Year in Review: What s New with Amazon? And What Does It Mean for You in 2015?

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2 Year in Review: What s New with Amazon? Year in Review: What s New with Amazon? And What Does It Mean for You in 2015? Another year, another round of updates from Amazon. The e-commerce giant continued to evolve in 2014, staying ahead of the competition, exciting retailers and shoppers and growing its impressive marketplace sales at an estimated rate of 20%. 1 Amazon is one of a handful of global brands that are so entrenched in the way we purchase products and consume media, that their periodic updates actually have the ability to directly influence our short- and long-term behavior patterns. So when Amazon updates a purchasing process or releases a new product, however minor, it can have major implications on our culture for years to come. Not bad for a Seattle-based book seller. If you ve had your head in the sand this year or really, just had your head down trying to run your business we ve broken down some of the major Amazon changes in 2014 you might have missed. Then, we ll tell you what implications they have for you as a retailer and provide a quick checklist for some of the steps you should be taking to adapt to them. Specifically, we ll cover six Amazon topics: Amazon Prime Fulfillment by Amazon (FBA) Mobile and Social Advertising and Promotions Expansion Changing Listing Requirements 1

3 Year in Review: What s New with Amazon? Amazon Prime The popular Amazon Prime program grants its members access to a variety of media and books, as well as the now-famous free, two-day shipping on millions of items. The Prime program launched in 2005 and has seen significant growth each year since. In fact, based on a new calculation by RBC Capital, Amazon Prime has between 30 and 40 million users in the US and between 40 and 50 million users worldwide.2 Amazon introduced some significant changes in 2014, however, and many in the e-commerce world are curious to see just how they ll play out in the long run. Price Change By far the most buzzed-about change to Prime in 2014 was the price increase from $79 to $99 per year. Many naysayers thought the higher cost would slow new membership rates. While the long-term effect remains to be seen, the current growth rate of Prime appears consistent, and analysts are projecting that the new subscription cost could help Amazon generate as much as $1.7 billion in incremental revenue by Prime Music Perhaps a strategic move to counterbalance the new, higher cost of Prime, Amazon continued to add value to a Prime membership by releasing Prime Music in Prime Music gives members unlimited, ad-free access to over a million songs and even allows users to save songs to their devices for offline listening. Amazon Fire TV The release of Amazon Fire TV shows that Amazon has its sights firmly on the future. It clearly doesn t just want to be a purveyor of and destination for products and media content. It wants to provide you with the devices and platforms to consume them on. Amazon Fire TV connects to HDTVs and provides access to all the streaming content available through Prime, as well as other paid services such as Netflix, Hulu Plus and more. 2,3 3

4 Year in Review: What s New with Amazon? No Rush Shipping Over the last several years, Amazon almost single-handedly reconditioned shoppers to expect fast, free shipping through Amazon Prime. Its ripple effect could be felt throughout the e-commerce world as retailers scrambled to add this new value proposition that customers were growing to expect. Now, it looks like Amazon may be shifting the tide the other way every so slightly. With the introduction of No Rush Shipping, Amazon is giving Prime users a $1 credit toward books and ebooks if they choose the slower shipping option. Who knows, maybe it will ease consumers expectations of fulfillment, slow the arms race toward instant delivery and allow retailers that struggled in that area to get back in the game. In Summary What do the new changes to Amazon Prime mean for retailers? Amazon Prime s user base of loyal and active shoppers is still growing Prime s value proposition to retailers remains strong Shoppers are still conditioned to expect fast, free shipping even when purchasing from sites other than Amazon What can retailers do? Offer free shipping Partner with Fulfillment by Amazon (FBA) Appeal to Prime users during the holidays, if not all year long Offer fast, low- or no-cost shipping

5 Year in Review: What s New with Amazon? Fulfillment by Amazon (FBA) We apologize in advance for sounding like a broken record when it comes to using FBA. You heard it in the last section, and you re going to hear it much more. And that s because using FBA has a flywheel effect on the other two major pieces of the Amazon e-commerce pie: Amazon Prime and the Amazon marketplace. Choosing to use FBA is the only way to make your products eligible for Prime, which in turn is the most effective way to access the loyal hordes of Prime users on the Amazon marketplace. Each one affects the other. So what FBA-related changes did we see in 2014? New Services for Sellers Returns Repacking Services: Allows you to repackage your eligible customer returns so that they can be sold as new. Additionally, it gives you increased visibility into inbound shipment-preparation problems. centers and therefore faster visibility to online shoppers. Updates to the Receiving Process: Ensures faster receipt of your products into the fulfillment Fee Preview: Enables you to search for and view estimated fulfillment fees for your products. Replenishment Alerts: Manages your inventory in the FBA program by sending you alerts when quantities of specified products fall below a predetermined level.

