Success on Amazon – What You Need to Know by Joe Hansen

Joe Hansen is a seasoned entrepreneur and business executive and the CEO & Founder of Buy Box Experts. He cofounded and sold four other companies prior to starting Buy Box Experts in 2013, quickly growing it into one of the most profitable and invaluable digital performance marketing agencies for merchants on Amazon.

In 2015, he also co-founded the PROSPER Show with James Thomson where they were responsible for growing the business from a two-person startup to the largest U.S.-based educational conference for Amazon Sellers. The company was successfully sold to Emerald Expositions (NYSE: EEX) at the end of 2017.

Hansen developed The Marketplace Flywheel®, a proprietary brand and revenue optimization process that the Buy Box Experts team of 200+ employees use to create quick and long-term growth for brands on Amazon.

Want to know how to grow your business and brands on various ecommerce marketplaces, particularly Amazon? Hansen has the answers you’re seeking.

Growth of Ecommerce

Ecommerce continues to change and grow dramatically. Today, U.S. ecommerce is worth $788 billion GMV. To put that in perspective, the total world ecommerce market GMV is $4.2 trillion. There’s ample opportunity for every business to grow in ecommerce marketplaces.

Spreetail is worth about $1 billion, making it a fraction of a percent of the total U.S. and world ecommerce market, but it’s still incredibly powerful. This shows that it doesn’t take a huge percentage of the ecommerce pie to have considerable success.

You can either sell and distribute your own products or sell and distribute others’ products online as a means of taking part in the marketplace.

Think Internationally

The U.S. isn’t the only country that has a strong ecommerce marketplace. China’s is more than double the size of the U.S. Also, Canada, the UK, the European Union, and Japan have sizable markets, through they’re smaller than the U.S.’s. There are plenty of international options for selling.

The Evolving Nature of Advertising on Channels

Joe Hansen is a presenter at the Inventory Management + Growth Summit.

The pandemic forced many businesses to put ecommerce front and center over traditional retail space. As a result, they have changed the way they advertise to customers. They’re doing it more and more online. Cost per click (CPC) in paid advertising has increased 100 percent year over year, which is unheard of.

Thankfully, conversion rates have also increased somewhat. That’s because many consumers have switched to online shopping instead of going to physical stores. So even though there’s added competition, there’s also added interest from buyers in what you’re selling online.

Other aggregators are entering the market to compete with Amazon. Heyday and Perch are a couple of examples. There are more than 80 of these aggregators right now, and they continue to receive funding. Their success is driving up CPCs in marketplace channels.

Holding companies that normally invest in the media industry are now investing heavily in ecommerce businesses like Amazon and Walmart. Retailers are also getting involved in the mix. They are advertising directly on the marketplace channels.

Tactics vs. Strategies

Advertising on Amazon and other marketplace channels is different than advertising on Google and other search engines. It’s easy to confuse tactics with strategies when advertising on Amazon. Tactics include such things as:

  • Keyword research
  • Keyword isolation
  • Organizing campaigns
  • Bidding
  • Ad units
  • Tools and analytics

Advertising strategies should incorporate a number of aspects, including:

  • Budgeting
  • Audience targeting
  • Funnels
  • Measures of performance (KPI)

In addition, your strategies need to conform to your overall business plan:

  • Quarterly and annual operating priorities
  • Three-year plan
  • The main goal of your advertising

These are all important, but they need to be addressed individually instead of thinking of them as one big thing.

Built to Sell

It’s a good idea to think of your business from a built-to-sell perspective. Is it organized so well that you could turn it over to an investor and have them run it just as well because of all the automated systems you have put in place? Or do you have to manually do everything yourself?

You’ll be able to scale and thrive much better if you have the right tools in place.

Three-Year Plan

You should focus on creating a foundation of:

  • Growth
  • Achieving better top-line sales
  • Collecting data
  • Establishing a budget between 10-15 percent of channel sales

Use your budget to collect the following data:

  • Customers’ 12-month value
  • Cost per acquisition
  • Audience demographics with the demand-side platform on Amazon

This data will enable you to prepare for expansion in the next year and margin harvesting and earnings in the third year. The first year won’t be the most profitable, but it will provide invaluable data that will launch more-lucrative ventures in years 2 and 3.

Use 70 percent of your budget on discovery and awareness in the first year. Then drop it to 40 percent in the second year, zeroing in on your most-profitable segments. In year 3, it drops to 20 percent.

Beyond Year-to-Year Comparisons

COVID-19 changed the market so much that year-to-year revenue comparisons aren’t always the best way of measuring your performance. Sometimes it’s better to mainly monitor your current market share and look to the future instead of always looking back.

In addition to daily and weekly trends, try keeping an eye on the long term. And keep in mind that customers aren’t only on Amazon. They have a lot of options across multiple channels, such as:

  • Retail stores
  • Search engines
  • Online marketplaces
  • Direct sales from your website
  • Distributor websites

They bounce around a lot instead of going down a linear funnel. That’s why it’s so important to advertise across multiple channels.

Changing Buying Habits

Customers sometimes look at your products in a new light, like when the pandemic struck. For example, luxury goods can suddenly go out of style when people are focused on necessities. So you need to get creative in how you promote your products to make sure you’re appealing to customers as their needs and tastes change.

The Amazon Flywheel

Amazon’s model from the start has been:

Opening a broad marketplace leads to greater selection, which leads to a better customer experience, which leads to greater sales and more sellers entering the marketplace. Then they take their profits and use them to lower costs, which makes everything more appealing to sellers and customers.

However, this can lead to a lot of competition if others start selling your products on Amazon. Make sure you are constantly taking charge of your branding and being the leader in your space.

Mobile vs. Desktop

People used to access Amazon and make purchases online mostly on desktop computers. But now, they make most of their purchases on smartphones and other mobile devices. This changes the way they interact with content. Instead of lots of text, it’s often better to mainly use videos and images people can click and swipe between.

Messaging should primarily focus on benefits and features users will enjoy by using a product.

Your Own Flywheel

The way to create your own flywheel is by increasing your sales and conversion rates. It’s much cheaper to get repeat customers than to bring new ones in through advertising. If you can make a good impression on customers, they’re more likely to keep coming back and making future purchases from you. Then you can add more customers over time to your pool.

Expanding Beyond Amazon and the U.S.

Once you’re established on Amazon, you can branch out to other marketplaces and achieve even more success. The three steps are:

  • Market coverage
  • Market expansion
  • Diversification

Expansion includes going to other platforms like Walmart, Home Depot, and eBay. But it also includes moving internationally. Amazon helps you sell internationally, simplifying the process of shipping and calculating all sorts of fees, including VAT. Canada and Mexico are two of the easiest countries to expand into at first because of their proximity to the U.S.

Europe, Japan, and China offer greater growth opportunities because of their large ecommerce markets. Make sure it makes sense to go into a new market before you make the effort. Is there demand for your products? And is your business mature enough to handle the added load?

Mergers and Acquisitions

You have two options to succeed in ecommerce. You can build your own marketplace success, or you can join forces with a company that has already achieved success. If you find that someone else is doing a great job selling online and you can add synergistically to their product offering, you may want to consider engaging in a merger or acquisition.

Embrace Change

Your business is going to grow and change, so you’ll need to change your processes, data gathering, auditing, and standard operating procedures. By planning on these changes occurring and being adaptive, you’ll be in a great position to stay ahead of the game.

Protect your corporate culture along the way, and take care of your people. Plus, be sure to hire and promote talented employees. These are general principles every business should institute.