5 key questions before starting to sell on Amazon

Amazon.

Yes, the current world of e-commerce dominates.

Yes, it has great potential.

Yes, it helps reach millions of customers.

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

There are many questions, but below I present to you those that are critical for clarity regarding the direction of Sales on Amazon. Regardless of whether you are a CEO, an e-commerce specialist, whether your brand is present in 20 countries or only in the local market. Before you rush ahead recklessly, please read the following carefully and consider whether you and your business know the answers to these questions and thus whether you know the aim of your journey and whether you know your way to achieve it?

Let’s get started!

1) Is Amazon even a market for my products?

This is probably the most common question we hear from those facing the choice of defining their e-commerce strategy, as well as product development plans, exports, channel expansion, or those undergoing digital transformation of their business.

Let's take a look at the e-commerce market in numbers comparing Poland against the countries of the European Union where Amazon operates. This comparison is supported by data from E-commerce Europe reports https://www.ecommerce-europe.eu

There are several key figures in them that you should consider when deciding whether Amazon is the place for your products.

Market size. If e-commerce is the market you are betting on in your development strategy and the basis for this decision was the Polish market, its potential and growth, see how this compares to other EU countries. British e-commerce is nearly 19 times larger than Polish, French almost 10 times larger and German a staggering 6 times larger.

Demographics. If your products are very niche and you need broad reach, statistically in France and the UK you have twice the chance of finding customers for your products. Germany, with a population of 82 million people, opens a market that is 2.15 times larger than Poland.

Leading e-commerce platform. Among the 3 largest e-economies in Western Europe, Amazon has a dominant market position, thus aggregating the overwhelming majority of the entire European e-commerce within 3 domains - Amazon.de, Amazon.fr and Amazon.co.uk 

Outlook. This is the most critical part. The Polish e-commerce is growing at a rate of 25% year on year. Bravo to us - one might say that is a dizzying pace. However, let’s look at it through the prism of base values from which these growths 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. In the same period, German e-commerce, growing by 9.1% from a base value of EUR 53.6 billion, will statistically grow by EUR 4.88 billion in the next year, while British e-commerce will grow by an incredible EUR 25.5 billion. Delving further into the statistics and considering nominal and percentage growth in GDP per capita and the size of what is called Disposable Income in Poland compared to the countries from the above comparison, catching up by Polish e-commerce with the economies of Germany, France, and especially the UK is practically impossible from the current perspective.

The above data should help in making the decision on the question, "Whether?" Of course, most businesses are focused on their domestic market, often offering products taking into account local conditions, having formal and product constraints, which can be an obstacle to export development. For this reason, the answer to the question, "Whether?" should take into account the horizon of years ahead, development of the offer, investment in the brand and its presence in various countries, and not just here and now.

2) What are my business goals on Amazon?

Seemingly an obvious question, to which in most cases the answer is: sales.

However, you need to pause and reflect on this. Much depends on what type of company you are or what company you represent. Here are a few examples of what goals drive companies depending on their profile of activity:

I am a manufacturer and I 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 act in the opposite way and build 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, what prices they are offered at, and what their sales/reach is. If there are not many of them, that's good news. You can build product content on your own terms, register the brand and manage it. You can choose a selected model (FBA, FBM, and Vendor) and showcase your brands and products in the best light.

If the offer, due to distribution, is already substantial and sales/reach significant, you need to "adopt" your products under the umbrella of your own brand as soon as possible, audit them, optimize and think about pricing strategies on Amazon versus prices in traditional distribution channels. If you don’t do this, your offer will live its own life, but without proper care, it can harm your brand. We know examples of large international brands that allowed such a "wild" expansion, and the consequences were very difficult to reverse. If you plan, for example, talks with offline retail chains in Western Europe, be sure that the first thing a buyer will do after receiving the offer is to check its quality on Amazon and prices to the individual customer. If you have no control over this, your negotiations will be tough.

If you want Amazon to be your direct sales channel, 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 do not leave it to chance.

I am an OEM manufacturer.

The primary goal is usually sales, but how to do it without your own brand? There are several options. You can create one for Amazon, which is a common practice. By changing the product, its features, communication, and prices, so that it is not "like for like" with the product you manufacture for your client (who may already sell on Amazon), you protect the interests of both parties.

You can also investigate the potential for your products in a given Amazon market and, together with your client, develop a certain market and category product-wise using their brand.

Another alternative is to sell "No name" products. However, this case is associated with the risk that as sales increase, interest in this product among other sellers and manufacturers will also grow, and more sellers of your products and/or their equivalents will emerge.

I am a distributor of foreign brands. 

This is so-called arbitrage - offline or online. Besides the sales target, Amazon will allow you to increase your margin in the traditional channel due to sales volumes and increasing your purchasing power. This sales model does not require creating product content, brand registration, etc., so the process of starting it is relatively straightforward, guaranteeing sales almost from day one and building an additional sales channel for your company. In arbitrage, continuous cost analysis is key due to typically low margins. Also, make sure that your commercial agreements with your suppliers do not have restrictions related to online sales or cross-border/export.

