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5 crucial questions before selling on Amazon

Amazon.

Yes, it dominates the current e-commerce world.

Yes, it has great potential.

Yes, it helps you reach millions of customers.

Yes, the road to it, and already within it, is bumpy.

There are many questions, but below I give you the ones that are critical to having clarity about the direction of Selling on Amazon. Whether you’re a CEO or an eCommerce Specialist, whether your brand has a presence in 20 countries or just a local marketplace. Before you hastily move on, please read the following carefully and ask yourself if you, and your business, know the answers to these questions and thus, do you know what your destination is and do you know your path to get there?

 Let’s get started…

1) Is Amazon even a marketplace for my products?

This is probably the most common question we hear from those who are faced with the choice of defining their e-commerce strategy, but also their plans for product development, exporting, expanding distribution channels or being in the process of digital transformation of their business.

 Let’s take a look at the e-commerce market in numbers comparing Poland to the European Union countries where Amazon is present. Compilation supported by data from E-commerce Europe reports https://www.ecommerce-europe.eu

 

There are some key figures you should take into account when deciding whether Amazon is the place for your products.

    – Market size. If e-commerce is the market you are targeting in your development strategy and the basis for this decision was the Polish market, its potential and growth, look at how it compares to other EU countries. British e-commerce is almost 19 times bigger than Polish one, French is almost 10 times bigger and German is 6 times bigger.

    – Demographics. If your products are niche and you need broad reach, statistically you are twice as likely to find customers for your products in France and the UK. Germany, with a population of 82 million, opens up a market 2.15 times bigger than Poland.

    – Leading e-commerce platform. Amongst the top 3 e-businesses in Western Europe, Amazon has a dominant market position, thus aggregating the vast majority of all European e-commerce inside 3 domains – Amazon.de, Amazon.fr and Amazon.co.uk 

    – Perspective. This is the most important part. Polish e-commerce is growing at a rate of 25% year-on-year. Bravo to us – you could say that’s a dizzying pace. But let’s look at it through the prism of the underlying values from which these increases are generated. Polish e-commerce, growing by 25% annually from a base value of EUR 9.3 billion, gives an annual growth value of EUR 2.33 billion. At the same time, German e-commerce, growing by 9.1% on a base value of EUR 53.6 billion, will statistically grow by EUR 4.88 billion next year and UK e-commerce by an incredible EUR 25.5 billion. Going further into statistics and taking into account the nominal and percentage growth of GDP per capita and the size of the so-called Disposable Income in Poland compared to the countries in the above list, it is practically impossible for Polish e-commerce to catch up with the economies of Germany, France and, above all, Great Britain from the current perspective.

The above data should help you decide on the question, “Is it for business?”. Of course, most businesses are focused on their home market, often offering products taking into account local conditions, having formal and product restrictions that may be an obstacle to export development. For this reason, the answer to the question, “Is it for my business?” should take into account the horizon of years ahead, the development of the offer, the investment in the brand and its presence in each country, and not just the here and now.

2) What are my business goals on Amazon?

A seemingly obvious question to which, for the most part, the answer is sales.

 However, you need to pause on this for a moment. A lot depends on what kind of company you are, or what kind of company you represent. Here are some examples of what companies aim to achieve depending on their business profile:

    – I am a manufacturer and have my own brand.

This is probably the most complex case. Amazon can help build awareness of your brand in Western Europe and significantly increase sales, but it can also work the other way around and build its negative connotations among individual customers and among online and offline distributors. The essential question here is whether your products are already available on Amazon through distribution, how many there are, how they are presented, at what prices they are offered and what their sales / reach is. If there aren’t many, that’s good news. You can build product content on your own terms, register a brand and manage it. You can use the model of your choice (FBA, FBM and Vendor) and show your brands and products at their best.

If your offer, through distribution, is already large and your sales/reach is significant, you need to “bring” your products under your own brand umbrella as soon as possible, audit them, optimize them and think about pricing on Amazon versus pricing in the traditional distribution channel. If you don’t do this, your offering will have a life of its own, but without proper care it can damage your brand. We know of examples of large international brands that have allowed such ‘wild’ expansion and the consequences have been very difficult to undo. If you are planning to talk to offline retail chains in Western Europe, for example, be sure that the first thing a buyer does when they receive an offer is to check on Amazon for its quality and price to the individual customer. If you have no control over this, your negotiations will be difficult.

If you want Amazon to be your sales channel directly, or even if you want to build it for your distributors, or branches in other countries, do it in a structured way on your own terms, and don’t leave it to chance.

    – I am an original equipment manufacturer (OEM).

The ultimate goal is usually sales, but how do you do that without having your own brand? There are several options. You can create one for Amazon, which is a common practice. By changing your product, its features, messaging, pricing, so that it is not “like for like” with the product you produce for your customer, (who may already be selling on Amazon) you protect the interests of both parties.

You can also explore the potential for your products on a particular Amazon marketplace and work with your customer to product develop a particular marketplace and a particular category using their brand.

Another alternative is to sell “No name” products. This case, however, carries the risk that as sales grow, interest in this product will also grow among other sellers and manufacturers and there will be other sellers of your product and / or its equivalents.

    – I am a distributor of foreign brands. 

