WHICH P IS BEST FOR YOU? Identify the Right Business Model and Fulfillment Strategy for Amazon [Velocity Amazon Strategy Series]

Written by Christa Klausner 

As you can imagine, there are many pros and cons to consider when identifying the right fulfillment strategy on Amazon.  There may not be a right or wrong answer, but each brand has a “best answer” scenario:

  • As a 1P (first-party) Vendor, brands and manufactures sell product directly to Amazon at wholesale prices, and Amazon resells the product to the consumer at a marked-up price – much like traditional retailers.
  • As a 3P (third-party) Seller, brands, manufactures, resellers and distributors sell product on Amazon directly to consumers through the Amazon marketplace.
  • A Hybrid model allows businesses to implement both 1P and 3P across their product catalog.

As a 1P Vendor, you have limited control over the sell price and inventory levels, however Amazon handles a majority of the responsibility on the backend including fulfillment to the customer, returns, customer service. 1P is typically more ideal for brands with richer margins.

As a 3P Seller, you have significantly more control over price and inventory levels, however you handle for all backend responsibilities (that is unless you participate in Fulfillment By Amazon). 3P allows you to maintain control of the full supply chain but can be difficult to scale if there are others selling the same product. Also, with 3P, there are restrictions to which Amazon channels 3P Sellers can sell on, restrictions on available marketing programs and placements, and hurdles to winning the Buy Box (more on winning the Buy Box to come later in this series).

With a Hybrid model, businesses are able to supplement additional available inventory for any inaccurate Amazon demand forecasts as well as leverage 3P for pricing terms and negotiations. Hybrid models are often used to build demand for newly launched products that Amazon or other retailers may not yet take.

As outlined by CPC Strategy, there are multiple fulfillment models for Vendors and Sellers.

A quick audit of your internal capabilities and the setup of your warehouse logistics will help determine which business model and fulfillment options are available to you and which are ideal to implement in your current structure. Note, it is possible to move from 3P to 1P and vice versa.

To summarize, 1P and 3P FBA provides the largest opportunity for volume and scale by increasing chances to win the Buy Box, however 3P provides the highest level of control over price and inventory.  

#VelocityKnowsAmazon

At Velocity, we have a simple framework that can help you assess if 1P, 3P or a Hybrid model is right for you. Please reach out to Christa Klausner or Rami Odeh if you are interested in hearing more about Amazon fulfillment or how Velocity can help you get up and running on Amazon.

CES 2019: A Clearer Picture of Our Future

Written by: Joe Scartz 

Last week, Las Vegas was the center of the digital universe, as The Consumer Electronics Show (CES) was held.  Every year, we see astonishing new technology meant to change the lives of people and provide brands new ways to engage with consumers and shoppers.  This year was no different.

The convergence of Personalized, Predictive, Assistive, and Seamlessexperiences was the story at CES; all of the underpinnings are there.

In and of itself there was plenty of innovation…but dare I say, there was no one BIG THING.  And that’s OK.  In fact, maybe that’s better.

As the VELOCITY team walked the floors and had meetings, we found there to be a general, integrated march to personalized experiences that are predictive, assistive and seamless, a confluence of technologies, products and innovations helped to create this story.

In fact, we learned something much bigger than the event itself—it became evident that our lives as human beings really are going to be appreciably different in positive ways over the next five years.

It’s not just about how the myriad technologies work together (life is not just OLED 8K TVs or AI or 5G or IOT, although those technologies were all there in spades) in and of themselves; it’s how they are adapting to fit into our lives in new and exciting ways and in broad strokes.

What the Future Looks Like

To truly understand what that means, let’s first address the technology and trends (check out the links to get a deeper dive):

  1. AI as a lifestyle – Google Assistant and Amazon Alexa were truly the slugfest of the show and were both everywhere and integrated into everything.
  2. 8K OLED foldable screens
  3. 5G will rollout and be available to homes in certain areas in 2019 and more noticeably in 2020
  4. Self-driving autonomous commercial and consumer vehicles
  5. AI-driven and functional robots that provide real assistance
  6. Smart Health devices that integrate data into wider ecosystems
  7. Baby tech and sleep technology were sub themes.
  8. Smarter Homes and increased focus on automation – like a refrigerator that actually recognizes its content
  9. The collapse of walled garden (Apple Homekit on LG and Samsung TVs)

