This is a guest post from SellersFunding. SellersFunding created a unique artificial intelligence algorithm capable of predicting future account performance based on billions of data points of publicly available data. For them, your work speaks louder than your credit score.
In this post, we’re giving you a glimpse into how Amazon marketplace sellers do in Q4, and what tasks are critical to take full advantage of the holiday shopping season. This post is an adapted version of Why September is the Most Important Month of the Year for Amazon Sellers.
You may or may not be in the Amazon marketplace, but as an eCommerce seller, this post will help you focus your efforts towards what counts, and take full advantage of the holiday season. As a business owner, it is fairly easy to get pulled in all directions and have a hard time prioritizing what needs to be done to make your business thrive.
We turned to our customer base of mature Amazon sellers and asked a simple question: What are the critical tasks for successful Q4 sales performance?
Over 150 answers later, here’s what they had to say…
For an eCommerce seller, roughly 30% of sales occur in the last quarter of the year. That’s thanks to Thanksgiving, Black Friday, Cyber Monday and Christmas all occurring in a very short period. Our estimation is that this year’s total sales for Amazon Sellers will be $120 billion, out of which $34.6 billion will occur in Q4.
1) In-portfolio product purchase
83% of all respondents said that “In-portfolio Products Purchase” is the most critical task.
Here’s where you should focus your attention regarding in-portfolio purchases:
- Be aware of your suppliers lead time, especially if you’re importing from overseas. Are your products private labeled? Careful with production backlogs. Are you increasing quantities? Lead time will increase as well.
- Check your cash flow projections. Are you going to have enough money to buy new inventory or will you need a business loan?
- Are the new imports tariffs increasing your costs? Beware of purchasing items under situations that make them unprofitable. Call your customs broker, they should be able to tell you.
- Do your sales trend upward or downward? Analyze a 3-month period of this year and compare it to last year.
- Do you have new competition? For example, if you’re selling a tech gadget, it’s likely there’s a new model out this year.
- What is your inventory turnover, and how does it compare to previous years? With changes to FBA inventory fees, your turnover could be the cause of surprise fees.
Knowing that trends change regularly, keep an eye on your sales, turnover, and new products.
Are you setting goals?
Small business owners tend to be less structured than big corporations when it comes to goals. A common denominator is to have the goal to “make as much money as possible,” which sounds good but is hardly effective from a management perspective.
We know “goals” is a word you don’t want to deal with, but unless you have a clearly defined goal, you won’t be as effective as you can in your business. Moving forward without aim means wasting time and money.
Not having a goal is the shortest way to get trapped by the Shining Object Syndrome, meaning, a new and better opportunity shows up left and right, and you chase them all and conquer none.
Having a goal doesn’t mean you have to lose opportunities, but it certainly means you have to choose the opportunities you’re working on now.
SMART stands for: Specific, Measurable, Attainable, Relevant and Time-bound. Here’s a worksheet from the University of Virginia that’ll help you set SMART goals the right way.
Goals aren’t as simple as making it (pass) or missing it (fail), and that the world will end if you don’t make it. Goals aren’t meant to make your life miserable, but to give you clarity on where to put your efforts. The best thing about goals is that once you conquer one, you’ll see its power and you will become unstoppable.
2) Cash flow
69% of respondents said a healthy cash flow is a critical task for Q4 success.
You know that “Cash Flow is king,” but it was the second most voted option in our survey. So we’ll go over the obvious.
When we were invited to write this post for Deliverr, we were told about their audience’s characteristics. We know you’re an established business. However, we’ve seen multi-million dollar companies without a simple ratios worksheet, who don’t know how much free cash flow is available. So, from our perspective, here are the top ones you should look for:
- Current Ratio: Can you pay all your short-term debts?
- Quick Ratio: Can you pay all your short-term debts if you stop making sales for a while?
- Inventory Turnover: How long does it take to make a sale? This is how many times in a year you’re selling all your inventory. Divide 365 by the result and you will get the number of days it takes you to sell. Pro Tip: Do this calculation by product and you will uncover a whole universe of data.
- ROI: How much are you really making? As a small business owner, you should look at the bottom line, including tax estimates.
- ROAS (Return On Ad Spend): This is a tricky one. Are those Facebook Ad dollars making you richer or poorer?
The cure to most of the issues is to have available funds to gain time to get back to order.
Cash flow problems usually trigger a chain of events with mostly predictable bad outcomes, like running out of stock, losing good rankings, delay of new products launch and more. You may even lose the Buy Box on Amazon or its equivalent on other platforms.
3) Advertising and funnels
Product-based companies tend to have a hard time setting up funnels to acquire and nurture customers, and maximize the average purchase. The most common reason behind that is it takes some effort to switch from products to offers.
Tip: When your products are highly commoditized, you can turn instead to bragging rights. Are your customers proud to use your product? That’s the key to turning customers into fans.
