Amazon’s rules for vendors are like a board game. They’re specific, can’t be changed, and you have to follow them if you want to win.
In fact, the vendors who do the best on Amazon aren’t necessarily the ones with the highest marketing budget or the best wholesales, they’re the ones who stick to the rules of the game.
It’s important for vendors to remember that in this game, you’re playing the house, not each other. Making the right strategic decisions is how you’ll get ahead.
Learn the players of the game
It may be counterintuitive, but in this game, you need to ignore the competition and focus on the players that matter.
“When we look at and obsess about the competition, they operate with a different business model, different supply chain, different cost structure,” said Peter Beke, co-founder of The Hawker’s Club. “And so whatever they may do, you may not be able to replicate.”
Reacting to what the competition does will not give you great results. Instead learn the players of the game: the vendor or brand, the customer, and Amazon.
“The important piece here is that all of these three players are connected,” he said. “And if the connection remains intact, then ultimately we are good because what we want from a long-term perspective is that these players walk together in sync, in balance, and they progress forward together.”
If you eliminate the link between any of the players, that’s when you get into trouble.
Keep your brand, Amazon, and the customer in sync
Keeping the three players in sync is difficult, but necessary to maintain your business over time. If one side is left behind, the whole game can collapse.
For instance, let’s imagine you’re launching a new product and decide to submit a low wholesale price and set the MSRP and the list price low as well. In that scenario the customer will be happy because the price is low, so the connection between brand and customer is there.
Amazon will be happy because, with a low wholesale and list price, the product is selling well.
“However, later down the line, let’s say the brand is not allowed to put in a wholesale increase, which obviously is a very timely conversation here,” Peter said. “And so then this link between the brand and Amazon is going to be broken.”
Amazon and the customer can move forward, but the brand is left behind.
If you change the variables a bit and set the retail price too high so that the wholesale price will be high, Amazon and the brand are happy, but the customer won’t convert. That link is now broken.
Every time you make a decision as a vendor, you have to try to do so in a way that keeps these three parts in sync.
Take an infinite approach instead of finite
There used to be vendor managers to keep the three sides in sync, but now vendors have to consider all of the effects on their own. The best way to make decisions is by using an infinite instead of a finite approach.
“If you take a finite approach and we focus on, are we good today, what we aren’t doing is thinking about our future because the new program, the governing algorithm change is going to come in and it is going to come in,” Peter said.
When you’re unprepared for algorithm changes and only focus on what works right now, your runway to adapt to changes is very short and you may get left behind.
Take an infinite approach instead and think of how to systematically make decisions that help yourself, help the customer, and help Amazon’s contribution margins, then you put yourself in a better position.
“All of a sudden we started first managing Amazon’s P&L on their behalf proactively,” he said. “And number two started making the first steps to build a runway for ourselves in case something goes wrong, in case there’s a process change we need to go through that wasn’t there yesterday.”
You’ve created a safety net or a buffer for your ASINs that keeps your afloat even when things change.
Start making changes when it gets you a reward
Amazon has a history of introducing upcoming requirements by first making them something you can do for an incentive like a cash reward.
This is what they did with Ship in your Own Container (SIOC). First, you could do it for a reward, then it was required, but not penalized. Ultimately if you didn’t offer SIOC, you were fined.
“Our advice on this is to watch what Amazon is saying, hey, this is great, you’ll get a reward or, hey, this is great, it’s free,” said Hannah Blackburn, co-founder of The Hawker’s Club. “And try that, understand it, commit resources to it as soon as possible.”
If you make those changes early, you’re able to make mistakes without it costing you and learn how it works for your business.
One that Amazon is introducing right now is Amazon Posts.
“Learn what works for your business before Amazon makes it where it’s you have to pay for every single click you get and then any bad posts you do is going to be pretty painful,” she said.
“Right now it’s okay. We can put that down to learning. It just cost us our time and move on.”
If you jump into these changes early, you have a longer runway to succeed.
“And ultimately the gap between Amazon asking nicely and forcing you is also the head start you’ll get between yourself and your competition,” she said.
Understand one-way moves
One concept to understand as you play the Amazon board game is one and two-way doors. It’s a lot like chess where some decisions can be reversed or changed, while others cannot.
“Most of the decisions you make with Amazon, most of the pieces you move in a chess game, you can move them back again, maybe in different directions,” Hannah said.
“However, there are certain decisions which are the pawn of the chess game. You move it forward and that is where it is. You can only keep going forward.”
It’s important to know which type of chess piece you’re playing with when you make an Amazon decision.
Hannah said that if you can move it, move fast, like with SIOC or Amazon Posts. Try it out and roll it back if necessary.
If you can’t move it, then be much more cautious with your decision, like if you’re doing prepaid freight, but then try to move away from that.
“That’s the kind of thing where you need to study it,” she said. “You need to be ready and you need to very, very much understand that we have to live with this decision.”
Consistency is equally important
Just as important as keeping that balance between the vendor side, the customer, and Amazon is staying consistent in your product, packaging, and delivery.
“Consistency is an equally important concept when it comes to Amazon as having all three players in sync because algorithms look for consistency and reliability,” Peter said.
When the algorithm is deciding whether to show your ASIN or someone else’s, it will look at whether you’re able to deliver on all of the promises you make on your detail page.
“Are you going to be able to make your ship window or are you going to start racking up late shipment notices?” he said. “Are you going to be able to deliver a product intact or is the product going to have damaged packaging? Is the product going to be cracked at some places so that ultimately it creates a customer return?”
Returns break the link between Amazon and the customer and Amazon’s algorithm will take that into consideration.
“Ultimately ASINs and vendors and brands that adopt the consistent approach on Amazon tend to get not only a higher share of organic revenue but ultimately an increased conversion rate as well because the algorithm trusts them more,” he said.
Consistency builds trust with Amazon and the customer, too, which keeps that triangle of players well-balanced and lets you win against the competition.