1,400 per year. Prime is Amazon’s most lethal weapon, and the company seems to be luring Dutch customers in with the service from the start. Dutch customers can try Prime for free for 30 days. After that it only costs €2.99 per month. In most markets, Amazon costs somewhere in the range of €8 per month. High-runners Amazon also seemed to pick fast-movers for deep promotions. This is called the high-runner strategy, and is in line with what Amazon has done in the past. We saw this on several products today, including some Sony headphones, which are the number one selling electronics product on the Dutch market. The truth is that we expected this. What was far more fascinating today was the market reaction to these changes. Bol.com, for example, also dropped its price on those same headphones. How Dutch retailers can react While consumers may stay loyal, Amazon will change the Dutch market significantly. It’s our expectation that local players (like Bol, Coolblue, and Mediamarkt) will interact with this new player. Bol.com’s fast response on the Sony Headphones will become the new norm. Dynamic pricing To start, you can expect the market to become more dynamic and competitive. Pricing is incredibly important to Amazon. The company uses a high-runner strategy, so it adjusts prices to appear more attractive to consumers. With this strategy, Amazon prices aggressively on highly-elastic items to draw traffic to the site. Once on the site, Amazon will sell these elastic products at a discount, but will often bundle them with other products that are less-elastic and sell at the full price. This strategy is advantageous in that Amazon makes profit on the non-elastic items. But it also helps solidify Amazon’s price perception as the e-commerce outlet with the lowest prices on the market. The high runner strategy comes with a high frequency of price changes. To keep up, retailers and brands need to invest in their ability to update prices at a similar rate. Bol has already proven itself capable of responding to Amazon’s price changes and strategy by dropping prices on high-runner items. If you can’t beat them, join them If you don’t want to compete against Amazon, another option is to use the marketplace to your advantage. Amazon is a great channel that draws tons of consumers, so it might be an interesting place to sell your products. To learn more about selling on Amazon, check out the Complete Guide to Selling on Amazon in 2020. Key lessons for selling on Amazon If you want to sell successfully on Amazon, you need to think about how you can make the customer’s life better while also serving your business goals. As some parting advice, here are some steps to help you get into that mindset. 1. Define your commercial objective: Your commercial objective is an explanation of why your company exists and what your overarching goals are for the company. Your commercial objective extends beyond your products, and touches every single area of your organization, from your hiring all the way to your pricing. It’s similar to a company’s mission statement and is something you should consider carefully to set yourself apart from the competition. To define your commercial objective you need to analyze the market, think about your goals, and design a plan to achieve those goals across your entire organization. 2. Create a harmonious strategy How can you achieve your goals while also giving customers the best experience possible? Discovering the right balance for your company is the recipe for Amazon success. The commercial objective only works well if you can make it actionable. After deciding what you want to do, you need to consider how you’re going to do it. 3. Think from the consumer’s perspective Amazon is, first and foremost, a company that’s obsessed with the consumer. You should do everything in your power to give consumers an above-average experience. 4. Use tools to keep your products aligned with your strategy Tools can make or break your experience on Amazon, especially if you want to sell a high volume of items. Consider competitor intelligence tools to track product prices and repricing tools to keep your prices up to date. Tools can also be consultancy; if you’re an individual seller it might not make sense to hire an Amazon consultant, but if you’re a larger company that wants to learn more, it might be worth investing in consulting help. Conclusion Amazon’s launch in the Netherlands was not as grand as we expected, but that may be a strategic move. Day One demonstrated that Amazon.nl does have the power to influence the market, but also that Dutch retailers can fight back with the right technology. We’ll keep monitoring what happens with Amazon over the next few weeks and provide regular updates on how the Dutch e-commerce market changes, and provide more commentary as we go Curious to read more Amazon related content? Check out some of our other articles below The Strategies Behind Amazon's Success: Learn how Amazon became 'the place' to buy products online. The Complete Guide To Selling on Amazon: In this guide we answer some of the top questions we hear about Amazon and give helpful hints on how to succeed on the platform. How Does Amazon's Search Algorithm Work: Find out how Amazon connects their shoppers with relevant products as quickly as possible.
09.03.2020
The Strategies Behind Amazon’s Success
Amazon is built around one thing: customer happiness. Amazon was founded in 1994, and since 1995, the company has set out to be “Earth’s most customer-centric company, where customers can find and discover anything they...
