Amazon is the largest ecommerce platform in the world, and continues to grow rapidly – if you can successfully sell on Amazon, then you can reach millions of shoppers and never dream of suffering through the 9-to-5 ever again! In this post, we’ve included the best Amazon selling tips for private labellers, FBA and FBM sellers summarized in just two key insights: product positioning and increasing sales.
How this article will help you sell on Amazon successfully:
- Discover factors determining the sales success of a product
- Analyze the typical buying process on Amazon
- Understand different levers you can use to drive success
How to Sell More on Amazon: Start with a Solid Understanding of the Platform
Let’s start by saying there is no straightforward process to sell on Amazon successfully; There aren’t a certain number of steps to follow so that you can become a millionare with FBA. There are many different products in many different categories on Amazon – so you’ll have to adapt the advice here to suit your individual business needs.
This post isn’t for novices, but if you’re a quick learner then you’ll become extremely successful in selling on Amazon in only a short amount of time. If you’d like to catch up on the basics of how Amazon works, check out our Complete Guide to Amazon SEO.
Understand the 3-Step Buying Process to Sell on Amazon Like an Expert
To understand how to successfully sell on Amazon, you have to get in the users’ shoes and reflect on the buying process from their perspective. This way, it is possible to determine the relevant steps of decision making which guide the user to a decision on whether or not to buy certain products. Sellers, in turn, have to make sure that users will decide to purchase their products.
The buying process on Amazon consists of three simple steps: Users search for certain products, click some of them and finally buy one.
- Search: Users only look at products ranking well for their search terms
- Click: Users decide which product they intend to buy
- Buy: Users decide which seller to buy it from
We’ll explain these steps below.
Step 1: Search
The buying process on Amazon usually starts with a search. Users enter a search term, a keyword, into the search bar and click “search”. Amazon then displays a list of all products that match the requested keyword(s). The products are then sorted in a relevance ranking which is determined by the Amazon search engine. 16 products per results page are presented to the user, a simple click leads to the subsequent results page showing the next 16 items.
Step 2: Click
In a second step, users click on the products that aroused their interest and which they want to get more information about. As with other search engines, Amazon users primarily pay attention to the first few results only. Extensive studies on click behavior in search engines showed surprisingly that over 95% of users only consider results listed on the first page.
Therefore, the further back a product is listed, the smaller the probability that users will see and click it. But without clicking, there’s no buying. In order to successfully sell on Amazon, you must make your products rank as high as possible for relevant keywords!
Step 3: Buy
After clicking a product, users land on the product page. This is where they can find detailed information about the product and its characteristics and conditions. The most important thing here though is to make sure they actually buy the product on this page! But since a product may be offered by multiple sellers at the same time, at different prices, it is also important which offer will be chosen, who will close the deal with the user.
Generally, users can view the full list of offers and sellers available for the specific product they selected by another click. But in fact, 85% of users buy from the dealer that was automatically selected for the shopping cart box, i.e. the “buy box”. So in order to win on Amazon, sellers need to become the owner of the buy box.
Two Factors for Successful Selling on Amazon
Based upon analysis of the Amazon buying process, we can conclude that sellers maximize their sales on Amazon by being ranked at the top for all relevant keywords and by always owning the buy box. The two key success factors you need to master if you want to expertly sell on Amazon are, therefore:
1. Ranking of a product for relevant keywords (i.e. product placement)
2. Ownership of the buy box
What Do You Sell on Amazon? Optimization Relevance Varies by Product Type
An important aspect to note is that usually, either ranking or buy box optimization is relevant for a given product. Only in exceptional cases a seller should try to optimize both ranking and buy box. Which of the two is relevant depends on the product type. Simply put, all products on Amazon can be categorized into two types:
Amazon Selling Tip for Proprietary Products (Only 1 Seller)
= Ranking Optimization
For those products that are offered by only one seller, ranking optimization is the main course of action. In the case of proprietary products, the seller usually has full control over product title, description, information and images – which is a prerequisite for ranking optimization. Buy box optimization is unnecessary since there are no other sellers against which to compete for the buy box. Sales of proprietary products can thus be increased by ranking optimization.
Amazon Selling Tip for Reseller Products (2+ Sellers)
= Buy Box Optimization
For products that are being sold on Amazon by at least two different sellers, buy box optimization is key. Of course you may also try and optimize the ranking of reseller products for relevant keywords. But the problem here is that sellers without ASIN priority cannot influence a product’s presentation in terms of title, description, etc. This makes ranking optimization tricky and hard to monitor. In addition, most sellers would not want to waste time and effort when another seller may win the buy box and reap the extra sales in the end.
Exceptions to this rule include (well-known) brand products. Brand manufacturers should make ranking optimization efforts even if there are other sellers offering their products, as the brand manufacturers will also benefit from the sales generated by their intermediaries.
Thus it becomes clear that correct classification of products according to these two types is very important for what kind of optimization you do when you sell on Amazon. For proprietary products, the goal is to increase the amount of clicks through a better ranking. For reseller products, sellers should aim at generating incremental sales through optimized ownership of the buy box.
The Best Amazon Selling Tips Always Involve Understanding Amazon’s Own Motives
Amazon wants to make money – and if you can help them do that, then your business plan will be hugely successful. Basically, Amazon makes money by investing in excellent customer experience. The fly wheel below, hand-scribbled by Jeff Bezos, outlines their modus operandi.
These are the most basic levers of Amazon’s operation. Keep in mind, however, that ‘lower prices’ doesn’t necessarily mean that shoppers should always have the lowest-priced item available at the top of the search results. Remember that Amazon makes a proportional commission on sales.
