Australia’s biggest retail players need not fear the imminent rollout of Amazon Marketplace in Australia. This is not the death knell of the status quo; local retail businesses and smaller Aussie brands should be seeing this as a golden opportunity to grow their business.
The imminent rollout of Amazon Marketplace in Australia may be seen as the death knell for the status quo that some of the biggest retail players have fed off for years, but for many local retail businesses and smaller Aussie brands it actually represents a huge opportunity to grow their business.
Instead of being intimidated, Australia’s most savvy businesses are already gearing up to make the most of this long overdue industry shake-up, signing up for early interest in becoming Amazon sellers.
One-part retail, one-part search engine and one-part logistics company, Amazon’s core product offering relies heavily on providing e-commerce solutions for businesses. Around 50 per cent of the goods they sell coming from third party sellers.
Assuming that the terms of the rollout will be similar to those of Amazon Marketplaces in the US and UK, Australian businesses would do well to learn Amazon’s model so they can fully capitalise on it when it does launch next year.
Amazon’s three types of sellers
Amazon sellers can be divided into one of three types: Fulfilled by merchant (FBM), Fulfilled by Amazon (FBA) – collectively known as ‘3P Sellers’ – as well as Amazon Vendor and Vendor Express. Dedicated research and understanding the different time investment and margin impact of each model is the key to making a smooth transition into the Amazon ecosystem.
FBM is the basic model, where a seller can list a product for sale on Amazon but handle all logistics, customer service and shipping themselves. This model can have the best margins and leverage existing logistics infrastructure, but businesses will miss out on some of the perks that die-hard Amazon customers rely on like Amazon Prime shipping and flexible returns policy.
The model that most small to medium-sized retailers should be looking at is FBA, especially if they’re selling their own branded product or distributing unique items. Under the FBA model, sellers send their stock into an Amazon fulfilment centre and list it for sale on the marketplace. Amazon handles all shipping and returns and sellers usually get paid for sold items within two weeks. Prime members get free or discounted delivery and can buy with confidence.
One of the biggest advantages of the FBA model is that it has an option for Multi-Channel Fulfilment. This means that a company can sell items both from the Amazon store and their own eCommerce website or other marketplaces, and have their products stored, picked, packed and shipped by Amazon. This can really help small businesses grow, as it’s easily scalable and allows them to sell internationally without the need for their own logistics and warehousing.
There are some things to be aware of though. The first is that unsold units stored with Amazon can be charged for storage after six months, so good inventory management is critical. The second is that Amazon’s “no questions asked” return policy known as the A-Z Guarantee applies to all FBA sellers, and is non-negotiable. Businesses should factor in about a five per cent return rate to anticipate this.
The last kind of seller is an Amazon Vendor, which is more like a traditional wholesale agreement. Sellers are invited into the vendor program and Amazon will buy a number of units at a pre-agreed price. This is generally for larger companies and manufacturers with a ‘hands off’ approach to distribution. Vendor has its perks, such as enhanced on page content and more marketing options, but for small businesses their standard Net 60 terms and laundry list of ‘chargebacks’ can wreak havoc on cash flow and margins.
Getting the most out of your Amazon account
With all seller types, businesses need to create an account and list each of your products with clear names, descriptions, keywords and high-quality photos. As with any other online marketplace, products are only as appealing as their online presence so engaging copy and professional product photography are a must. If participating in the FBA or Vendor models, businesses need to keep in mind they will also need to send their items into Amazon ready to be shipped to customers.
The next step is making sure products show up on the SERP (or Search Engine Results Page) for all the right searches. This is where Amazon starts to feel similar to Google. A number of SEO factors go into which products ‘rank’ higher than others, including the title and backend keywords, sales history, pricing, customer reviews, fulfilment method as well as customer reviews (quality and quantity) and the all-important star rating.
Amazon has a suite of on platform marketing tools available for companies to promote their products on the marketplace, with Amazon Sponsored Products being the centrepiece. Like AdWords for Amazon, it is a keyword-focused Pay Per Click advertising service which lets sellers bid their way to the top of search results and get customers eyes on their products. Unlike traditional PPC platforms like AdWords, a targeted paid keyword strategy on Amazon can have the added benefit of improving organic visibility as sales and reviews obtained through advertising channels are indexed by Amazon’s A9 algorithm.
It’s also worth noting Amazon’s strict policies regarding the review system.Positive customer reviews can give your sales a huge boost, but businesses should resist all temptations to review their own products, or those of competitors. Amazon’s sophisticated detection software will always be one step ahead.
It’s also a no-no to provide any sort of discount or remuneration to customers to encourage them to leave reviews. Amazon recently clamped down on third party services who facilitate these arrangements, and whilst there are still companies out there that will sell businesses the promise of a foundation of reviews for a new product launch, it is unwise to position any business against Amazon’s will on reviews.
Vendor sellers can still give out products for reviews through the Amazon Vine program for a considerable fee, but for most sellers the best approach is simply following up on sales with good customer service, responding to negative reviews and simply asking customers to leave feedback.
By understanding the basics of how to get started on Amazon Marketplace, Australian retailers should be excited rather than wary of the local launch.
About the author
Tim Parker is the CEO of digital agency Gruden, one of only two accredited Amazon Web Services Government Partners in the country. Gruden’s Performance Marketing division helps Australian businesses manage their online presence, search visibility and sales.