Amazon is built around one thing: customer happiness. Amazon was founded in 1994, and since 1995, the company has set out to be “Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.” Its mission statement is clear: do whatever it takes to make the customer happy. In this article we'll examine the strategies behind Amazon's success. Why is Amazon so successful? So what are Amazon’s strengths? The answer is a relentless commitment to the customer experience. Everything that Amazon does — every strategic move, every investment — is guided by its goal to be the most customer-centric company in the world. Every step along the way is designed to serve customers as best as humanly possible. Amazon has largely succeeded in this mission, as you can read about in our Complete Guide to Selling on Amazon in 2020. Over the last 25 years the company has introduced a wide variety of innovations to the market that have forever changed e-commerce. From a consumer perspective, these innovations ensure that Amazon is the place to shop for anything and everything. What is Amazon’s business promotion strategy? A SWOT analysis Amazon’s business promotion strategy is complex, especially since the company competes in three major industries. What are Amazon’s strengths? Amazon has a culture of testing ideas rigorously and then doubling down on the things that are effective. And as a company that’s not afraid to fail, and will put money on the line to develop a product or service, even if the product poses some risk of failing. Data: The sheer amount of data that Amazon has on consumers is mind-boggling. Amazon not only uses that data to improve its own operations and product offering, but also sells that data to advertisers through the Amazon DSP program. Prime membership: Consumers know and love Amazon, and there is a high loyalty to the company among Prime members. A recent survey by Consumer Intelligence Research Partners (CIRP) suggests that over 100 million people in the United States have an Amazon Prime account. CIRP estimates that 58% of Prime Members pay the full $119 yearly fee, 36% pay on a monthly basis, and the remaining 6% are on a free trial. CIRP also estimates that Prime members spend double the amount of non-prime members on Amazon — an average of $1,400 every year. Worldwide recognition: Amazon has a powerful influence on any new market it enters. Amazon has been able to leverage its brand recognition globally, which makes it such a threat to new markets. Amazon now has 31% of the market share in Germany and 47% market share in the UK. Logistics: Amazon has a logistics system that is far superior compared to other global retailers, and this is one of the key ways Amazon is able to deliver on its goal of being the earth’s most customer-centric company. From distribution centers near large cities to an advanced robotics system for improved efficiency, Amazon invests deeply in its logistical systems. Learn more about the history of Amazon’s logistics strategy and warehouses in this fascinating episode of Land of the Giants. Agility: Despite its size, Amazon can make decisions quickly that enable it to stay ahead of the game. The company has several built-in systems that keep teams and decision-making flexible and fast. One famous system is the “two-pizza rule,” which keeps problem-solving teams small and forces decision making. What are Amazon’s weaknesses? Just because Amazon is so big doesn’t mean it’s untouchable. The company also has several weaknesses that make it vulnerable. Fragmentation: Amazon is an “everything” company. It runs a media operation that produces top-quality television series and movies, a cloud-based web provider, and an online retailer, all wrapped into one. This could be a strength as Amazon can dominate multiple industries, but it also limits the company’s ability to focus on one strategic goal. Not brand friendly: There are some categories where brand value is more important than others. Amazon has traditionally done poorly in these categories where brand is important, such as fashion and home goods. Limited brick-and-mortar presence: Amazon has a more limited brick-and-mortar presence compared to competitors like Target and Walmart. But this is changing as Amazon adopts a strategy to move from pure-player to omnichannel giant. Amazon started this journey with its acquisition of Whole Foods grocery stores in August 2017 as its first foray into the world of grocery shopping. The company also recently announced it would open its own line of grocery stores that are separate from the Whole Foods chain. But Amazon doesn’t just have grocery stores; it also has four other types of physical shops around the United States: Amazon Books, Amazon 4-Star, Amazon Go, and Amazon Pop Up. Amazon Go is an especially interesting retail location. Consumers must have the Amazon Go app to enter the store, but once in, there are “no lines, no checkout.” Consumers can just pick the items they’d like off the shelf, then upon leaving the store Amazon will charge the customer’s Amazon account. What are opportunities for Amazon? Growth of voice: Alexa has been a strategic move for Amazon to get consumers even further locked into the Amazon system. While Alexa and the Amazon Echo both further the company’s mission of providing a great experience, the ultimate motivation for these products is to make the ordering process seamless. Amazon Basics brand: Amazon’s ultimate goal is consumer data, but it’s not some Doctor Evil plan to take over the world. Amazon sees consumer data as the key to providing more value to its customers. This is partially the motivation behind the growth of Amazon Basics, Amazon’s private label. What started out as the Amazon alternative for charging cables and batteries has exploded into all kinds of products, including kitchen accessories Right now, Amazon understands the whole customer journey from the moment they sign up for an Amazon account, place an order, all the way up until they receive a product. But as soon as the product enters