Related Post: FBA Calculator – Amazon Seller Fees Explained
Now that is has become clear that sales of proprietary products can be improved by a ranking optimization and sales of reseller products can be improved with buy box optimization, the following question arises for people selling on Amazon:
What can I do to optimize the ranking of my products
or to increase my buy box ownership?
The following section presents all the levers that can be influenced by sellers on Amazon. Contrary to popular belief, there are many more levers than just the price of a product. Unfortunately, the myth persists among sellers that “optimization” on Amazon basically equals price reduction. We intend to bust this myth in the following!
Sell More on Amazon Without Necessarily Lowering Prices
Price, assortment and shopping experience determine Amazon’s profit. The levers that can be actively used by sellers can be deducted from the levers that Amazon itself has for maximizing its profit from the marketplace. Accordingly, it’s useful to understand how Amazon’s marketplace profit is composed. For each successful transaction, Amazon receives a variable fee (7-20% of the revenue) from the dealer. Simply put, Amazon’s profit is made up of revenue and merchant fee:
Amazon’s Profit = Revenue x Merchant Fee
Revenue, in turn, is composed of the number of purchases and the price.
Amazon’s Profit = (No. of Purchases x Price) x Merchant Fee
Two factors influencing number of purchases on Amazon
The number of purchases depends on multiple factors, but Amazon can mainly influence this number by two main factors.
The first factor is the assortment: If a user wishes to buy a product but does not find it on Amazon, there can be no transaction, i.e. Amazon has lost earnings from merchant fees. The bigger the assortment, the more transactions are realized on Amazon and the more profit Amazon makes.
Furthermore, a unique range of products which is not yet to be found on Amazon will automatically reward sellers through a good ranking for the related keywords. A seller being the only one offering a rare ming vase will be at the top position for “rare ming vase” and will also automatically own the buy box, since there are no other sellers for this product.
A good assortment can lead to decreasing or avoiding competition. For sellers in direct competition with each other, however, shopping experience and price are the crucial factors.
The second factor consists of various sub-factors, but can be summarized as shopping experience. The list below are the main factors that comprise shopping experience:
- Delivery conditions (time and cost)
- Product presentation (images, description,…)
- Return conditions
- Ccomfort (no creation of new accounts)
- User-friendliness (product reviews)
- Customer service (response time, cooperativeness)
A shop in which products are presented in detail, where the user has already created an account, where products are delivered within one day, where there are no complications, where there is a quick and friendly customer service, all this means a very good shopping experience for customers. This leads to more purchases in the short term. And even in the long run it helps you sell more on Amazon by increasing customer loyalty, which in turn leads to more purchases again.
Sellers are not able to influence all the factors that determine the shopping experience. For instance, sellers cannot change Amazon’s checkout process or the user-friendliness of Amazon’s interface. Other factors though clearly are in the seller’s domain. Especially the product presentation, delivery conditions and customer service are core responsibilities of the seller. Since Amazon too benefits from a good shopping experience customers have on their website, sellers taking measures to improve this experience will be rewarded.
For the profit made by Amazon, this means:
Amazon’s Profit = [(Size of Assortment x Shopping Experience) x Price] x Merchant Fee
It is in Amazon’s best interest that these levers are adjusted the optimal way, because that’s how Amazon maximizes profits. These very levers are also crucial for a seller’s success on Amazon, and therefore should be optimized as much as possible. A successful store pleases Amazon and the seller the same way: This is why Amazon and its algorithm reward those sellers using said levers optimally by preferring them in keyword rankings and buy boxes.
Price Optimization on Amazon: A Last Resort & Not A Final Decision
You can see this on Amazon yourself all the time – the best-selling product is most often not the cheapest. Even products bearing the “Amazon’s Choice” label aren’t the lowest-priced on the market. Remember shopper behavior on Amazon when you’re optimizing! Search queries are often long-tail, meaning shoppers know fairly exactly what they want to buy. And the vast majority of shoppers only click on the first page of the SERPs. If customers can perceive more value in your product than your competitor’s, then they are often willing to pay a higher price.
Among many retailers the belief is strong that in order to successfully sell on Amazon, the lowest price always wins. But this is not correct. Neither is the best product always the best ranking one, nor is the cheapest seller always the one winning the buy box. This can be explained using Amazon’s profit formula: The lower the price, the less profit Amazon makes. Naturally, a high price in turn leads to users not buying or buying from a cheaper competitor.
Therefore, for Amazon it is important to find the right balance of price and quantity in the marketplace. Balance means that the price is set as high as possible in order to get the highest merchant fees. At the same time it has to be low enough for Amazon to defend its reputation as a price leader and to prevent users from buying from a competitor or not at all. For sellers, this means that it’s not always the cheapest price that wins, but on the contrary, increasing the price may benefit sold quantities.
Summary of How to Successfully Sell on Amazon
Sellers want to maximize their profit on Amazon. Profit depends on two success factors: Contingent on the product type (proprietary or reseller product), what matters is a good keyword ranking (ranking optimization) or owning the buy box (buy box optimization). In order to influence these success factors, sellers on Amazon have the following levers to adjust in their favor:
- Shopping Experience
- Product presentation (title, description, product information, reviews, images, …)
- Delivery conditions (delivery costs, duration, use of FBA)
- Customer service (e.g. response time to customer inquiries)
All of these levers can be adjusted actively and systematically in order to optimize keyword rankings and buy box ownership. How exactly these levers should be pulled is explained in our background information on Amazon SEO and buy box optimization.
P.S. We have been featured in the 2018 Amazon Tools Software list by FitSmallBusiness, check it out here!
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August 3, 2018
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