Game Has Changed
Often I hear that Amazon FBA business model is dead or that only those who started early and/or have tons of capital at their disposal can be profitable.
That's not true.
Whether you started in 2017 or a month ago, you can still make (a lot of) money by selling on Amazon.
BUT it's essential to acknowledge that the rules of the game have changed over the years.
The good old days when it was enough “just to launch products” to be successful are gone. Competition is becoming ferocious, and it's harder than ever to stand out. The quality of listing that was extraordinary 5 years ago is barely a standard today… In other words, if you want to get noticed in the crowded Amazon marketplace in 2021 and be highly profitable, you have to play according to the new rules.
I will do my best to show you how.
More Is Required
There are critical business needs that every Amazon business has. Product development, supply management and forecasting, keyword optimization… If you are bad at those, it’s almost guaranteed that your business won’t succeed in the long term.
The problem is that it doesn’t work the other way around anymore - nowadays, being great at those doesn’t mean you’re automatically successful.
If you want to maximize your chances to thrive on Amazon in 2021, you have to do more. You have to level up your game.
Increase your traffic, conversions, and sales by adding branding to the matrix.
Nowadays, you'd hardly find a product that's not already sold by someone else (kudos if you did). So if you aren't a fantastic innovator, there's only one option left, and that's to sell something similar to what others sell too.
But why should the customer choose your product over those of competitors if they're almost the same? Good question.
The single most important factor has always been price. When there are two products available, both offering the same fundamental features, most people will always choose the cheaper one. It's wise after all - why would you pay more if you can have (more or less) the same thing for less.
But unless you are a Chinese factory, you probably can't compete on price because your costs are simply higher than theirs. And even if you'd somehow manage to do that and match the lowest prices, the tiny margin you would get out would hardly be worth it.
So what to do? How to differentiate from other sellers who are selling more or less the same product as you do while keeping your margins high?
Well, here comes the power of branding.
If you do it right, branding will allow you to:
differentiate your products from those of competitors,
increase and protect your margins,
boost your traffic by increasing click-through rates from both search results and ads,
boost your conversion rates,
which all together shall result in more sales and profit.
Branding On Amazon
Branding on Amazon is very different from branding in general. The reason for that is Amazon standing between you and your customers. On the one hand, Amazon allows you to tap into its immense traffic; on the other hand, it makes it much harder for you to create genuine, long-lasting relationships with your customers (IMHO, the core of branding in general).
Even successful 7-8-figure FBA brands that I’ve worked with had only around 5% of repetitive customers. That means that the long-term value (LTV) of acquired customers is limited to one sale in the vast majority of cases.
On any other platform, e.g., Shopify, the goal would be clear, to increase the % of repetitive customers and thereby the LTV of a customer way higher.
Unfortunately, this is hardly applicable to Amazon. Because it’s so hard to create a relationship with your customers there, it’s generally more efficient to focus on driving more traffic to listings (more impressions, higher click-through rate) and, most importantly, increasing conversions.
In other words, focusing on traffic and conversions has a more significant impact on the bottom line - bring you more dollars - than focusing on building relationships with customers.
*A short disclaimer - At some point, it may make perfect sense to switch the strategy and approach an Amazon business like a “standard brand” and strive to create genuine relationships with the customers, but that’s up for a longer, more in-depth discussion.
Frankly, during my career as a brand manager of an 8-figure FBA business, I struggled to apply general branding principles to the Amazon ecosystem myself. I studied dozens of successful Amazon brands, put the findings together, and created the Amazon Branding System.
Amazon Branding System
Amazon Branding System narrows down the usual approach to branding to what matters the most for Amazon businesses.
There are 3 parts and 13 elements of the system:
Brand Website (for legitimacy purposes, not an e-shop)
Imagine it like a pyramid.
The Brand Identity level is a prerequisite for the Brand Assets level and so on. When doing the branding work on your Amazon business, always ensure that the pyramid’s previous level has a solid foundation before focusing on the next one. If the foundation is not there, it is more likely to “fall apart”.
Don't get me wrong; it’s possible to sell with, e.g., excellent graphics and photos even if you don't know who your target customer is. But the probability that you’ll make a sale is dropping down significantly.
In the utopian world, you’d always create the pyramid from the base, one element at a time. First, you’d create the Brand Identity level, then proceed to the Brand Assets level and only then to the Brand Touchpoints level. In the real world, it's not that simple. You probably already have some of those elements in place, e.g., lifestyle photos on product listings, and others not, e.g., your message and brand positioning are not clarified.
That doesn’t mean you should stop using your current photos until you figure it out, but you should definitely invest in the creation/optimization of lower parts of the pyramid first.
Optimization Is The Key
To reap all the benefits mentioned above and get more sales and profit out of your business, it’s vital to optimize as many brand elements as possible.
Do you know who your target customer is?
Do you use consistent patterns in your main images and secondary images?
Do you use icons and infographics to communicate your brand message? Do you know what that message is in the first place?
Do you have lifestyle photos and videos showing how people benefit from your product?
Do you use A+ Content, Amazon Store, Amazon Posts, and all the other features Amazon is constantly adding?
Do you do all these things? And if you do, do you do them well?
Probably not. I understand that there are more important, pressing business needs you have to take care of. Still, by not having those elements optimized, you’re literally throwing money out of a window, respectively leaving them on the table. Give me a chance to explain this.
Imagine a situation quite familiar for many Amazon sellers:
You are spending a lot of money on PPC campaigns, but your main image sucks. What’s going to happen? Many potential customers who saw your ad won’t go to your listings or Store because of the image, although you paid for them to see the ad in the first place. In other words, you’re throwing money out of a window.
Or imagine another common situation:
Traffic to your best-selling product is damn high, and your conversion rate is around 25%. Although you have the Brand Registry, you don’t use the A+ Content feature on your listing. Suppose that the A+ Content feature generally tends to increase conversions by 5% percent on average. How much money are you leaving on the table by wasting that 5%? You do the math.
FBA is still a viable business opportunity, but the rules of the game have changed.
Whether you are just starting your FBA journey or own an 8-figure Amazon business, you can surely benefit from branding.
You can't focus on branding instead of, e.g., supply management and forecasting, which are undoubtedly more pressing business needs - you have to add branding on top of it.
Branding on Amazon is very different from branding in general - it's more focused on traffic and conversions than on genuine relationships with customers and their long-term value.
The key is to know what to focus on (which branding elements are the most important for Amazon businesses) and optimize it.