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.

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.

“TALK” ABOUT A BUSY HOLIDAY SHOPPING SEASON— V-COMMERCE JUST GETTING STARTED. ARE YOU READY?

Author: Joe Scartz

We are already anticipating the largest digital commerce holiday shopping season of all time this year. Digital Commerce is set to account for $123.73 million out of the roughly $1 trillion dollars that will spend this holiday season at retail, according to eMarketer.

Voice, while a fractional amount of that total currently, is accounted for in the digital commerce number. The question is…how big can voice commerce (v-commerce) grow in the years to come and what should brands and manufacturers do about it?

 

The Landscape Today

Today, voice commerce is benefitting from broad adoption of software and hardware platforms and tools that enable voice shopping. At VELOCITY., we divide this software and hardware into four primary categories: The voice assistant powering the experience (distributed through various devices), the pervasive smart phone, smart speakers, and IOT as a category.

The Voice Assistant

The four major AI players are Google Assistant, Alexa, Siri and Cortana. Nearly half of U.S. adults use voice assistants on their smartphones, but also through IOT, laptops, tablets, cars and various other devices. Siri is the most widely used due to the iPhone followed by Alexa, Google Assistant and then Cortana. However, Amazon and Google clearly lead in proliferation and usage of smart speakers (Echo and Google Home specifically).  More on that  in a moment..

The Smartphone

We all know that the smartphone has reached critical mass (particularly in developed countries). What is important for v-commerce is that AI and voice assistants are being embedded into the user experience on these phones more seamlessly. Siri integration was a major component of ios 12. Earlier in 2018, Google announced that 95% of Android phones will  be reached by Google Assistant. Clearly the two biggest players in the smartphone world want their assistant to be the center of your relationship with their hardware and software.

The Smart Speaker

It is anticipated that the Google Home and Amazon Echo (all variations) will be two of the hottest selling items this holiday season and throughout 2019. As of June, 2018 20% of U.S. households own a smart speaker and Deloitte expects 63% growth next year globally.

 

The Prospects for Growth

As we have seen, the technology and the platforms for continued growth in voice are established. So, what are the commerce opportunities for voice?

Some firms have predicted that voice will grow to $40 billion dollars in the U.S. and U.K. by 2022. This is significant, when you consider that those two countries are leading nations in adoption of voice globally. Therefore, brands need to be prepared. In a world where one or a firm search results on Amazon or Google, or even Siri could limit your brand exposure, optimizing for voice today; not tomorrow, is your best bet. Measure your voice readiness on a brand-by-brand and product-by-product basis now. The future of search and brand engagement via voice has arrived.

Amazon Wants to Own Your Home

In the past several years Amazon has moved from your desktop to your mobile to your home speaker to your home broadly and now to your front door. Amazon is buying smart doorbell maker Ring for a reported $1 billion.

The move makes perfect sense as:

  1. Amazon continues to play a massive role in the smart home market and Ring was already integrated as a partner.
  2. Amazon probably arrives at your front door more than any other delivery service or friend or family member, (other than possibly the US Postal Service)
  3. They have already let it know that they want more frictionless entry into your home via Amazon Key for delivery

As Amazon continues their seemingly relentless quest to embed themselves into all the cracks of life, its evident that they are looking to enable everyone to shop as they go through their day, but obstacle-less delivery across the board. So in sum, Amazon has added a key element in the smart home ecosystem and a technology with an installed base that will further accelerate the user satisfaction and growth of their core e-commerce business.

What We Expect to See From Amazon in 2018

At this point, its clear that Amazon has become more than just another e-commerce company that we all shop from. They are also a digital content provider, research destination and marketing channel. And, with their first brick and mortar opening to the public earlier this week, their bigger step into grocery last year and other recent innovations, everyone seems to be watching and wondering what’s next. Based on what we know and are seeing, here’s what we expect from Amazon in 2018: Sensor Replenishment, Voice and Camera-Enabled Machine Learning.

Continued Alexa Growth

Amazon Alexa is growing at a faster rate than any other voice platform. Today Alexa is used mostly for Setting timers, playing songs, reading the news, and shopping.  Shoppers that utilize Alexa purchase 30% more than Prime members that do not utilize alexa, and 70% more than non-Prime members. With this much potential growth, Amazon looks to be doubling down on voice. We expect to see continued aggressive discounting on the device to get the Amazon Echo into more homes and continued improvements and skills.