the customer’s house, the company loses track of how customers use the products. The closest they can get is reviews. Technology and gadgets, notably the Amazon Echo and Amazon Alexa, let Amazon understand customers inside the home. Alexa began as a standalone voice assistant to answer questions, but Amazon has evolved the technology to be more useful, both for consumers and Amazon as a company. You can now connect Alexa to a number of Amazon Basics items, such as a voice-controlled microwave. Connecting voice with these products makes the product easier for consumers to use. But it also gives Amazon more insights into how you use the product. With the microwave, for example, Amazon knows how often you say “pop this popcorn.” It can then calculate how many times you’ve said “pop this popcorn,” compare that number to the number of popcorn bags in your last purchase via Amazon, and automatically reorder popcorn for you at a 10% discount. This isn’t necessarily a bad thing, and it does give consumers freedom to do other things. And, more importantly for Amazon, these products make it easy to order something new through the marketplace. What are threats to Amazon? Data and online privacy: One of the biggest threats Amazon will face in the future is the continued debate over what is private data versus what is public data. Legislation and regulations: Despite its power, Amazon is still subject to the laws and regulations of any country in which it operates. If any sweeping legislative changes are introduced in these countries, it could damage the company’s ability to operate as it does. An example might be a new data privacy regulation. If major reform meant that Amazon could not collect as much consumer data as it does, it could harm the business. At the more extreme end of the spectrum are antitrust laws that could force the company to break up its operations for the sake of competition. What is Amazon’s markup strategy? Amazon itself does not have a markup strategy. It’s up to Sellers to determine how much markup they want to add to their online products and set healthy margins. For low margin products, consider raising the price or strategically bundling the product with a high-margin product. You can also try to cut production costs. For high-margin products, it may be worth it to increase your marketing spend, shoot for cross- and up-sells, and devoting more time to the product. What is Amazon’s positioning strategy? Amazon’s brand is built on customer satisfaction. It wants to be known as the most customer-friendly company on the entire planet. This means Amazon wants to position itself as the most convenient company with the lowest prices and the best customer service out there. Amazon largely achieves this goal, and it’s developed a strong brand as a result. A 2019 survey of 2,000 US shoppers found that 89% were more likely to buy products from Amazon than other e-commerce sites. The same survey found that Amazon was indispensable through the customer journey, especially when it came to reviews. As Kiri Masters writes in Forbes, Two-thirds of respondents (66%) typically start their search for new products on Amazon, compared with one-fifth (20%) who start on a search engine such as Google…and when consumers are ready to buy a specific product, 74% go directly to Amazon. Amazon repricing strategies A successful repricing strategy should help you achieve your company goals. Here are 5 tips to build a successful repricing strategy: Define your commercial objective Build a pricing strategy (such as a charm pricing strategy) Choose your pricing method Establish pricing rules Implement, test, and evaluate the strategy To learn more about Amazon pricing strategies, check out the Amazon pricing article. Amazon sales strategies Being successful on Amazon comes down to working hard and thinking about the customer. The company rewards Sellers who put the customer first and offer a consistently great experience. But what does that look like in real life? If you want to sell on Amazon, you should have one goal: getting your listing into the so-called “Buy Box.” The Buy Box is the box on the right side of any product listing. It has two major calls-to-action: Add to Cart and Buy Now. If there are several third parties selling the same product, the Seller who “wins” the Buy Box is the Seller whose item gets added to shoppers’ carts when a customer clicks on either of these CTAs. Statista estimates that 82% of Amazon sales go to the winner of the Buy Box. This number is higher for purchases on Amazon’s mobile platforms, whether that’s the app or web browser. Winning the Buy Box is a complicated dance, and it requires work across all aspects of your Amazon business. Much like Amazon considers customer satisfaction in its every move, so to do its Sellers. To win the Buy Box, delivering an excellent experience should be at the top of your priorities. Amazon takes a holistic view of Sellers when considering who to feature in the Buy Box. If you craft your strategy carefully, you can create listings that consistently land in the Buy Box. So, how do you build a sales strategy for Amazon? There are four steps. 1. Define your commercial objective on Amazon What do you want to achieve out of selling on Amazon, and what do you want consumers to think of your Amazon store? Do you want to be seen as a luxury brand? Or do you want to have rock bottom prices? These are all questions that you’ll answer when you define your commercial objective: the explanation of why your company exists and what its goals are. 2. Create a harmonious strategy based on the commercial objective After defining your goals, you need to figure out how to make them actionable. This is where you’ll create a more traditional “sales” strategy. Some factors to consider include: Pricing Promotions and marketing Packaging Fulfillment method Delivery and handling time There are countless other choices to make for your sales strategy, but these are a good place to start. Use your commercial objective as a compass for making decisions around your strategy; everything you do should strive to deliver on those overarching goals. 