September 12, 2023
August 5, 2022
This article was written by Podean Global CEO Travis Johnson and originally published on The Drum on August 2, 2021. Full article can be found here.
As Amazon focuses on profits over growth, brands need to shift their focus from growth to increased market share, writes Travis Johnson, global president of marketplace consultancy Podean. Based on Amazon’s latest earnings, he examines the eight challenges brands must navigate to succeed.
Amazon just released its second quarter results and they tell an interesting story. Most companies would be thrilled with 24% sales growth but the market expected more, and as a result the stock price dropped around 7% in response to the news. Online store sales grew only 13%, a sharp decline from approximately 40% growth seen in the previous five quarters.
For brands, working within Amazon’s ecosystem is becoming more challenging than ever, but the company still dominates ecommerce in the US and most parts of the world, so participation is non-negotiable.
There used to be a straightforward formula for driving growth on Amazon: list your products and be exposed to a large and growing audience, ship stock to Fulfillment by Amazon (FBA) or sell to Amazon as a vendor, optimize your product pages and run some media to support.
Now, each of those core pillars are facing challenges that brands must navigate to succeed. Here are some of the key hurdles.
It’s inconsistent and for many categories shows little growth or declines year-on-year. This is likely due to an uptick in brick-and-mortar shopping as markets reopen, combined with intense competition from direct-to-consumer websites and rivals Walmart and Target. In a bold move, Amazon is now incentivizing brands to drive more traffic to its site.
Amazon is taking longer to set up accounts and approve products for sale. In some countries, pages can literally take weeks to be updated with correct titles and descriptions.
Brands have noted that this year’s vendor negotiations have been particularly brutal with Amazon asking for large fee increases and not accepting necessary price increases (even if the retail price increases in tandem and Amazon’s margin remains constant). This has led to some brands having a stand-off and refusing to sell their full range of products to Amazon as they cannot absorb the additional costs and margin dilution.
Amazon seller accounts are taking weeks to receive approval as Amazon clamps down on unscrupulous sellers. They’re also inundated with applications from new companies and companies that need to shift to a “hybrid” selling model because of aforementioned vendor pressures. Interestingly, the quarterly financial results indicate that Amazon seller services increased by 34%, eclipsing the growth of the vendor side of the business. The spike suggests that the trend toward marketplace selling will continue.
Advertising revenue grew 83% in Q2, driven by an influx of brands selling and advertising paired with higher advertising costs. Data from PacVue, a leading advertising optimization platform, revealed that the cost-per-clicks for sponsored product ads rose 36% in cost, and sponsored brand ads rose 18% in Q2. In addition to using a raft of technologies to power media experts, brands need to consider off-Amazon tactics to drive traffic and brand awareness. Amazon just last week launched a program to rebate advertisers some of their selling fee if they drive external traffic to Amazon via Google or Facebook ads, for example.
Marketplace Pulse research estimates the number of individual sellers will increase 45% year-on-year. Brands need to have the strongest content, competitively priced products, great reviews and efficient media to win. It’s labor-intensive and requires many skill sets to succeed.
FBA rates went up an average of about 20% this month, further impacting margins. Brands should consider physical-virtual bundles and investigate alternative fulfillment options.
Amazon simply doesn’t have enough capacity to store and deliver all the items they need to. In late April, Amazon instituted a new policy whereby the volume of items that can be shifted into their warehouses is capped at the brand level. The algorithm is supposed to consider sales momentum and increase the capacity allowed, but it’s just not working for many brands, leading to out-of-stock events and lower-than-expected revenues. If you’re a new brand to Amazon, it’s even harder. Even large brands that see massive sales volumes through other channels are subject to inventory caps that restrict product volumes and impede growth. A third-party logistics company or seller-fulfilled delivery model is a prudent backup plan while Amazon continues to struggle with capacity.
If all of this sounds pretty hard, you’re right. And it’s only getting harder.
But with Amazon entrenched in our lives — not just the website, but also physical stores and a thriving media ecosystem — consumers rely on the ecommerce giant for a large share of their purchases.
As a brand seller, operational excellence across all facets is critical — as is an understanding that when working with Amazon, things often change without notice, and such changes are rarely to the advantage of the seller.