This is known as arbitrage – offline or online. In addition to the sales target itself, Amazon will allow you to increase your margin in the traditional channel through sales volumes and increasing your buying power. This sales model does not require the creation of product content, brand registration, etc., so the launch process is relatively simple, guaranteeing sales practically from day one, and builds an additional sales channel for your business. In arbitrage, it is crucial to constantly analyse costs due to the usually low margins. Remember also to make sure that your commercial contracts with your suppliers do not have restrictions related to online sales or cross-border / export.

    – I am an importer. 

Your goal here, in addition to sales values, will be to achieve supply chain optimization and reduce “product to market” time and costs.

Supply chain optimization is all about: being able to supply FBA warehouses directly from your suppliers; not having to expand your own warehouse space (especially for seasonal products); not having to operationally handle unit orders (FBA model).

By introducing new products, you will be able to very quickly build a reach to a very wide customer base that will reliably verify the products, its advantages and disadvantages and the sales history will allow you to plan cyclical, smaller deliveries instead of building a large warehouse stock and agilely adjust the offer to the market needs.

    – I am an artisan.

 Crafts and handmade are increasingly sought after products in every category. This is not mainstream sales and Amazon can serve here as a medium through which niche products reaching millions of people find the proxies of customers we care about. In this case, the magic of numbers does matter. In September this year alone, amazon.de recorded a total of 469 million visits.

https://www.similarweb.com/website/amazon.de

Already know your goals? OK, let’s check out what else you need to continue your journey down the Amazon road.

3) Is my organisation prepared to Sell on Amazon?

This is primarily a question about operational, system, product and formal readiness.

You need to make sure you have the ability to handle retail sales, (because that’s the customers you sell your products to via Amazon) in terms of your ERP/CRM system.

Additionally, make sure that your products meet the regulations for allowing the product to be sold in your country – certifications, product labels in your language, testing, etc. Additionally, be aware that some of Amazon’s categories require them to be unlocked, which often involves submitting documents to Amazon attesting to the product data and its certification or origin.

If you sell through FBA, you will also be required to register for VAT in your country. Destination country regulations may also apply, such as the need to register for LUCID in Germany.

Remember that you will also need people to handle the sales processes and work on its development. This is a critical element of the whole.

If you know your readiness for Amazon, it’s time to determine what product offering you will present on Amazon.

4) Which offer to choose?

This is one of the more difficult decisions. Of course, if you have a few products, the choice is easy. However, if you represent a large manufacturing company in, for example, the fashion industry characterised by great seasonality, the choice becomes very difficult.

First of all, you need to separate products from your range that, for whatever reason, cannot be sold on Amazon. Such reasons could be those restricted by other brands’ intellectual property rights, the specific nature of the product (e.g. very fragile, beyond standard dimensions), prohibited products (tobacco products, strong alcohol, imitation weapons, etc.) or products considered dangerous. You should also not consider products whose continuity you are unable to ensure – end-of-series products, products in small quantities, etc.

It is best to base the selection of product groups or individual products selected for sale on sales data and the potential of the category. Analyse each product category in terms of its sales value, seasonality and competitiveness against your own offer and its features that should serve as product differentiators (USPs) and margins. This analysis will allow you to choose the optimal product offering that will have a chance to exist and succeed on Amazon.

A common mistake that companies make is preparing a product offer based on sales and popularity in Poland. Customer preferences, market standards and affluence of buyers on Amazon markets are usually different from those observed in Poland, which is why very often products that are not very popular on the domestic market turn out to be sales hits on Amazon markets and vice versa.

If you are convinced that your business is product-ready, it remains to decide who should accompany you on your Amazon launch.

5) With whom to go the Amazon route?

There are two options:

    – Using your own team.

If you have the resources and expertise within your organisation to manage sales on Amazon, this is the obvious solution.  However, remember that Amazon is truly huge – it currently employs over 600,000 people worldwide. What follows is a huge amount of change that occurs virtually every day. On top of that, it’s not just a sales platform, but an infrastructure of interconnected systems, each of which is a separate entity requiring different competencies. The marketing part on Amazon is similar in terms of functionality and level of complexity to Google AdWords. The module on customer service and customer communication management, together with the related guidelines, can also be treated as a separate module. The same applies to reporting and FBA management. If you decide that your team will lead this sales channel, secure enough resources, time and provide them with training or consultancy support to develop this channel effectively and safely.

    – Outsourcing.

This is obviously a much quicker solution and one that guarantees correct implementation and development from the outset, without exposing yourself to account blockages or restrictions, and cheaper in the long run. The danger with this, unfortunately, is entrusting it to a company or people who will not meet your business goals and requirements.

Steve Jobs used to say that “All the world gets out of the way of the man who knows where he is going”. This is a universal truth. First set a conscious goal by answering the fundamental questions above honestly as an organisation. If you have them – great. Move ahead. Do you feel alone in this? We’d be happy to accompany you.

Other companies, brands or individuals probably have similar dilemmas to yours. Share them in the comments below the article – we’d love to hear from you and maybe it will be useful to others. Be part of the Go2Market Community.

Happy (Strategic) Thinking,

Go2Market Crew.

 

14.10
2019

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