These technologies working in tandem create four themes that point to future:

  1. faster connected world than we’ve ever seen before (5G) where you access information/experiences dramatically faster than previously imagined (a movie in seconds anyone?).
  2. Screens will be more beautiful and “flexible,”delivering delightful experiences and creating new pleasurable interactions with AI, whether through flat screen, foldable screens, AR or VR.
  3. AI devices are as ubiquitous as connected devices are. Alexa and Google Assistant smart speakers and integrated devices are the fastest growing technology since the smart phone.  That means instant answers, instant content, instant home automation, automated automotive, integrated health and based on how these devices learn and adapt, completely personal experiences controlled by voice.  Imagine a world where Google Assistant automates your home’s morning, plots your drive, reminds you when you need lettuce and automatically orders it for you—all the while figuring out how to help you best next.
  4. Technology will aid and support our health.Robots will monitor and help the elderly and sick.   For example, robots watch and report falling episodes and connected devices monitor vital signs to allow for blanket coverage for the elderly and are regular in communication with remote caregivers.

Technology is getting smarter, more automated, more assistive and in doing that is getting more invisible and that is the story of 2019.  The implications on brands and retailers is wide ranging because as technology changes expectations, consumers will evolve their demands with those companies with whom they transact.

What do you think?  Did I miss anything you saw at CES?  Shoot me a note on Twitter and let me know.

MAKING WHOLE FOODS AND AMAZON TRULY WHOLE? FOLLOW THE DATA

Written by: Rami Odeh

 

When you work for Amazon, you rely on two decision-making maxims for everything you do.

First, you must test and gather data.

Second, you must make decisions based on that data.

With the recent announcement that Amazon will expand Whole Foods reach and create new locations, Amazon’s leadership followed this model to a tee.

This is a decision based on what the data was telling people, and people are saying that they want more touchpoints for Whole Foods’ products.  Recently, I wrote an article for Love of Retail  highlighting how predictive artificial intelligence (AI) can impact manufacturers and brands.  Here is a great example of how the data and AI are coming together to create a solution that benefits so many stakeholders.

Amazon and Whole Foods are creating greater access for products sold in the stores.  By having more physical locations, it entrenches more locations for Prime Now customers to get products delivered when and where they want it. But the VELOCITY team sees other opportunities.

Amazon is using the data to solve for supply chain efficiencies on the back end through their confidence in their data. Amazon did not specifically reduce the number of options the customer has, but it is reducing the number of vendors providing those options.

What’s more, this “clean-up in Aisle 7” is a signal that something bigger could be in store (pun intended).  something very different is on the horizon.

At VELOCITY, we believe that the level of efficiency that Amazon is creating on a cost and logistical level indicates that it is paving the way for next-level of ordering, utilizing predictive analytics.  Amazon is going to focus on efficiencies and create an unmatched customer fulfillment model, which in turn will provide savings and convenience to the customers never before seen  in the grocery category.

Although this will seem very new, we’re confident that when managed properly, and mirroring the clear methods that have worked for success on Amazon’s platform in the past, brands and manufacturers have a once-in-a-lifetime opportunity to create a bold brand presence within Amazon’s new system, and dominate market share within their categories.

Reach out to us with any questions on how to be prepared for the coming changes. Let us know on Twitter…or send an email to either Rami Odeh or Christa Klausner.

I resolve to sell my product on Amazon in 2019 – WHERE TO BEGIN [Velocity Amazon Strategy Series]

Author: Christa Klausner

Is launching your product on Amazon on your list of New Year’s resolutions? Or is optimizing your brand’s presence on Amazon part of your 2019 eCommerce road map? If not, it should be.

According to eMarketer, Amazon’s online sales grew nearly 30% in 2018, outpacing total US retail ecommerce’s growth by 16%. What’s more, Amazon took almost half the share of retail ecommerce sales in the US. And 2019 is looking even bigger. Let’s make sure you get a part of that pie.

Success on Amazon is highly dependent upon understanding its inner workings, knowing what they expect from you, properly setting up your internal operations and logistics and strategically leveraging the tools available to vendors and sellers.

In a new series of articles we will be sharing with everyone, we outline various tools, processes and considerations for either launching or optimizing on Amazon.

Where to Begin?

Conducting an audit of your current presence and of the competitive landscape will give you a view into the current situation on the platform and can help identify specific opportunities for launch or optimization.