3. Put yourself in the customer’s shoes Amazon is all about giving customers the best experience possible. In fact, Amazon wants to be the “world’s most customer-centric company.” And, if you can optimize your sales strategy to provide a great experience, Amazon will notice. This means you may need to lower prices or adjust your promotions to meet the specific desires of Amazon’s audience. 4. Use tools Finally, staying current with Amazon requires a lot of work. The only way to make it truly possible to stay up-to-date is to use automation tools. For advertising, you may want to consider using optimizing your listings for Amazon’s search algorithm and using Amazon marketing tools like the DSP platform. This service can automatically create ads for you and test the effectiveness of each. For pricing, consider using a competitive intelligence and Amazon repricing tool. These will help keep your store listed as the Buy Box option. Who are Amazon's competitors? Amazon is a tech company, media kingdom, and omnichannel retailer wrapped into one large conglomerate. Because of the varied types of products and services, Amazon has numerous competitors from different industries. In retail, some of Amazon’s biggest competitors include Target, Walmart, Best Buy, and Alibaba. For tech, IBM, Google, Salesforce, and Accenture all stand as competition. In the media arm of the company, competition comes from Netflix, Hulu, Disney, and Time Warner. Conclusion Amazon is a highly strategic company, and it has been since its inception. It will continue to use its customer-centric philosophy as a compass in the future. If you’re a Seller who wants to succeed on Amazon, it behooves you to remember Amazon’s overarching goals. If you can incorporate Amazon’s strategy into your own, you’ll be able to succeed on the platform as well.
09.03.2020
How Does Amazon's Search Algorithm Work?
Amazon’s search algorithm is a sophisticated system that has one goal: connect shoppers with relevant products as quickly as possible. If you can engineer your way to the top through organic search, it’s a free way to...
Amazon’s search algorithm is a sophisticated system that has one goal: connect shoppers with relevant products as quickly as possible. If you can engineer your way to the top through organic search, it’s a free way to improve sales and support brand visibility. And the good news is that this is possible through Search Engine Optimization (SEO). With some work and critical thinking, you can get your listings to appear favorably in Amazon’s search results. This article details everything you need to know about Amazon’s search algorithm: how it works, what’s important to consider, and how to boost your overall visibility. To learn even more about Amazon, check out our Complete Guide to Selling on Amazon in 2020. How does Amazon's search algorithm work? At its core, Amazon’s ranking algorithm is similar to Google’s search algorithm. It analyzes search queries for keywords, then tries to match customer desires with relevant products. Every day, Amazon tries to find relevant, informative, and trustworthy content to deliver to its customers. Amazon’s relationship with consumers is different than Google’s though, and as a self-contained platform it has access to a huge amount of data to use for search engine results. Amazon A9 ranking algorithm Designed by A9, a subsidiary company of Amazon, Amazon’s search algorithm’s sole purpose is to connect shoppers with the product they’re looking for in as little time as possible. It’s built around the same philosophy as Amazon itself: deliver the best customer experience possible. Since Amazon’s goal is first and foremost to deliver a spectacular customer experience, it analyzes several different pieces of information to determine which products appear at the top of search results. The information the algorithm considers when determining product ranking include: Keywords: does your listing have the search terms consumers look for? Sales conversions: do your products sell well? Customer reviews: are customers happy with your products and service? Performance history: do you have a record of sustainable sales? Delivery time: do customers receive their products quickly? Price: are your products priced competitively? Amazon’s ranking algorithm evaluates a broad amount of criteria to determine who appears on the first page of a search, which is a lucrative place to be. Your products will be seen by more people, and you’ll be more likely to win the Buy Box. How do I find my Amazon ranking? To find your sales rank, search for the product on Amazon.com, locate your listing, scroll down to the “Product Details” section, and find the information for “Amazon Best Seller’s Rank.” This number is the ranking of the product in the category in which it is listed. How do you increase visibility on Amazon? There are three fundamental parts to your overall strategy that will help increase your visibility on Amazon. 1. Optimize your listings for SEO Optimizing your listing for keywords is the easiest way to get started increasing your visibility across the marketplace. One of the main things Amazon considers when deciding which products to display for a search result is keywords. This is for the obvious reason that consumers will type certain keywords into the search bar and want to be connected with relevant products immediately. You should learn what those keywords are for your products so you can start getting your listings in front of the right consumers. There are two ways to do keyword research. The first way to do keyword research is completely free: it’s to think logically about what keywords your target market might use to find a product like yours. If you’re selling a camera, for example, a logical place might be to start with “camera” or your brand’s name. The second way to do keyword research is more scientific. It involves using tools that tell you exactly what consumers search for in Amazon. These tools, like KeywordTool.io, MerchantWords, Viral Launch, and others can give you detailed information like search volume, frequent words, and related products. Some keyword tools are free. Some keyword tools have costs associated with them. You’ll be able to find one at any price point. Once you’ve determined which keywords you want to use, integrate them into your product title and listing in a way that’s organic and informative. Don’t be spammy though, because it quickly makes consumers suspicious of products. Keep your writing natural, and user-focused. Always follow best practices for SEO writing. Take some time to dive into what your target market searches for on the platform, what your competitors do to capture sales, and where there are opportunities for your product to shine. 