6 Year in Review: What s New with Amazon? Buy Box FBA has proven more important than ever in winning the coveted Amazon Buy Box. Though Amazon doesn t release the specific algorithm used to determine the Buy Box, it s based on several factors: Price: Total landed price (product price + shipping cost) Availability: Fulfillment channel (quick and consistent shipping time) Performance: Seller rating (Featured Merchant, low order defect rate) Volume: Number of available products you carry for that listing Using FBA tends to give retailers and their products a leg up in the Buy Box selection and even trumps price in overall importance (as seen in the example to the right of a pocket journal that won the Buy Box yet doesn t have the lowest price). If a product is FBA, then Amazon knows it will be fulfilled quickly and efficiently. Amazon Selling Coach Most third-party retailers on Amazon have seen and used the Selling Coach before. It s been around for a while. It notifies you of low inventory levels, new product opportunities, listings you should fix and more. But this year, the Selling Coach started alerting retailers to additional fulfillment opportunities. Amazon will let you know which of your products have proven popular on the marketplace and that you might want to consider offering through FBA. (And in doing so, you d of course also make them eligible for Prime.) Working with an e-commerce platform provider like ChannelAdvisor makes keeping up with fulfillment, including FBA, even easier. Our technology keeps your inventory data in one place, transforms it for the demands of each channel and allows you to be in more places at once. Additionally, our Amazon Retailer Insights feature brings strategic recommendations from the Selling Coach to the surface, including suggested items for FBA.

7 Year in Review: What s New with Amazon? In Summary What do the changes to FBA mean for retailers? FBA is a significant factor in winning the Amazon Buy Box Amazon is consistently trying to improve the FBA process FBA is the primary way to access Prime members What can retailers do? Identify products to sell using FBA View your Amazon Selling Coach for FBA suggestions Monitor and measure your performance Partner with an e-commerce platform provider to centralize your inventory and streamline the FBA process. Mobile and Social In January 2014, 69% of US smartphone owners used their devices to access Amazon.com. 4 That s a lot of mobile traffic. And like mobile commerce across the board, that number does nothing but increase each year. 5 Likewise, social media continues to dominate the media landscape, as retailers and industry analysts try to predict how best to harness it for e-commerce sales. Here s what happened in Amazon s mobile and social world this year. Amazon Fire Phone Launched in July to much media fanfare, the Amazon Fire Phone was obviously designed with mobile commerce in mind and puts users even closer to the Amazon marketplace. If it gains traction, the phone could be a great step forward for retailers. The Fire Phone comes with a Prime subscription (of course), new Dynamic Perspective technology, Amazon Firefly technology and a seamless integration with the whole Amazon ecosystem

8 Year in Review: What s New with Amazon? Amazon Firefly Amazon Firefly could be another win for Amazon retailers, should consumers embrace it. The new mobile and tablet technology allows users to identify real-world objects, including retail products, by scanning them with their phones. It takes the processes of showrooming and webrooming to a whole new level by offering a direct link from the physical world to the digital world. Firefly users simply see, and then scan, products they re interested in at dinner, at the park or wherever they happen to encounter them. Amazon has invested a sizable amount of money in developing this technology and hopes retailers will adapt to it. So how can retailers make sure they re showing up on this new technology? Yep, you guessed it: through FBA. Again, FBA and Prime are your way to get priority access to these active customers. Twitter and Amazon Although new social media platforms keep popping up each year, Twitter remains one of the more dominant means of daily news and communication: 46% of all Twitter users use it at least once a day, 6 and the average user spends 170 minutes per month on the social network. 7 The challenge that social platforms have always faced is how to monetize their massive popularity. Meanwhile, retailers keep trying to figure out how to successfully integrate e-commerce into the platforms. Amazon made headlines this year by introducing several new hashtags that connect the social world with Amazon s e-commerce realm. #AmazonCart First, we have #AmazonCart, which launched in May. Consumers can use this hashtag as part of a reply to a tweet about a product, and Amazon will automatically add it to their Amazon cart. Then, the consumer can buy it later. #AmazonBasket functions the exact same way as #AmazonCart only for UK users

