Amazon: CPG Retails

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Large CPG Retailers

CPG retailers selling on Amazon leverage advertising on Amazon, software that automates processes, search engine optimized product description and high-quality images, as well as strategies to maximize profitability and first-page success to succeed on Amazon.

Advertising Correctly

  • A study by Feedvisor of over 1,200 retailers on Amazon found that high-volume sellers are benefiting from advertising on Amazon. The study found that 12% of seller respondents with annual revenue of "over $2 million spend more than $1 million annually, which is a 5% increase from the percentage of sellers who spent over $1 million annually last year. "
  • This isn't surprising as brands such as Procter & Gamble Co. (P&G), Nestle S.A. and The Kraft Heinz Co are spending massively on digital channels to catch up in the digital marketplace and online CPG sales grew by 17.9% in 2018. The fastest-growing segment in the market is personal care products, with 72% of surveyed consumers stating that they bought personal care products online.
  • The above "reveals that high-volume sellers have realized advertising is a focus for Amazon and learning how to effectively manage marketing campaigns and promotions can prove to be extremely profitable."
  • The best ways to advertise on Amazon based on a survey of Amazon retailers are Amazon Sponsored Products (54%), Product Listings (38%), Social Media (35%), and AdWords and/or Search Marketing (21%).
  • A 2018 study by Salsify found that "41% of digital shoppers in the US favor searching for products and buying on Amazon. No other method of search, including Google, came close to driving purchases to a specific e-commerce platform."

Leveraging Software to Succeed on Amazon

  • According to Feedvisor, "three-quarters of high-volume sellers (over $2 million in annual sales) that were surveyed utilize inventory management software and nearly that same number of sellers utilize order management and shipping software, which are both being used more now than last year."
  • Large CPG retailers spend on software to help them easily automate certain business functions.
  • Popular software used by retailers on Amazon include repricing software, analytics software, and assortment review software.

Product Review and Descriptions

  • A 2018 Study by Field Agent found that more "than eight in 10 of smartphone users in the US said that product images and descriptions influenced their purchase decisions, while three-quarters of respondents surveyed cited product reviews as a key purchase driver."
  • The above means that CPG brands have to pay particular attention to the image and product description when setting up their products on Amazon. It is important for companies to have a "sufficient number of up-to-date, high-quality images and put in place concise, informative and keyword-optimized product descriptions."
  • Product reviews are also very important to consumers on Amazon and brands on Amazon rank negative reviews as a key concern on Amazon. Large CPG companies need a strategy in place to ensure they have a large number of good user reviews and ways to deal with negative reviews. These strategies include participating in Amazon’s Vine and Official Comment programs.
  • CPG retailers also have to decide which "products they will make eligible for Prime as well as Subscribe & Save, decisions which have both revenue and profitability ramifications. Among Amazon.com’s 100 bestsellers, 88% are Prime eligible. Subscribe & Save has bigger economic implications for the manufacturer given steep discounts."

Maximizing Profitability and First-Page Success

  • An Amazon CPG expert from Boston Consulting Group advises big CPG companies to build their Amazon strategy around "maximizing profitable sales by boosting volume, concentrating on profitable items and remembering that prices will be tested by Amazon’s dynamic pricing algorithm."
  • In addition, large CPG retailers should consider adopting Amazon's "optimized product design, managing inventory actively and adapting supply chains dynamically to avoid stock-outs, monitoring and de-listing unprofitable items, minimizing freight administration costs, and complying with Amazon reporting processes."
  • While many retailers believe that the online shelf space is endless and that Amazon offers unlimited SKUs, large retailers must remember that the idea can be misleading as "consumers don’t necessarily scroll down through that endless variety and are much more likely to choose from the initial selection they see—the first page on a laptop or the first screen on a smartphone."
  • Hence, companies need to ensure that they are "on that “first page,” and because that page is algorithm-driven, that means maximizing sales using the tools available. One tool is search engine optimization (SEO)—how well does a company optimize keywords and product volumes on a regular basis to drive page-one ranking for Amazon search results."
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