One of every five beauty purchases online is made via the Amazon marketplace, according to a new report.
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Only so-called "professional" sellers can attain "featured seller" status, which is required before sellers can become eligible to win the Buy Box. These larger sellers pay a monthly subscription fee of $39.99, plus a percentage of sales transactions that varies by product category, and get access to tools and data feeds for loading inventory. Small sellers with less than 40 orders a month pay 99 cents per sale transaction. Product data loading services are also available through companies like Mercent and ChannelAdvisor, which charge about 2-3% of sales for their overall marketplace management services.
And while all sellers are free to provide their own fulfillment, going with Amazon's Fulfillment by Amazon service is one of the best tools for winning the Buy Box—a seller without it will almost always lose to a comparable retailer with it, Wingo and other experts say. It's another way that growing with Amazon helps to make Amazon itself more dominant in both e-commerce and e-commerce services, as it helps Amazon cover the cost of its more than 50 distribution centers worldwide. Fulfillment by Amazon fees are set per-transaction and vary by type of order; packing and shipping a one-pound book, for instance, costs a seller about 90 cents; a two-pound electronics item, about $2.25.
In addition, Mercent, ChannelAdvisor, Teikametrics and Zoovy.com each offer tools that enable retailers to automatically change the prices on their Amazon marketplace product listings based on multiple types of data, including the seller's profit margin, how many other marketplace sellers (including Amazon itself) are offering a similar item, at what prices and in what volumes.
Davidson, the former Amazon marketplace recruiter, sells through the Amazon marketplace, using Teikametrics to figure out which products he can sell without competing against Amazon or many other sellers. "We strive not to go head to head with Amazon, but come up with new SKUs or bundles that are exclusive," he says. Teikametrics charges a set-up fee of about $500, plus a fee for its re-pricing tool starting at $200 based on a retailer's number of SKUs, according to CEO Alasdair McLean-Foreman.
Davidson has done well on the Amazon marketplace, for instance, in selling a particular SKU of the ZOKU Quick Pop Maker at $49.99, for which he has controlled the Buy Box; it also helps that he offers Fulfillment by Amazon. Davidson also operates his own e-commerce site, MtBakerMercantile.com, that sells items ranging from wine glasses and kitchenware to "eco-friendly" wallets and iPad cases made of leather and wool.
While Fulfillment by Amazon seems to help Amazon sellers win the coveted Buy Box, some retailers say they do just fine without FBA. Ozbo, for instance, can fulfill orders and ship them less expensively through its own warehouse and under its own contracts with FedEx Corp. and the U.S. Postal Service, Wood says. Opting for FBA would require Ozbo to bake in FBA fees to its retail prices, and Ozbo's policy is to keep its product and shipping prices separate, which helps it win higher-volume orders, Wood says.
Though avoiding FBA may cost Ozbo some sales, Wood figures he still wins the Amazon Buy Box about half of the time—or for about 50,000 of the some 100,000 items Ozbo sells through Amazon.
Other strategies for winning the Buy Box include selling private-label products—a strategy used by an increasing number of Mercent's clients as a way to offer products other retailers can't, Best says.
Even retailers who have left Amazon say they may come back under the right circumstances. Carolina Rustica may consider it again for certain products like table lamps that are relatively simple to display and ship, Sexton says. And sports gear retailer evo will keep its eye on Amazon as a possible future outlet, such as for selling off-season or excess merchandise, Decker says.
Amazon Product Ads
Another option is to run Amazon Product Ads, either exclusively or in addition to marketplace listings. These are ads on Amazon.com that take the visitor to the advertiser's web site, allowing a retailer to follow up with the customer and denying Amazon access to sales data. Some sellers choose to sell through the marketplace only products most likely to win the Buy Box with little competition from Amazon, and sell through Product Ads items common among Amazon and other sellers, Wingo says.
The ads serve other purposess as well. Wine.com, for instance, sells non-wine gift boxes on Amazon.com (which doesn't allow for direct wine sales) and runs Amazon Product Ads for wine products. "The Product Ads are new for us, but we have high hopes for them," says Wine.com CEO Rich Bergsund. "They're a win for Amazon because they let it have a category it hadn't been able to address, and we get new customers."
Bergsund says he likes being associated with Amazon, not only for the sales opportunity but because it sets a good example for retailing. "We see Amazon as a role model of innovation and being customer-centric," he says.
Indeed, Wood of Ozbo says the pressure of winning the Buy Box on Amazon has made Ozbo a better retailer. "It drives us to be more competitive, and we often have the best price on other comparative shopping engines as well as on Amazon," he says.
Wary 'til the end
Still, Wood is wary of Amazon becoming too much a part of Ozbo's sales. His partial exit strategy involves simultaneously improving Ozbo.com, such as with more enticing product images and greater exposure on Facebook, so that he can eventually slash the share of business he does through Amazon. "My goal is to continue growing through Amazon, but have it account for only 5% of our business," he says. "So when we reach $400 million, only $20 million will be through Amazon."
A lofty goal, but with a woolly bear of a retailer partner, it might just bear fruit.