9 Year in Review: What s New with Amazon? #AmazonWishList According to Amazon, one in three customers worldwide added items to their Amazon Wish List last year, amounting to 50 items added per second. 8 Now, on-the-go Twitter users can use the hashtag #AmazonWishList in the same way they use #AmazonCart to expedite the process. From there, they can share their Wish Lists with friends and family, making it a particularly good strategy for retailers to incorporate during the holidays. In Summary What do the changes to Amazon s mobile and social strategies mean for retailers? Your products will be seen by on-the-go shoppers Mobile still favors Prime Mobile and social are great ways to engage with consumers particularly millennials What can retailers do? Increase FBA usage Create a Twitter account and an active strategy Promote yourself and gain followers Promote your Amazon products on social channels nfocus on the benefits of the product and educate your audience ncurate your brand nget creative with your promotions Advertising and Promotions It may be surprising to some, but the percentage of shoppers who start their product searches on Amazon is more than double that of those who begin their product searches on Google. 9 And Amazon has almost 250 million active customers searching for products, 10 so of course you want to advertise your products there. Well, retailers now have several options Amazon company data 9 Forrester Research, Why Amazon Matters, Amazon company data

10 Year in Review: What s New with Amazon? Amazon Sponsored Products Amazon Sponsored Products are an easy and effective way for you to get shoppers directly in front of your product listings on Amazon. Though they re often confused with Amazon Product Ads, which take shoppers off Amazon and directly to the retailer s webstore, Sponsored Products are keyword driven, based on customer search queries, and take shoppers to the specific Amazon listing. Retailers can create sales campaigns based on whichever products or groups of products they d like. For 2014, Amazon added a new Campaign Manager in Seller Central, which includes a new Advertising Cost of Sales metric, a new Automated Targeting option, more keyword recommendations with the manual targeting option, simplified navigation and the ability to sort your columns. Amazon Sponsored Links Amazon Sponsored Links can also be used to deliver ads based on the search keywords that shoppers use on Amazon. The example below is for the search term coffee maker. Sponsored Links are always clearly labeled, and like Amazon Product Ads, if you click one of the links, you ll be taken off Amazon s site. Now that Amazon is tapping its data for ads, Amazon Sponsored Links are seen as direct competition to Google AdWords. Maybe one day Amazon will take them off the marketplace and into the greater internet, but that remains to be seen.

11 Year in Review: What s New with Amazon? New Promotions Third-party retailers slowly saw more and more promotional opportunities open up to them in 2014 through Lightning Deals, including the Gold Box page. Traditionally, these deals were reserved for products owned and sold by Amazon. Retailers should keep an eye on this program as the number of product categories open to third parties grows. In Summary What do the changes to Amazon advertising and promotions opportunities mean for retailers? There are new opportunities to promote your products and become visible to more shoppers You have the ability to drive traffic from Amazon to your own webstores through Amazon Product Ads and Amazon Sponsored Links Daily Deals now offer more ways to participate What can retailers do? Consider using Automated Targeting, within the Amazon Sponsored Products program, to increase the likelihood that your advertised products will match customer searches Submit potential deals to Amazon via Seller Central

12 Year in Review: What s New with Amazon? Expansion Amazon continues to aggressively expand its global reach. In 2014, it launched a series of new product categories and new countries to connect with more consumers than ever before. Category Expansion in the US On the heels of last year s expansion of the Collectibles category, which introduced Fine Art, Entertainment and Sports classifications, Amazon added Coins in May. Amazon is obviously giving more prominence to used items as it also started adding used items to the Buy Box and tapping into the vast potential there. It also updated the Automotive & Powersports Part Finder and made some broad updates to the global Jewelry categories as well. Category Expansion in Canada In Canada, Amazon launched the following new categories: Automotive & Powersports, Health & Personal Care, Beauty, and Jewelry. Amazon Global Selling Advice For retailers hesitant about the intricacies of selling abroad, even within the relatively comfortable bounds of the Amazon marketplace, there s now a global selling page within Amazon for you to get tips and advice. Whether you re new to international selling or a seasoned pro, there s something for you there. ChannelAdvisor makes it easy for retailers looking to take their inventory to new, international Amazon marketplaces. You give us your feed, we ll optimize it and take your listings to any number of marketplaces around the world, while also juggling the inventory quantity and making sure you re competitive in each new market.