2. Build better pages for increased sales conversions Optimization doesn’t end with keywords. After driving people to your listing through keyword research, it’s time to convince them to buy from you. You can do this by creating better product pages that clearly explain the features and benefits of your product. One of the variables that the A9 algorithm evaluates when deciding who to list in the top results for a search query is sales conversions. It does this for two reasons. First, the listings with best sales conversions are the listings that customers seem to deem the best solution to whatever it is they search for. Second, listings with high sales conversions also make Amazon the most money, whether that’s through fees or advertising sales. This gives Amazon even more incentive to push these articles to the top to drive even more sales. How can I increase my online sales on Amazon? There are several ways to increase your sales on Amazon. One of the easiest is to make sure your product listings provide enough information for consumers to make informed buying choices. To do this, evaluate your product description. Does it have keywords tactfully incorporated? Is it interesting to read and compelling? Does it answer questions consumers may have about your products? Make sure that all these components are included in the product description, and add bullet points, if possible. Additionally, look at the photos in your listing. Are they bright, clear, and inviting? The best photos on Amazon show all the details of a product and how it should be used. You can also include video in your listing to showcase your product even more. When you create a listing on Amazon, you can add a maximum of eight product photos to the page. You can add more engaging content though by paying for Amazon A+ Content, a service that lets you add more images, video and other multimedia content to your page. 3. Get great reviews Reviews are another logical way to improve your visibility across the platform (and increase your online sales on Amazon). If you have a high number of reviews, it’s a signal to Amazon that people enjoy your product and find it useful. If it’s useful for customers, Amazon will favor your product over others. Reviews help with more than just visibility though. When you get honest reviews, you can learn what customers like about your product or what they don’t like about the product, all feedback you can incorporate into the next iteration of your product. Are Amazon reviews important? Reviews are important for ranking well in Amazon’s search algorithm. In many cases, they’re more important than the actual brand of a product, as Fred Dimyan, CEO of Potoo Solutions (an e-commerce consultancy), explained in an interview with Wired . In the interview he points out the rise of direct-to-consumer or direct-to-Amazon brands like Cali White toothpaste that crush industry giants like Crest and Colgate. But Amazon’s rating system is not as straightforward as it appears. The search algorithm doesn’t just take a simple average of the available ratings. Instead, Amazon uses advanced machine learning to look for relevancy of ratings. It looks at the average star rating, of course, but also considers (among other criteria): How recently reviews were posted How frequently people post reviews Whether the reviews are from “verified” purchasers The algorithm calculates a star rating based on all this information and displays it on your listing. Surprisingly though, reviews are not as important as you may think. Skubana analyzed the top 3,000 organically-ranked Amazon pages and found that the number of reviews varied dramatically among top-performers. The company found that quality of reviews was significantly more important than the quantity of reviews, and that all the top items had overwhelmingly positive reviews regardless of the absolute number of reviews. The lesson: don’t focus your energy on getting a huge number of reviews. Focus instead on getting the best reviews you possibly can by providing a great product experience. Authenticity Amazon’s A9 algorithm tries to verify the authenticity of reviews. It’s easy enough for sellers to hire a clickfarm or freelancers to go and leave false reviews on products to boost visibility. Amazon recognizes this, and tries to prevent it with sophisticated detection methods. To combat this, Amazon launched the Amazon Vine program where Sellers can give products away for free in exchange for unbiased reviews from verified users. To enroll in this program, you will need to contact Amazon directly. Amazon SEO is only part of your marketing mix SEO for Amazon is an incredibly powerful tool in your marketing mix, but if you rely exclusively on SEO, you might be disappointed with your results. The sad reality is that keywords can only take you so far. The importance of advertisements has skyrocketed in the last three years. Even big brands have increased their Amazon ad spend to stay at the top of search results. Check out our Introduction to Amazon Pricing article for more information on this. This doesn’t mean that SEO isn’t a worthy investment. It just means that it’s only a part of marketing on amazon.