For the year ahead, and as the dust settles after Covid, brands should focus on maintaining and growing share against key competitors in the US rather than simply achieving growth. But if you’re looking for absolute growth, then it’s worth noting Amazon is growing faster outside the US. By creating a carefully tailored strategy and working with trustworthy partners in key regions, a brand can grow profitability in the US and swiftly introduce its products to international markets to drive growth.
This article was written by Podean Global CEO Travis Johnson and originally published on The Drum on August 2, 2021. Full article can be found here.
September 12, 2023
September 12, 2023
August 5, 2022
Emily…
James comes to Podean with a wealth of marketplace knowledge having worked at Amazon Corporate for 5+ years. He worked in many different roles and groups during his time there from Seller Support to Vendor Management. From recruiting and onboarding 3P sellers to new categories, handling highly escalated executive level contacts, and managing vendor relationships he brings an inside understanding of how Amazon works. James is passionate about online retail and brings a client and customer centered approach as the Head of US Retail Operations. Before his e-commerce focused life, James worked across industries that have always focused and delivered results in customer service, account management, and inventory management.
With more than 15 years of experience Alejandro has led some of the most edgy projects in the LATAM region and has built-up high-performance teams from both agency and brand sides. Working with Havas he put together a Consumer Engagement unit for Pepsi. He led a WPP digital solution for L’Oréal and while working with Mediacom he redesigned Coca-Cola’s media team. Most recently he was a fundamental part of Danone’s media transformation into a brand salience unit. He was born and raised in Mexico City, loves being outdoors, listening to music and spending time with his 7-year-old daughter.
Danielle leads media globally for Podean. She previously led the Amazon and e-commerce division at performance marketing agency, Merkle (part of Dentsu). Danielle has deep expertise across all facets of Amazon advertising – DSP, sponsored ads, audio, out of home and beyond. She has delivered significant growth for some of the world’s largest brands including Nestle, managing tens of millions of advertising spend on their behalf.
Before Podean, Travis Johnson was Founder and President of Dentsu’s Amazon-focused consultancy, Sellwin. Prior joining Dentsu he was Global CEO of Ansible Mobile in New York, and also held CEO positions in Australia for media agencies UM, Initiative and Cadreon. He was an Adweek Media Allstar in 2017 and has won over 50 International Awards across his career.
Maddie leads our client management team and also marketing for Podean. Maddie’s team operates as an extension of our client’s teams – anticipating their needs, thinking proactively, and always delivering on time. Maddie is also responsible for all aspects of Podean marketing, from blogs and email newsletters to PR, content, and advertising.
Lizzy manages the Podean media team across any, and every, media solution offered by Amazon and other marketplaces. Whether it’s search/sponsored ads, DSP display and video, Twitch, audio or activations we have the experts to deliver. Every client that her team has worked on has seen a step-change in media effectiveness and sales versus their previous operations.
Jonathan Hawkins leads Podean’s European operations, working with clients spanning all categories. His team assists brands with every aspect of setup and optimization across the region including supply chain advice, logistics, retail operations, analytics and media management. P Before joining Podean, Hawkins was Commercial Director of Square Up media, owners of media properties including Escapism, Foodism and Square Mile. During his decade at Square Up he led editorial, content and most recently commercialisation and sales with a focus on digital products and ecommerce growth.
We have hand-picked the best and brightest Amazon talent from around the USA and the world. Our delivery team of 6 New York based, and 17 Amazon and marketplace marketing specialists ensure our clients receive the best campaign performance. They are experts in retail management, performance media optimization, but also video, analytics, AMC, voice, creative and higher impact executions.
Ashley has covered all aspects of digital marketing in his career, having led digital media for Initiative Media Australia, then managed a team of cross-functional digital salespeople at Mi9 (MSN) and was most recently the Managing Director of ecommerce conversion optimization software company, Ve. Ashley’s leadership, collaboration skills and entrepreneurial spirit drive the Australian business.
Mark is a 20+ year digital leader and before Podean was EVP at Reprise where he successfully launched IPG’s Amazon Center Of Excellence. Prior to this, Mark led mobile and innovation agency Ansible. Earlier in his career he was the Founder and CEO of Concep, an email and performance marketing agency with offices in the UK, USA and Australia.
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