13 Year in Review: What s New with Amazon? In Summary What do Amazon s newly expanded categories mean for retailers? Amazon introduced lower-risk options for selling to international audiences Prime is a core value proposition for gaining new shoppers What can retailers do? Use FBA globally (Canada and UK are great first steps for US retailers) Consider new locales, especially as new categories are added Check out Amazon s Global Selling website for expansion tips Changing Listing Requirements One of the main reasons consumers flock to Amazon is the massive product selection. Amazon seemingly has everything. And one of the biggest difficulties of selling on Amazon is getting your inventory seen amid such a staggering volume and variety of products. Amazon is famously consumer first in its approach to business, and therefore is always trying to create the best possible customer experience. And as a retailer, that means you ll need to stay on top of Amazon s ever-changing listing requirements and keep your data clean, so you know that all your products are making it into the mix. The last thing you want is to have Amazon keep your perfectly good products off the marketplace because your listing information was incorrect or incomplete. Listing Optimization Framework Listings with complete product information improve the shopping experience by making it easier for customers to find, evaluate and purchase products. Amazon has too many changing data requirements to list here, but retailers should break down and think about each of their listings using a Listing Optimization Framework, consisting of core data (product title, image, brand, etc.); categorization data (Item Type keyword) and product-specific data (size, color, style, etc.).

14 Year in Review: What s New with Amazon? Suppressed Listings Ask your yourself this question: Are all the items you ve listed live on the site? Amazon will suppress product listings that don t meet certain standards, so it s important that you keep a close watch on which products are being suppressed. The Amazon Selling Coach can provide you with an updated list. Listing Visibility In traditional, brick-and-mortar merchandising, retailers need to organize their products in a store logically and strategically, so buyers can locate them. Amazon accomplishes this merchandising concept online by using an Item Type keyword value to put your product in the right place. Make sure you re using the right Item Type, so that your products are being cataloged correctly and finding the right shoppers. Data quality becomes a problem for many retailers as they increase their number of SKUs and have more to keep up with. It helps to use a robust e-commerce platform provider that has the tools to keep your data accurate and up to date. ChannelAdvisor s Amazon Insights feature can monitor your data quality for you, alert you to potential data quality issues and help you solve them before they become problems. In Summary What do Amazon s new listing requirements mean for retailers? Listing quality improves visibility and conversion Amazon may already be suppressing some of your products Amazon will continue to increase listing requirements, so you should clean and expand your data now What can retailers do? missing data Find a tool and a process for monitoring data quality Regularly review Amazon s Suppressed Products and address Classify with specific and latest Item Type Keyword Act like a buyer, review the product browsing process on Amazon.com and provide the attributes that are missing

15 Year in Review: What s New with Amazon? What a difference a year makes! Amazon s reach grows greater with each trip around the sun. But every year also sees increased competition from emerging third-party marketplaces. Naturally, we can count on a steady stream of further advancements, upgrades and product releases in the years to come, as Amazon attempts to keep and improve its foothold in the expanding e-commerce universe. Whether you re attempting to try FBA for the first time, looking to advertise a new product line on Amazon or listing products on one of Amazon s many international marketplaces, ChannelAdvisor can help. Send your entire product feed to our platform once, and our Data Transformation Engine will keep your inventory optimized and ready to send to a variety of marketplaces. Our platform also features an array of features, such as the ChannelAdvisor Repricer, that can increase the performance of your products on Amazon and boost your bottom line. If you have questions about Amazon s most recent changes or want more information on how you can grow your marketplaces sales, give us a call at or info@channeladvisor.com. Trust us. Be Seen. To learn more: Call US UK AU Visit marketing@channeladvisor.com Copyright 2014 ChannelAdvisor Corporation. All rights reserved. The global standard for e-commerce leaders.