2018 is almost in the books. Typically, during this time of year, most Amazon sellers are deeply immersed in wrapping up their holiday sales season, which for many may define the overall profitability of their businesses.
That being said, it’s also an important time of year for sellers to begin shifting their focus to what lies ahead in the coming year.
Amazon is Changing the Game (again) in 2019
Amazon is a juggernaut that will continue to evolve and grow. Obviously, sellers want to showcase their products on and leverage the truly massive power that is the Amazon global marketplace. Sellers must however be vigilant, because as part of Amazon’s on-going evolution, it is rolling out a number of significant new changes currently, and this process will continue throughout 2019.
Sellers should always keep in mind that the shopper is Amazon’s main concern and focus. Amazon continues to alter their terms of service with the goal of rendering to the customer the best terms/benefits, as well as to uphold the integrity of their website.
Part of the ‘Success Equation’ for sellers in 2019, lies in not only keeping an ear to the ground, but also the speed at which they can adapt creatively to incorporate these changes into a flexible and responsive business model.
Sellers must resist becoming the ‘bottleneck’ in the smooth flow of their businesses. The key is to be open to shifting with change, rather than fighting it, so that sellers position their businesses to work these new changes to their advantage while adhering to Amazon’s policies.
Learn From What has Transpired in 2018
Wisdom comes from experience.
Identifying marketplace objectives and creating appropriate strategies to achieve them in 2019 is imperative for any Amazon seller who wishes to build a rock-solid foundation upon which to increase the profitability and brand awareness of their business.
Reflect on what has worked over the past twelve months, what areas need to be improved, and which things didn’t work and why. Amazon sellers should look back at the data from the previous 12 months to determine where they excelled and where there were struggles.
This process is an excellent way to capitalize on your Amazon business’ history and metrics to shape its future.
Take into consideration…
- operational functions (tech, automation, systems),
- advertising (monthly/seasonal/special budgets),
- use of software platforms that can improve marketing efforts (like PPC Entourage),
- inventory (figure out the sweet-spot to eliminate too much or not enough products),
- pricing models (know your margins)
- traffic sources (Paid Traffic VS Organic Traffic on Amazon: Which Is More Important?)
Prepping for the New Year
The New Year promises to be more challenging than ever before for Amazon sellers.
The competition throughout the various niches in the marketplace is becoming more sophisticated, knowledgeable and determined, while Amazon continues to ‘keep it interesting’ by presenting sellers with new twists and turns on what seems like an almost weekly basis. Sellers must start to prepare for these challenges now, rather than reacting to them (possibly too late), after they have taken place.
As 2018 draws to a rapid close, now is an ideal time for Amazon sellers to perform incremental tweaks that clean up and improve the quality and performance of their Sponsored Products Ads campaigns, in order to position their businesses to experience higher profits and increased brand awareness in 2019.
Amazon Seller’s 2019 Prep Checklist for cleaning up Sponsored Products Ads campaigns:
Review Negatives – the end goal of reviewing negatives is to help increase impressions and visibility that a seller may have inadvertently loss, while giving his or her campaigns more flexibility.
Optimize SKUs in Bulk – this is used to find the variations of a seller’s products that are doing well, divert traffic to them, and to simultaneously find the SKUs that aren’t performing so that the seller can then pause them in order to stop wasting ad spend.
Optimize Based on Average Cost Per Click – by implementing this strategy, sellers will be able to quickly and easily find the most expensive keywords across all of their Sponsored Products campaigns and ad groups. (These are the individual keywords that are underperforming relative to the seller’s saved campaign parameters that have a high ACoS or no sales).
Use Negative Phrase Match – this enables an Amazon seller to eliminate the search term phrase used, in any order that it is placed in a query by a shopper. This can be accomplished on a campaign level (that effects all of the SKUs in that particular campaign), or on an ad group level.
Eliminate High ACoS Keywords – find the keywords in your ad groups that are 60% or higher, those keywords are not going to be profitable and therefore, need to be paused/eliminated. Sellers can also try putting these high ACoS keywords into a different campaign with a lower bid price.
Evaluate where your business stands with inventory after the holiday selling season.
Create a plan focused on moving unsold inventory. Amazon charges long-term storage fees. In order to avoid them, take careful note of those items that have been sitting around for a while and make a concerted effort to sell them.
Try increasing ad spend for items that are “collecting dust” in order to move them out before long-term storage fees kick-in during 2019. Determine a threshold for the speed at which inventory is moved before using price reduction as a catalyst, so that the bid system reacts more aggressively.
Because with Sponsored Products campaigns, a 20% increase in ad spend can often be more advantageous to overall sales (due to an increase in organic sales) than reducing prices by the same percentage amount.
Next, renew, negotiate, or renegotiate any yearly contracts with suppliers or manufacturers.
Also look at ways to reduce costs associated with your inventory.
2019 should see in place a system designed to regularly monitor your inventory levels regardless of your fulfillment model (FBA, FBM, SFP, or a combination of these).
Use as a reference point inventory and sales data from Q1 of 2018. Take a close look at units purchased, profit margins, returns, and sales rank to determine how many units of each SKU you should plan on ordering after the holiday selling season.
Evaluate Shipping Costs
Consider using a carrier that has partnered with Amazon to receive better or deeply discounted shipping rates. As a seller you cannot select a specific carrier because Amazon uses multiple carriers and selects them based on their available capacity and cost.
However, it’s wise to obtain an estimate on shipping costs with each partnered carrier because those estimates can vary based upon shipping weight and distance, and there may be an opportunity to save. For example, in your area, Amazon may be partnered with both FedEx and UPS and for the items you are shipping, FedEx may be cheaper the UPS.
Moving Forward Into the New Year…
- Create a detailed plan for your ad spends to refer back to during 2019, in order to help monitor effectively the impact of advertising on your bottom line.
- Your returns process is just as important as your pricing strategy and product selection, as returns are now inevitably part of the customer experience. Be sure that with each return transaction that occurs, you are evaluating the impact the return has on your bottom line.
- Make sure you have a social strategy attached to your brand. Find creative ways for shoppers to connect with you through product packaging/inserts, a strong brand story, discounts off future purchases, etc.
- Incorporate and leverage a variety of ad types and ad opportunities into your overall Amazon marketing strategy.
- Network with other Amazon sellers. Going to select conferences and events exposes you to industry news you might be missing out on, as well as the chance to make key contacts you can leverage for further growth during 2019.
- Early in the 2019, take time to define the net profit margin you are targeting after ad spend in order to determine each product’s target ACoS. You shouldn’t assume that each SKU has the same margin. A comprehensive understanding of the cost structure of each item that you sell will help to reveal how profitable your SP campaigns truly are.
While it can be a difficult balancing act at times, solidifying your marketing strategies and setting performance goals now and in the early part of the New Year will help you to determine how your sales and profits are stacking up as the year goes on.
Michael Zagare is a serial entrepreneur, a recovering physical therapist, and the founder of PPC Entourage. Using the same tactics and strategies he shares through Entourage, he scaled his business from $50K per/m to $250K per/m in less than seven months.
Mike has an unquenchable thirst for knowledge in all things Amazon, and loves sharing that knowledge with other sellers to help them take steps towards personal and financial freedom.
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