  • Who is your competition? It might be different than you think.
  • Insight on your competition. Where, what and how they are selling.
  • Current ASIN performance. What areas can immediately be improved?

New to Amazon?

Gathering information from the competitive landscape will help you make important launch decisions once you get a bit further along in the process including. Details including category selection, price, marketing and merchandising, product listings, content, pack types and selling channels, are a few of the important criteria to evaluate when auditing the landscape.

If are you already selling on Amazon…

If you have already launched on Amazon, conducting an Amazon Product HealthScoreTM(PHS) can help identify specific areas to focus on in order to improve your Amazon brand presence, product awareness, traffic and overall conversion. Velocity’sPHS is a proprietary process that takes a quantitative and qualitative analysis of an individual SKU’s health on Amazon. The process analyzes creative, SEO, inventory management, third-party sellers and merchandising & marketing, and assigns a score to each area, on a 5-point scale. The lowest scoring areas identify the immediate areas of opportunity for improvement.

Evaluate CONSTANTLY

Conducting a PHS on a monthly basis can provide an ongoing look at your individual ASINs performance and continuously provide insight for areas for improvement.

Competitive audits should be conducted monthly or quarterly in order to stay on top of the rapidly changing landscape on Amazon.

Velocity Knows Amazon

Velocity currently conducts competitive audits and Amazon Product Health Score for a variety of clients at varying cadence. Please reach out to either Christa Klausner or Rami Odeh so you can learn more about what YOUR health score is.

Amazon’s Customer-centric Evolution—What Amazon’s predictive AI means to Manufacturers and Brands

Author: Rami Odeh 

We already know Amazon is a customer-centric company, and quite possibly the most customer-centric company in modern day history.

Amazon prides itself on focusing on the customer—period.  But even now, the company is evolving into something…more. Recent changes and announcements from Amazon indicate that the next era for Amazon is approaching—or in some cases, already here—focusing on predictive AI feeding its efficiency and profitability.

Let’s be honest, Jeff Bezos, Amazon’s CEO, is a visionary with a master plan and that somewhere in his R&D department, predictive ordering will be coming very soon.

Huh? Said differently, Amazon’s artificial I intelligence (AI) will use past data to predict your future needs.

Bezos Knows You More Than You Do.

Amazon knows its customers VERY well.  Some would argue that Amazon’s data on its customers is unmatched to any other company (or even any government agency).  Amazon’s AI has reached a point where it is able to make some bold moves based on the confidence of their data.   Amazon not only will predict what a customer will order before they even think about it, this predictive AI is essentially picking which products and ultimately brands will succeed before they even launch!

In other words, Amazon has so much confidence in its ability to predict the future, they will be able to tell brands notto launch products, and what products customers actually want before it even happens.  This can have some huge implications for brands in terms of production, demand planning, research and development, and even finances.  A brand can spend tons of money on R&D or production, only to find out that one of their main selling channels is rejecting the product because its predictive abilities already know the product will fail. Let that soak in for a second.

This ultimately means that Amazon is less of a level playing field for all sellers, and products success will be determined through predictive AI.  Evidence of Amazon’s confidence in their predictive AI can be found in the following events that lead us to believe that the is time is now.

Amazon Apple deal–  Apple is selling on Amazon directly, and Amazon is removing other distributors from selling Apple products.

Amazon One Vendor– Amazon is approaching supply chain in a new way where they are dictating if a brand will be a vendor or seller. 

Amazon CRaP Clean-Up– Amazon removing CRaP items from its catalogue, forcing manufacturers to refresh packaging, and kill production of less successful products.

Why AI?

We are entering an era where Amazon’s technology and algorithms are starting to do the thinking for the customer—as opposed to a customer having to choose brands, products and sellers on her own.  Amazon is confident with its own data to dictate products, pack types, sellers, vendors, fulfillment and even brands to be sold on its site.

Some would say that Amazon is going to a more traditional retailer model; I would argue that Amazon is doing its best Walmart meets The Matrix mash-up to create a mass retailer model that is infused with technology and data.

The bottom line?  Amazon has reached a point of confidence in their predictive AI where they are able to make supply chain decisions for manufacturers, and fulfillment methods in the name of customer-centricity.

Velocity. believes that there is common ground where Amazon, the customer, and a manufacturer can profit.  Want to talk about what you can do to be on top of the upcoming changes?  Reach out to us here with questions.