Running an Amazon business comes with challenges not so different from your traditional entrepreneurial endeavor. Once you’ve set up your operation, you have to think of scaling.
In a nutshell, scaling has a lot to do with operational efficiency, promotional/channel diversification, product extensions, and more - just like any business - but in this regard, Amazon has some intrinsic specifics.
We invited some of the top Amazon specialists to join Dan Saunders in the quest to uncover the key drivers that lead to Amazon business scaling.
This post will highlight their top recommendations around the key elements to consider when thinking of Amazon business expansion. To get the whole picture, make sure to also tune in to Dan’s webinar with Robyn Johnson (CEO at Marketplace Blueprint), Charles Bernheim (Chief Commercial Officer at SellerX), and Cyndi Thomason (the Founder of Bookskeep).
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How to Scale Your Amazon Business
The success of any Amazon business is essentially made up of three building blocks:
- Stock: you have to master the art of inventory and make sure you never run out of stock.
- Content: your listings are built on content, so you have to go smart about your listing optimization and communication strategy to nail those Amazon rankings.
- Price: well, the price should always be right - this goes without saying.
So, Amazon business scaling is built around these three factors, and our experts have kindly shared some advice on how to go about it.
Before Going On a Scaling Journey
We’ll talk about the four key approaches to ensuring business growth on Amazon in a second. Before that, as our experts suggest, there are few things to consider before setting out on a scaling journey:
1. Scale the right products.
Our experts emphasized that you should only scale those products with high margins. A product doesn't just need to sell, it also needs to be profitable, even with advertising and shipping costs. So, considering your margins and focusing on profitability is essential to protecting your overall cash flow.
2. Have enough cash.
Profitability is at the core of any Amazon business. So, before you start scaling, reassess your expenses. If you want to grow on Amazon, you need enough cash to keep the business going - this means watching overall fixed and variable expenses in addition to watching the profitability of individual items in your product mix.
3. Don’t scale too quickly.
You could jump into all four scaling approaches and implement them at the same time, but it’s better to start with one and move on to another once you start seeing results. Sudden scaling can negatively affect your business, so try to slow it down and take things one step at a time.
Now that you’ve made sure you have enough cash, picked the right product, and are ready to take things slowly but surely, here’s how to go about each approach.
Four Key Approaches to Amazon Business Scaling
There are four key approaches to ensuring business growth on Amazon:
- Improving operational efficiency
- Regional expansion
- Channel diversification/expansion
- Product expansion
Your Amazon business operation should run like a well-oiled machine. And the way to do this is to work on the following:
1. Never run out of stock.
If you’re selling on Amazon, there is one cardinal rule - never be out of stock.
You have to ensure the ultimate IPI (Inventory Performance Index), as this affects your sell-through rate. One way to do this is to make sure you closely follow your inventory within Amazon Fulfillment Centre.
Pro tip: Kevin offered a lifehack they use at their firm to improve IPI: increase your 3PL logistics coverage close to an Amazon Fulfillment Centre; this should help you make a quick refill if you’ve miscalculated demand and run out of stock. In general, Kevin suggested, you should do your own demand planning - while Amazon is getting better at forecasting demand, it’s still not 100%, so it’s best to run and rely on your own analysis.
2. Invest in a smart content strategy for your listing.
As we’ve already highlighted, content is what drives people to your listing and what helps convert them into buyers. So, you have to make sure your content gets you that perfect item data quality score:
- Add at least 5 images;
- Make sure you align with the Amazon style guide;
- Use the power of video content;
- Fill your listing with A+ content to boost the conversion rate (91% of bestseller listings contain A+ content, while for non-bestseller listings the number is just 70%);
- Think in terms of keywords to rank high on Amazon search (uncover the ins and outs of Amazon keyword research in 4 steps).
Pro tip: Once you’ve created or optimized your product listing, take a look at it from a cellphone. 50% of Amazon buyers shop on the phone, so make sure you are providing a great user experience on mobile as well as on desktop.
It is possible to audit whether your listings align with Amazon Guidelines, are complete, and don’t contain errors. You can get data-driven recommendations for listing optimization to enhance your visibility and increase conversions via Listing Quality Check for Amazon.
3. Set up your pricing for the greatest margins.
With pricing, there is no perfect solution - all you can do is test, test, and test again. But since we’re focusing on profitability while scaling, there are a few things to do if you want to increase your profit margins:
- Of course, you should watch out for competitors’ pricing strategies. But once you have a solid number of reviews, you can slightly increase the price of your product vs. competitors and see no downward purchasing trend.
