Lessons Learned From Scaling Amazon Businesses

There's an e-commerce gold rush happening right now and Amazon.com is leading the charge. Last year, Amazon generated $386 billion in annual revenue, with third-party sales accounting for 54 percent of it, according to Jungle Scout. However, selling on Amazon can be challenging as sellers battle a competitive marketplace that requires them to be agile while growing their brand. Amazon sellers include a vast majority of small businesses and solopreneurs who may not have access to a wide array of resources to effectively scale their business. To remain successful in a crowded field, they should prioritize a few key areas and ultimately make decisions that are right for their business.

Data Wins Out

Sellers know they can utilize data to drive increased sales, yet they're often presented with such large quantities of data on Amazon’s dashboard that they feel overwhelmed by all of it. Numerous services and platforms exist that help sellers organize and action on data in real time, but if they want to operate within the Seller Central platform they need to realize how to harness the provided data effectively.

Professional sellers on Amazon have access to the Business Report which contain key data such as:

• Units Ordered: Number of products customers order from the seller. This will help the seller determine the highest-grossing items they have for sale and pinpoint whether those items may need a boost to help with seller ranking.
• Total Sales: Ordered product sales and gross product sales. As seller revenue influences the brand ranking in the marketplace, it’s important to know how much money is coming in.
• Page Views: Number of visits to individual product pages. This allows the seller to see pages with lower visits so they can optimize listings. Improve your keyword optimization by understanding what types of keywords potential customers search for when attempting to buy in your product category and how many ultimately visit your page.
• Sessions (or traffic): Tracks visitors’ sessions and page views and helps sellers to determine which are the most-viewed products in the marketplace. Low sessions mean some page improvements may be needed to increase consumers' interest.
• Conversion Rate: Percentage of shoppers that add the seller’s product to their carts. A good percentage ranges from 10 percent to 15 percent.
• Buy Box Percentage: The price and “Add to Cart” area on a product’s page. While every seller can win the Buy Box, the spot is actually shared between the best-rated brands, so the Buy Box percentage report shows how often the product gets Buy Box time.

Sellers should also delve into the Ads Reports and look at Search Terms, Targeting, Advertised Product, Placement, Purchased Product, and Performance Over Time. These data points are critical in optimizing sales as they ensure your product pages are getting directly in front of consumers looking to make a purchase decision.

Plan for Supply Chain Uncertainty

The 2021 global supply chain crisis illustrated how advanced preparation can often make or break sales. Many sellers saw the brunt of this before the 2021 holiday season. Due to supply chain delays, sellers were out of stock for extended periods and couldn’t receive products from China. When the products eventually arrived after sellers faced increased shipping costs, many products were damaged which meant that sellers missed holiday sales — a crucial time for Amazon sellers. Successful sellers secure holiday inventory three months to six months in advance as building in excess buffer time helps to mitigate unforeseen delays. It’s important to note that sellers should also weigh the costs of excess inventory.

By leveraging analytics, sellers can drive accurate risk prediction for each leg of the supply chain and stay ahead of forthcoming supply chain disruptions. Safety stock planning is always a continuously moving target and without data systems and high-throughput scenario planning, a safety stock can quickly become insufficient and obsolete.

Leverage Promotions and Deals

The holidays and Amazon specialty days are major sales drivers for sellers. As such, it’s important that they understand how to utilize each of these promotional holidays in order to boost sales. Sellers should secure inventory well in advance to ensure they don’t run out of stock during these peak periods. Sellers should also push to optimize product listings in advance of specialty days, especially as consumers increasingly utilize Amazon as a search engine. According to Jungle Scout, 74 percent of U.S. customers begin their product searches on Amazon to discover new brands and/or products.

Sellers should also run competitor analyses around key specialty days. By tracking competitor keywords and ASINs, sellers can gain key insights into how to optimize their product pages to drive increased sales. After all, according to Marketplace Pulse, customers are seeking generic products rather than name brands, and 78 percent of keyword searches on Amazon are unbranded. This means that sellers and their competitors are vying for the same market share. Micro adjustments in pricing can drive maximum revenue while optimizing the number of units sold.

Optimize Brand for a Strategic Sale or Exit

Amazon sellers are experts at building brands from the ground up. However, continuing to scale brands past a certain point often requires distinct resources and capacity. Knowing the optimal moment to exit the brand allows entrepreneurs to focus on building new successful brands. Amazon sellers should always ensure that all their financial information is present, organized and clearly outlined if they're considering a strategic sale or exit. By being transparent and open with the operator, a smooth transition will ensue. Amazon third-party sales are growing faster than its own retail sales, hence the growth in aggregators buying and scaling brands.

Sellers are seeing boosted sales during the ongoing pandemic as customer buying has shifted more and more to Amazon. By leveraging data to prepare for any shifts in the supply chain or win out against competitors with deals and promos, sellers are primed to make better business decisions and continue scaling their businesses.

David Lam serves as vice president of growth at Acquco, an institutionally-backed acquisition company that allows Amazon FBA sellers to successfully exit their business in less than 30 days.