25.07.2019
26 Stats About Amazon Prime Day 2019
It’s no surprise that Prime Day 2019 was another record-breaking event. Sales this year surpassed Black Friday 2018 and Cyber Monday 2018 sales combined, and the number of Prime members exploded. More and more stores...
It’s no surprise that Prime Day 2019 was another record-breaking event. Sales this year surpassed Black Friday 2018 and Cyber Monday 2018 sales combined, and the number of Prime members exploded. More and more stores are now offering their own major sales on July 15th and 16th as a response to Prime, and the sales holiday is quickly cementing itself within the retail cycle. To see how Prime Day 2019 played out, we’ve rounded up 26 statistics to get an overview of the holiday. Amazon Prime Amazon Prime is Amazon's wildly successful membership program. Members pay $119 per year for access to free two-day shipping, photo storage, video streaming, and more. More than 100 million US shoppers have an Amazon Prime subscription (that’s 62% of Amazon’s customer base in the United States) (CIRP) Prime Members spend an average of $1,400 per year on Amazon. Non-members spend an average of $600 per year (CIRP) Prime Day began in 2015 to celebrate the company’s 20th anniversary and bring more people into the membership program Prime Day 2018 Prime Day 2018 was a record-breaking year, and sales surpassed Black Friday and Cyber Monday 2017 sales. Prime Day 2018 was a 36-hour event Amazon sold over 100 million products on Prime Day 2018, surpassing sales on Cyber Monday, Black Friday, and the previous Prime Day (Amazon) Estimates suggest that shoppers spent over $4 billion on Prime Day 2018 (Bloomberg) 17 countries participated in Prime Day 2018 (Amazon) The most popular categories for Prime Day 2018 were Toys, Beauty products, PCs and computer accessories, Apparel, and Kitchen products. (Amazon) Prime Day 2019 Prime Day 2019 was a full 12 hours longer than last year, but sales never lagged. While Amazon didn't release any information about how much the company made, Prime Day once again surpassed Black Friday and Cyber Monday in sales. Prime Day 2019 lasted a full 48 hours (Mashable) Amazon sold over 175 million products this year and consumers saved over $1 billion USD (Amazon) Prime members in 18 different countries participated in Prime Day: the United States, the United Kingdom, the United Arab Emirates, Spain, Singapore, the Netherlands, Mexico, Luxembourg, Japan, Italy, India, Germany, France, China, Canada, Belgium, Austria, and Australia. (Amazon) Amazon spent $8.1 trillion (USD) on television ads marketing Prime Day (Broadcasting Cable) $1.6 trillion of that $8.1 trillion went to Spanish-language advertising (Broadcasting Cable) US shoppers also saved at Whole Foods Market on Prime Day, hinting at Amazon’s omnichannel strategy. Strawberries, red cherries, and blueberries were the most popular Prime Day products at the grocery chain (Amazon) Popular Products The product trends on Prime Day 2019 were fascinating, and reflect changing cultures and demographics. "We saw a huge surge in 'smart' products this year, but that wasn't unexpected," comments Hidde Roeloffs Valk, Solution Consultant at Omnia. "This category is growing rapidly at all our customers across the board, so it's no surprise these were popular products on Prime Day." Hidde also believes that the popular products are reflective of new demographics. "In the Netherlands, diapers were among the top sellers. This is because more millennials are having children." Smart home and IoT products were particularly popular this year. Top sellers included robotic vacuums, smart garage door openers, and smart plugs. (Amazon) The Instant Pot continued its reign as one of the top sellers in the US (Amazon) The most popular products by country include (Amazon): United States: LifeStraw Personal Water Filters, Instant Pot DUO60, and 23andMe Health + Ancestry kits United Kingdom: Sony PlayStation Classic Console, Oral-B SmartSeries Electric Toothbrush, and Shark Vacuum Cleaner United Arab Emirates: Al Ain Bottled Water, Ariel Laundry Detergent, and Fine Towel Tissue Roll Spain: yobola Wireless Bluetooth Headphones, Philips Multigroom Series 7000 All-in-One Trimmer, and DoDot Diapers Singapore: Meiji Fresh Milk, Coca-Cola Zero Sugar Soft Drink, and Kleenex Clean Care Bath Tissue Netherlands: Mama Bear Diapers, SanDisk 