Amazon Dash Replenishment Program – More Automatic Reordering

Early 2018 Amazon announced that several manufacturers are producing smart products that integrate with Amazon to automatically reorder for consumables when supply runs low. 3M, Blustream, Epson, HP, and Kenmore are some of the key players in this program. It is expected that several more devices will follow suit.

Amazon’s Dash Replenishment leverages multiple sensors to analyze when a consumable is running low inducing a buy order to replenish the product before it runs out.  Printing paper, ink, laundry detergent, and coffee are some of the products that will be available through Amazon’s Dash Replenishment.

Machine Learning Video Camera

Amazon is capturing voice. So, what’s next? View. Amazon has technology that they are releasing to developers to utilize Machine Learning-enabled video cameras. We know Amazon is obsessed with tracking through sensors, and now they will continue to develop on their camera tracking. The next step from here is to follow a similar path to Alexa, where amazon will offer the technology to be included in the manufacturers’ end so they can continue to dominate auto-replenishment and more.

 

Written by: Rami Odeh, TPN VP, Digital Commerce

Amazon: What Does It Take To Win?

For brands today, Amazon.com is no longer just another retailer for selling products. Its a digital content provider, marketing channel, THE retailer and major starting point for all shopping research. 55% of product research leading up to a sale is now conducted on Amazon vs 28% on traditional search engines (BloomReach Survey—Sept. 2016). Because of this, brands can not treat Amazon like any other retailer. They have to take a Amazon-specific approach.

So what does an Amazon-specific approach look like? Well, we can’t give-away all of our knowledge and expertise over a blog post. But, here’s a starting point…

First, to orchestrate a winning plan, you need to start by knowing where you stand. What’s your Amazon.com Product Health Score? Understanding this allows you to build and adjust your actions and determine how to optimize.

Or, if you don’t know your Product Health Score, give us a call. We can help you determine where your product’s overall representation falls on the amazon.com health spectrum. Key elements of this include: evaluating your creative, SEO, inventory, third-party players, merchandising/AMS, and more.

Secondly, you have to build an experience based on the wants and needs of all parties: your target, brands and Amazon.com. That may sound like an simple and obvious thing and in some ways it is. But, if you get it wrong, you can quickly get off course.

YOUR TARGET

Create a plan that will engage your Amazon target in all her retail modes across the customer journey (consumer, shopper, buyer, influencer). Her mindset, behaviors and surroundings change in each so engaging in each will take the right plan.

YOUR BRAND

Understand you brand’s needs and presence on the platform, including your: Brand Position, Reach, PDP Impact, Conversion, Re-marketing, Influence and Overall Product Health.

 

AMAZON.COM

It’s imperative to know where your brand stands on amazon and we are talking about more than just sales – although certainly that is important. Talk to your customers, know how they are using amazon but also look at how they behave. Paint a broad picture that correlates your activities to action. Look at A/B testing, SEO, merchandising, traffic drivers and media segmentation, etc. More than anything, understand what your customer wants from your brand and translate that onto Amazon.com. It’s an environment where you can quickly become commoditized and understanding how it all works together is a full-time job.

Want to know more? Reach out to Joe_Scartz@tpnretail.com

The Amazon Effect on eCommerce and CPG Brands

The use of digital technologies in conjunction with changing shopper behaviors is making eCommerce an indispensable part of CPG omnichannel success. Brands seeking to convert online consumers should focus their attention on convenience, and how important it is in the shopper journey. According to Jennifer Silverberg, CEO of SmartCommerce, “Consumers might not care that something is more expensive, but if they can order it online and they don’t have to go to the store, they will.”

eCommerce and its ease of entry is growing and brands are taking notice. In fact, strong growth is forecast in several eCommerce shopping channels:

  • Computers and consumer electronics total $62.7B in 2017 and that number is expected to hit $97.6B by 2021[statista]
  • Apparel and Accessories eCommerce dollar sales come in at $86B and is expected to reach $96.4B by 2021[statista]
  • Auto and auto parts currently sit at $51.6B with growth projected to reach $57.4B in 2019[statista]
  • U.S. online grocery sales totaled $7B in 2015 and that total is expected to more than double to $18B by 2020[statista]

