Amazon is not like any other retailer; it’s all self-service. By just listing your products, you can get short-term success. But it’s not going to be sustainable, and without a growth strategy in place, you’re going to lose market share year on year – even as a big brand.
Internal knowledge inside brands on how Amazon works is improving. But there’s still a fundamental knowledge gap about the mechanics behind how it all works. Addressing this gap relies on understanding all the moving parts needed to achieve growth on Amazon and navigating the challenges brands face.
Let’s explore the three key challenges hindering growth on Amazon today.
The cost of shipping products from China has significantly increased. Last year containers would typically cost between $3000 to $3500 to ship. They’re currently at about $13,500, with some analysts forecasting this could increase to $20,000. The price of many products has increased because shipping costs have risen massively throughout the pandemic. Without managing this cost, it’s going to impact the bottom line and, ultimately, affect overall profitability on Amazon.
Many brands also face ongoing challenges with Amazon fulfillment centers. Getting into the Amazon fulfillment centers for Prime Day or Q4 is always challenging; this year has probably been the worst before Prime Day, and Q4 2021 is likely to be as bad. Amazon is going through a period of overstock in its warehouses. So the warehouse capacity is quite limited. It means sellers need to think about alternative fulfillment partners and other ways to send the products to their customers. Can they streamline operations? Is there a direct fulfillment option that could reliably and quickly ensure customers get their products? There’s likely to be an impact on margin, but it means you’re fulfilling the demand and not missing out on sales versus your competitors.
The supply chain element is a common operational challenge for brands working with Amazon. In particular, global growth can be held back without the proper infrastructure, the right VATs, or third-party logistics. In addition, if you don’t know how you’re going to set up operations and don’t have the language capabilities, it can hinder growth in new markets.
Brands can also struggle with day-to-day operations, including managing the purchase orders received and packing the products sold to or on Amazon – for example, complying with the platform’s stringent requirements around bubble wrapping and boxing. Terms of negotiations are also always tricky because Amazon does push for percentage points every year.
And, if you have an extensive portfolio, maintenance of that portfolio and ensuring all products are optimized and correctly prioritized when looking at advertising take significant resources.
There’s also the challenge with what Amazon calls CRAP ASINs – can’t realize any profit. Amazon has deemed these products unprofitable. But, for a vendor, it might be beneficial for them to have those products on Amazon. And there are options available to really streamline margins to make it work.
Amazon has a specific way of working; it always focuses on what’s best for the end customer. Amazon wants to offer the most competitive price and quickly provide genuine products. It’s why the Buy Box exists; why they have the Brand Registry program; and why they’re focused on anti-counterfeit measures.
Often challenges are exacerbated, as Amazon doesn’t always communicate with sellers about new features of platform changes – they just launch them. It’s a reason brands turn to an experienced partner who knows how Amazon works and can be agile and adaptive when faced with the challenges of working on Amazon.