The business objective of all Amazon vendors is to turn a decent profit, however this isn’t as easy as it may seem due to several barriers which may be blocking your path.
Below are four easy steps vendors can take to put them on the path to increased profitability.
1. Reconsider your retailer discounts
As a vendor on Amazon it is likely that you also have other distribution channels for your products, usually in the form of third party retailers who buy from you in bulk and sell to their own customers.
For these types of channels you may have built in specific discounts in order to incentivise bulk orders, this could be working for these retail partners, however the issue arises when the discounted price to hand to other channels has a knock on effect on your Amazon profits too.
Amazon bases their pricing on the availability of a product in the market and the price offered from other retailers. This means that if your discount has given the third party retailers a large enough margin to offer a cheaper price to their customers, to be competitive, Amazon will aim to match or beat this price, leading to a lower buy price from Amazon for your products.
Review the current offers you are giving to other retailers to ensure you are controlling the price in a way which doesn’t see your margins squeezed by Amazon on the other side.
2. Remove all unprofitable products
This may sound like an obvious step. In order to become more profitable as a business, remove unprofitable listings. However, with Amazon it isn’t as black and white as that. Amazon wants to offer your entire catalogue.
For this reason it is up to you as the vendor to keep a close eye on your underperforming products in order to identify those that are heading for unprofitability. The reason for this is not only will having unprofitable products in the mix dilute your focus from your profitable lines, Amazon could demand that you make up the difference for poor sales too.
3. Get external help from experts
It is no secret that it is competitive on Amazon and can sometimes feel like being a tiny fish in a huge pond, surrounded by sharks. Amazon can be a tricky place so it is best to approach it with a strong business strategy.
Enlisting the help of an external agency can help ease some of the pressure of putting this strategy together. These agencies are usually made up of experts who specialise in multiple aspects of being a seller or vendor on Amazon.
If you are struggling with profitability, booking in a consultation with one of these agencies may help you understand your pitfalls and determine whether short or long term help is necessary.
4. Opt for promoting high-margin over fast selling
To gain more profits it may seem like the logical step is to sell more and fast, however this is not a long term solution to profitability shortfalls. Instead, vendors should be focusing on their high-margin products over their lower-margin, but fast selling ones.
If you are currently advertising using Amazon PPC advertising, shift the focus of these ads to the higher margin products. These ads are pay-per-click meaning that by the time the consumer has already clicked the ad they are in the consideration phase, and as the margins are higher on these products, the total cost of the ad does eat as much into your profits for every one of these products sold.
You will also want to apply discounts and offers to these products in the short run, particularly around high-volume traffic sales such as Prime Day and Black Friday. Although this will see your margins for these products squeezed slightly, you should experience a sustained sales increase post promotion. This is due to the temporary increase of conversion rates and rankings on the Amazon product search pages.