The biggest driver of eCommerce growth continues to be Amazon.  Amazon’s success isn’t just a byproduct of its huge inventory and rapid service. The online shopping behemoth, according to Yaakov Kimelfeld, Chief Research Officer for Kantar Media, “is not a retailer anymore; it is the largest behavioral marketing company in the world.” Amazon understands shopper motivation not just with purchases but with research. Fifty-five percent of product research that led to a purchase started on Amazon.com compared to 28 percent of the same on search engines. Amazon is now the preferred starting point for product research. How did that happen?

Amazon’s march toward eCommerce preeminence starts with its creative customer service model.  Amazon lives at the perfect intersection between shopper and brand. By understanding shopper behaviors and patterns, they’re able to create actionable plans that can make a more immediate impact for consumers. They’ve also built brand affinity and awareness by positioning brands in the immediate shopper path of purchase. With a heavy focus on the customer, Amazon can optimize constantly, giving their consumers more of what they’re looking for, and driving conversions and shopper loyalty for brands. The shared success model is a driver of Amazon’s eCommerce dominance.

Where does that leave retailers like Walmart?  The shopping giant is responding by spending more on mobile and digital technologies to expand their online shopping capabilities. They’ve strengthened their presence in the eCommerce market with their purchases of men’s internet clothing brand Bonobos, and the innovative online shopping company Jet.com.  Another recent Walmart acquisition is Parcel, a New York-based same-day delivery startup that specializes in perishable grocery delivery, an attempt to leverage the former acquisitions and compete heavily in a market where they have no brick and mortar stores.

CPG brands know that being competitive in today’s convenience shopping environment means the buying process needs to be as painless to the shopper as possible. Luring consumers into buying your product is only half of the equation. Giving them the easiest path to purchase the moment they want to purchase will win the day.

Amazon Acquires Whole Foods…. Now What?

Amazon announced that it is acquiring Whole Foods. The impact of this purchase is far reaching for retailers, grocers and brands. As marketers, we need to understand what this shift means to the retail landscape and to shopper expectations. Given this news, TPN’s Digital Commerce team has developed thoughts on what happens now and what to do.

WHAT TO EXPECT

Amazon is going to get smart on grocery.
Whole Foods gives Amazon the ability to leverage its knowledge within the grocery channel and a better understanding of how to source local and organic foods.

Amazon will integrate its features at Whole Foods.
Expect Whole Foods to integrate the ability to make transactions through a Prime account similar to the Amazon Go grocery model – making for faster, more seamless experiences.

AmazonFresh will grow.
Whole Foods locations will enable AmazonFresh to take food delivery to the next level, with faster, fresher deliveries taking place in a truly on-demand model.

Prices at Whole Foods will drop.
Many expect this merger will make Whole Foods more affordable. That said, it’s fair to expect prices at grocery stores to drop altogether.

HOW TO PREPARE

Get to Know Amazon.
If food brands haven’t already, it’s crucially important to build relationships with Amazon, get familiar with their ecosystem, and start understanding its numerous paths to purchase.

Get to Know the Amazon shopper.
As stated in TPN’s Shopping in the Flow report from 2016, the retail purchase funnel is gone, and the buy is happening outside of physical stores through mobile devices and other in-home technology like Amazon Alexa. Brands must move to where these purchase take place… before it’s too late.

Don’t wait. It’s happening.
Amazon isn’t waiting for anyone in its efforts to extend its reach across the retail landscape. Getting familiar with the retailer today can only fuel a brand’s success for inevitable retail changes in the future.

SO WHAT’S NEXT?

More change is coming. While Amazon will continue to grow and extend its giant reach across the retail landscape, expect other heavy hitters – like Walmart, Target, and Kroger – to step up to the plate, find ways to evolve, and introduce their own retail innovations.

These are exciting times, and it’s just the beginning. While much of what this merger means is still very much unknown, one thing is certain: More change is coming.

At TPN, we’re ready for it.

Author: Rami Odeh | Digital Commerce Director | rami_odeh@tpnretail.com