I am an importer. 

Your goal, besides sales values, will be to achieve optimization regarding the supply chain and shorten the time "product to market" and its costs.

Supply chain optimization primarily involves: the ability to deliver to FBA warehouses directly from your suppliers; no need to expand your storage space (especially for seasonal products); no need for operational handling of individual orders (FBA model). 

When introducing new products, you will be able to very quickly build reach to a very broad customer base that will reliably verify products, their advantages, and disadvantages, while the sales history will allow for planning cyclical, smaller deliveries instead of building large stock levels and swiftly adjusting offers to market needs.

I am an artisan.

Handmade and crafts are becoming increasingly sought-after products in each of the categories. This is not mainstream sales, and Amazon can serve as a medium through which niche products reaching millions find the tiny fraction of customers we care about. In this case, the magic of numbers matters. Only in September of this year did the website amazon.de record a total of 469 million visits.

Do you already know your goals? OK, let’s check what else you need to continue on your journey through Amazon.

3) Is my organization ready for Sales on Amazon?

This is primarily a question of operational, systemic, product-related, and formal readiness.

You must ensure that you have the capability to handle retail sales (because that is precisely who you sell your products to through Amazon) in terms of your ERP/CRM system.

Additionally, ensure that your products meet the regulations regarding product admission for sale in a given country - certifications, product labels in the given language, testing, etc. Furthermore, remember that some of Amazon's categories require unlocking, which often involves submitting documents to Amazon certifying the product data and its certification or origin.

If sales will be conducted through FBA, VAT registration in the relevant country will also be required. Regulations from the destination country may also apply, such as the need for registration with LUCID in Germany.

Also remember that you will 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 regarding Amazon, it's time to determine what product offering will be presented by you on Amazon.

4) What offer to choose?

This is one of the tougher decisions. Of course, if you have several products, the choice is simple. However, if you represent a large manufacturing company, for example, from the fashion industry characterized by great seasonality, the choice becomes very challenging.

First, you must separate from your offer products that for any reason cannot be sold on Amazon. Such reasons may include restrictions due to the intellectual property rights of other brands, product specifics (e.g., very fragile, exceeding standard dimensions), prohibited products (tobacco products, strong alcohol, imitation weapons, etc.) or products considered dangerous. You should also not consider products for which continuity cannot be ensured - end-of-line items, products in quantities of a few pieces, etc.

Choosing product groups or individual products designated for sale should be best based on sales data and potential of the given category. Analyze each product category in terms of their sales value, seasonality, and competitiveness comparing this with your own offer and its attributes, which should serve as product differentiators USP, as well as profitability. Such an analysis will allow you to choose the optimal product offer that has a chance to succeed on Amazon.

A common mistake companies make is preparing product offerings based on sales and popularity in Poland. Customer preferences, market standards, and wealth of buyers in Amazon markets are usually different from those observed in Poland, hence often products that are very unpopular in the domestic market turn out to be bestsellers in Amazon markets and vice versa.

If you are convinced that your business is product-ready, you need to decide who will accompany you on your journey with Amazon.

5) Who to go with on the journey with Amazon?

There are two options:

I use my own team.

If you have the resources and competencies within your organization to manage sales on Amazon, this is the obvious solution. Remember, however, that Amazon is truly huge - currently employing over 600,000 people worldwide. Consequently, this means a tremendous amount of changes happening practically every day. Additionally, it is not only a sales platform but an infrastructure of interconnected systems, each of which is a separate entity requiring different competencies. The marketing aspect on Amazon is similar, in terms of functionality and level of complexity, to Google AdWords. The module dealing with customer service and managing communication with them along with associated guidelines can also be treated as a separate module. Similarly with reporting and managing FBA. If you decide that your team will run this sales channel, ensure you have sufficient resources, time, and provide them training or advisory support to effectively and safely grow this sales channel.

Outsourcing.

This is, of course, a much faster solution and guarantees proper implementation and development from the very start, without exposing yourself to account blocks or restrictions, and in the longer term, it is cheaper. The risk associated with this is, unfortunately, entrusting it to a company or individuals who may not meet your business goals and requirements.

Steve Jobs used to say that "the whole world moves out of the way of a person who knows where they are going." This is a universal truth. First, set a conscious goal, honestly answering fundamental questions above as an organization. If you have them - great. Move forward. Do you feel lonely in this? We would gladly accompany you.

Other companies, brands, or individuals probably have similar dilemmas to yours. Share them in the comments under the article - we will be happy to respond to them and maybe it will be helpful to others. Be part of the Go2Market Community.

Happy (Strategic) Thinking,

Go2Market Crew.

Selling on Amazon