128 GB Memory Card, and Philips Hue White and Color Ambiance Light Mexico: Nintendo Switch, HP Monitor 22w Borderless, and Nautica Travel Sport Eau de Toilette Spray Luxembourg: JBL Charge 3 Stealth Edition Bluetooth Portable Boombox, Tefal Jamie Oliver Stainless Steel Pan, and iRobot Roomba 671 Japan: Happy Belly Water, Anker PowerCore 10,000 Mobile Battery, and Pampers Premium Protection Diapers Italy: NESCAFÉ Dolce Gusto Barista Caffè Espresso, Dash 3-in-1 Detergent Pods, and AUKEY Powerbank Portable Charger India: Syska 9-Watt Smart LED Bulb Compatible with Amazon Alexa, boAt Rockerz Sports Bluetooth Wireless Earphones, and Godrej Aer Pocket Bathroom Fragrance Germany and Austria: JBL Bluetooth Speaker, Tefal Jamie Oliver Stainless Steel Pan, and OSRAM Smart+ Plug Zigbee Switchable Light Socket France: iRobot Roomba 671, Lunii Story Telling Factory, and Oral-B SmartSeries Electric Toothbrush China: Dove Exfoliating Scrub, L’Oreal Rejuvenating Eye Cream, and Silk’n Permanent Hair Removal Device Canada: PlayStation 4 Slim with Spiderman and Horizon Zero Dawn, LifeStraw Personal Water Filter, and 23andMe Health + Ancestry kits Belgium: OSRAM Smart+ Plug Zigbee Switchable Light Socket, SanDisk 128GB Memory Card, and Brita Water Filter Australia: Mario Kart 8 Deluxe, Finish Powerball All-in-1 Max Dishwasher Tablets, and Huggies Ultra Dry Nappies Amazon’s proprietary devices also did well, including Kindles, Echo, Alexa, Blink and Ring devices, and more. (Amazon) Prime Membership Prime membership skyrocketed this year, with both days of the retail holiday bringing in thousands of new members. But what is the average life cycle of these new members? July 15th brought in more Prime members than any previous day in the company history. (Amazon) July 16th brought in almost as many subscribers as the 15th. (Amazon) Searches for “Canceling Amazon Prime” increased 18x on the 15th of July, compared to the 14th, suggesting that consumers were signing up for the trial membership, browsing the deals, then canceling immediately. (Business Insider) Prime Day response Prime Day has officially moved beyond the domain of the Amazon company. Many other companies offered their own widespread sales during the same time period to capitalize on consumer readiness-to-spend. Prime Day 2019 was also met with protest from consumers globally, who worry about worker welfare. Online retail traffic surged on Prime Day. In the United States... (Emarketer) Amazon’s search index increased 184% in the first 24 hours of Prime Day Walmart’s search index increased by 130% Searches on eBay increased by 72% Best Buy’s searches soared by 255% Prime Day 2019 was met with public protests against the retail giant. Within Europe there were protests in Spain, the United Kingdom, Germany, and Poland (CNET) Delivery days marred consumer experience on Prime Day, with many shoppers complaining about 3-4 day shipping (Atlanta Journal Constitution) The number of companies giving major discounts during Prime Day has exploded, indicating that Prime Day is quickly becoming a full-blown summertime retail holiday as big as Black Friday. (Business Insider) This prime day record is expected to hold until Black Friday and Cyber Monday 2019. (CNET) Final thoughts In just four years, Amazon has managed to create an entirely new retail holiday that only continues to grow in importance each year. We can expect even more retailers and brands to launch their own sales next year on July 15th, and might even see the holiday spill over into the physical retail realm as well. Curious to read more Amazon related content? Check out some of our other articles below The Strategies Behind Amazon's Success: Learn how Amazon became 'the place' to buy products online. The Complete Guide To Selling on Amazon: In this guide we answer some of the top questions we hear about Amazon and give helpful hints on how to succeed on the platform. How Does Amazon's Search Algorithm Work: Find out how Amazon connects their shoppers with relevant products as quickly as possible.
07.12.2016
What does Amazon’s Increased Focus on the Netherlands Mean for Pricing in the Dutch Market?
After launching amazon.nl with an assortment of Dutch Kindle e-books by the end of 2014, Amazon recently made a second step in entering the Dutch market. Last week it added the Dutch language to their German website,...