- Set up a restock alerts system that will notify you when competitors run out of stock. When they do, you can temporarily increase your pricing and benefit from higher margins.
Our experts also touched upon the topic of coupons and deals. While they can give a quick boost to your sales, you have to be careful: do you really need a boost if it means your profit margin falls by X%? And can you ensure enough stock if your demand suddenly spikes? These are questions for consideration.
But if you feel like you can still benefit from discounting your product for a certain period, be sure to have a different discount strategy for different products:
- If you are just launching a product, make sure to go with coupons.
- Established products fare better with a deal that normally runs for more than 6 months.
4. Run daily/weekly checks.
While operating an Amazon business, there are a lot of things to watch out for. So, make sure to set up an alarm system that will automate the monitoring process for the following things:
- Your account health;
- Potential suspension threats;
- Listing quality; and
- Customer reviews.
If you want to track your keyword positions, buy boxes, listing suppression, and prices, the ideal option would be setting up alerts in the Listing Alerts tool. It helps sellers to instantly respond to unwanted listing changes and traffic loss.
Bonus tip on operational efficiency: Try various Amazon special programs.
Amazon is as interested in your success as a seller as you probably are. So, you should definitely try out some of the Amazon-initiated programs that meet your business scaling goals (this also depends a lot on your product and geo):
- If you’re selling products that are on the cheaper and smaller-sized scale, try the FBA Small and Light program. It comes with a longer shipment time but lower FBA fees, so you can reduce your price and increase profitability.
- If you’re serving B2B customers, Amazon’s B2B program can help you grow your B2B sales and discover new selling opportunities.
Expanding to new markets is a textbook example of business scaling. And it works the same way on Amazon. The marketplace actually encourages buyers to do this, making it easy to expand to other regions:
- If you’re a European seller, give Amazon’s Pan European FBA program a shot - this will help you sell your product all across Europe.
- If you’re a local seller but want to expand your business to other markets, try the FBA export program, which helps you make sure you face no tax, duty, or legal implications as a seller.
But you have to make sure your product is actually fit for geo expansion. One example Cyndi shared during her speech was with American football - if you’re selling a location-specific product, you might have to think twice before considering other markets.
Pro tip: Even if your product is potentially marketable to other locations, make sure you have someone on the team who speaks the local language. Auto-translations are still far from perfect, so bring in a native speaker to double-check your listing for foreign markets. Moreover, think of localization rather than a simple translation - a language and communication strategy that works for a US customer might not be fit for a customer from a different location.
Here is one more textbook example for you - portfolio or product expansion. You can introduce a new product and scale your business in that direction (think of related products and the “people also bought” section), but a better and more surefire strategy would be to introduce a new product variation.
Say, you’ve always sold brown wooden chairs, and now you can finally offer new colors (green and white). This way, you get to benefit from existing reviews and bring your older product’s authority to the table, making it easier to ensure success for the new product.
You can, and sometimes should, consider extending your product’s presence to other marketplaces (Etsy, Walmart, etc.), or even opening up your own store at Shopify.
This should help you expand your product’s visibility and reach new audiences. However, be considerate of your own resources, and don’t stretch them too much - if you’re present everywhere, you’re not really doing the best you can on a single platform.
Also, even if you’re nailing it on Amazon search and have top rankings for your product listing, think of external traffic drivers. While Amazon has an impressively large audience within the platform, there are more potential customers across Google, Facebook, and other sites.
Take advantage of the Traffic Insights and Search Insights tools, which help to upscale your marketing strategy and assess your market and audience potential by benchmarking the traffic channels and audience numbers of other Amazon listings and uncovering growth opportunities and new high-impact traffic sources.
This post reveals all the ins and outs of driving external traffic to your product listing - so make sure to read through and implement some of the ideas for channel diversification.
Are You Ready to Scale?
Now that you have a good grip on the top approaches to expanding your Amazon business, you can start your scaling journey. With enough cash, agility, and market and competitive insights, you can build a surefire scaling strategy that is set for success.
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Why do most businesses choose Amazon over other marketplaces? Dive into key trends in our Amazon 2022 report. We analyzed the landscape of the online retail industry to create actionable insights for Amazon merchants in 2022. It uncovers valuable strategies for growing your Amazon yearly profit in times of uncertainty and ongoing change.