After launching amazon.nl with an assortment of Dutch Kindle e-books by the end of 2014, Amazon recently made a second step in entering the Dutch market. Last week it added the Dutch language to their German website, amazon.de. While parts of the website have not yet been translated and there is no iDeal payment option yet, this is a clear sign that Amazon is starting to focus more on the Dutch market. It is becoming clear from comments on articles in the trade press about this move by Amazon that opinions vary wildly as to what this impact will be on pricing of products in the Netherlands. Some claim that “all margins will shrink to zero”, while others claim that Amazon is not priced aggressively at all. What does the data show? Of course, Omnia has access to pricing data of amazon.de. Amazon.de advertises on a major Dutch comparison site, so it is included in the Dutch Omnia Pricewatch data. However, this mainly covers electronics. It is also possible to source pricing data from all major German comparison shopping engines via Omnia's Pricewatch Module. This will expand insights into Amazon pricing in categories beyond electronics. For this analysis we looked at a large set of electronics products, found on amazon.de and 5 large Dutch electronic retailers, bcc.nl, bol.com, coolblue.nl, mediamarkt.nl and wehkamp.nl - all 6 of which were advertising on this major Dutch comparison shopping engine. In Omnia Pricewatch and Omnia Dynamic Pricing, price ratio and price position are key performance indicators reflecting your price position versus key competitors. The chart below shows the price-ratio and price position of amazon.de and the 5 key Dutch retailers mentioned above, both against the average of these six retailers in total. Looking at price ratio, amazon.de indeed has the lowest prices. However, the difference compared to mediamarkt.nl is small. Looking at price position, is seems that amazon.de is not pricing efficiently, because - although it has the lowest price ratio - its price position is one of the worst. This seems counterintuitive, as Amazon is known as one of the most advanced retailers in terms of dynamic pricing capability. The logical explanation for this is that Amazon does not have localized pricing for the Netherlands. The amazon.de pricing advertised in the Netherlands are simply their German price points and these price points are fully based on the German market. This may lead one to conclude that amazon.de only has a minor impact on pricing the Dutch market. However, this – unfortunately for Dutch retailers – is not the case. It’s precisely these German prices that cause amazon.de to undercut the lowest priced Dutch retailers by a very large margin in many cases. Except maybe in promotions, a Dutch retailer would never undercut its lowest priced Dutch rival by such a large margin. The chart below shows the price ratio of amazon.de versus the 5 key Dutch retailers. Each bar represents the price ratio on a single product. This data shows that amazon.de is undercutting Dutch retailers by a very large margin (up to 50% below the average of the 5 key Dutch retailers) on a significant portion of the product assortment used in this analysis. Conclusion Our expectation is that the greater focus of Amazon on the Dutch market will lead to further margin pressure in this market. The key reason for this, however, is not Amazon’s aggressive pricing in general, but the fact that it does not localize its pricing. Amazon is operating in the Dutch market with German pricing. And because Omnia as of right now has pricing data in 32 markets, including Germany, we know that - in general - pricing in the German market is more competitive that in the Dutch market. Omnia is a supplier of competitor pricing data and software to automate your pricing strategy in the most optimal way. Of course, Omnia is a software supplier and the choice of pricing strategy is always up to the retailer. Below are some suggestions in terms of pricing data and the use of Omnia software, considering the increased focus of the world’s number 1 retailer on the Dutch market. 1. It all starts with data. To decide about competitive pricing compared to amazon.de, it is crucial that you have access to amazon.de’s pricing data. With regards to electronics assortment, the pricing data of the Dutch comparison shopping engines will probably suffice. If you need data coverage on products outside of electronics, then you will need data of major German comparison shopping engines and/or data from the German Amazon Marketplace itself. If you’re interested in this, please contact Omnia. 2. Determine the impact of amazon.de on your product categories. The lack of iDeal payment option, and the longer delivery times make Amazon’s offers less attractive in the Netherlands. However, if the price differential is sufficient we see that many Dutch consumers will choose amazon.de over its higher priced Dutch competitors. The click-out reports of major Dutch comparison shopping engines may provide an indication of the impact of amazon.de on your product categories. 3. Determine whether you want to adjust according to amazon.de pricing. The answer on the previous point should, of course, be an important input to this decision. If you don’t want Omnia’s core algorithm to adjust to amazon.de, you can set the competitor weight to zero. 4. Omnia strongly advises always using a margin protection. Based on the dynamics of your business this protection can be set at zero percent, or at some percentage above or below zero. This has always been our advice, but considering a retailer is now offering goods at a 50% discount versus key retailers in the market, this has become much more important. 5. Use intelligent pricing methods. If the increased focus of amazon.de indeed leads to further pressure on margins in the Netherlands, then it becomes even more risky to apply a dynamic pricing strategy as “position X in the market”. The urgency to move to a more intelligent dynamic pricing strategy based on price elasticity product becomes even greater.
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