You can’t effectively run ads if you don’t have two things: defined audiences and a clear customer journey. We suggest checking out Digital Marketer and their Execution Plans, because they provide the best bang for your buck when it comes to learning the best practices of online advertising.
On the not-so-obvious side, Amazon is quietly becoming an advertising giant that competes with Google and Facebook. This make sense knowing that Amazon accounts for 50% of all online shopping, and they are the biggest online ad buyers..
People are being pulled in all directions by ads. It means that unless you have a customer base of raving fans, you’ll likely need to enter the PPC game in Amazon sooner than later if you want to grow.
There are still a large number of people skeptic of ads, and they will purposely go past them and browse for products, but trends show that advertisers are winning the battle and people are clicking more on sponsored products.
Here are the basics of Amazon Ads:
- There are two types of ads: Search Bar (Branding) and Sponsored Product (Sales). We recommend competing in Sponsored Product until you have built a follower base. The rest of this section deals with Sponsored Products.
- You compete on keywords and search terms, not products.
- You set a “bid” for the ad, which shows how much you’re willing to pay for it to show when shoppers search for the keyword.
- If someone else bids more than you, their ad will show up first until they run out of their daily budget.
- Each time someone clicks on the ad, Amazon will charge you your bid amount, capped at your daily budget (the max you’re willing to spend on ads on any given day).
2 Keys to Success on Amazon Ads:
- Your listings must be buy box eligible to qualify for a sponsored product ad, so ensure they fulfill all the requirements.
- Use negative keywords. A negative keyword is a way to filter search terms to avoid showing your ads to people who are not the right buyer for your product. For example, if you sell Collagen Peptides, your PPC campaign could be to bid on “Collagen Peptides” and use “Collagen Peptides Recipe Book” as a negative keyword, because you want people searching for products, and not people searching for books.
Determine your budget, set up an ad, and test it to start optimizing your ads.
4) Expanding your portfolio
There are different reasons why you may want to look into expanding your portfolio:
1) Seasonality: some products sell during certain months (think Christmas ornaments) and then sales volume drops. This is not good for your bottom line, but also, it makes your store more risky for third-party funding. Expanding to products with different seasonality than what you sell today will help you have consistent sales volume and become more attractive to lenders.
2) Profit Maximization/Bundling: do you sell shoes? Sell shoelaces or special insoles. Do you sell printers? Sell ink and paper. You get the idea, it’s pretty much what Amazon does with the “frequently bought together” offers, but with your own products. Bundling gives the perception of increased value for money, and people shift focus to the actual products in the bundle instead of the price.
3) Risk Diversification: this is a basic risk management principle that overlaps a little with seasonality, but it has more applications. Take tech gadgets as an example. These items tend to suffer from quick obsolescence. Another example, vaping paraphernalia. Think about what to do if your items get banned overnight.
Hey, you’re reading this on Deliverr’s blog. What else can we say that you don’t already know?
Well, we’re going to tell you reasons why you should consider doing more fulfillment with Deliverr.
It seems that in the case of Amazon Sellers, Fulfillment By Amazon (FBA) is the way to go no matter what. So then why does it show up as critical in our survey? We called some respondents to find out.
As you know, FBA is not a good idea for every product. Especially for low margin or low-priced products. We did additional research among Amazon Sellers, and there seems to be a consensus that anything below $20 with less than stellar sales should be strongly considered for Deliverr.
This change should be analyzed on a per-product basis. Remember: if you’re bundling products, make sure you don’t publish a bundle with split fulfilling, or else your sales, fulfillment costs, and reviews can break havoc on your store performance.
Another indicator Deliverr might be a good idea is if your product is really unique and there are very few or no competitors, because you’ll get a bulk of the buy box anyway, and the savings on Fulfillment can bring a beautiful profit without doing anything else.
If you have multiple items with high sales, compare your costs and profits between 100$ FBA and an FBA/Deliverr mix model. Remember that your business is important because of how much of their sales you represent. Consider: What can you gain by bringing all your business to Deliverr?
From our survey, we got a number of other responses that could have made the graph but didn’t get enough votes to have its own bar. We wanted to show you those mentioned more often.
1) Following up on deliveries of products to Amazon Warehouses: Transit from suppliers to Amazon Warehouses is key to avoiding stockouts and sales issues. Good fulfillment partners should be able to provide ETAs, and stay on top of Amazon changes regarding labeling and the like.
Pro Question: Can you increase your inventory turnover by switching fulfillment providers?
2) Keeping track of feedback and reviews: Reviews are the life of a product and its parent company. Be honest in descriptions. Ensure a positive unwrapping experience, offer quick responses to customer inquiries, and try to take all refunds.
80% of people will read reviews from the product or seller before making a purchase, according to an article by the Association of Psychological Science. People will also go out of their own way to post a negative review as a way to punish an unsatisfactory experience. This isn’t the case with positive experiences.
3) Following up on competition prices: Sellers can use price checking tools to track competitors items. Keep in mind price isn’t always the deciding factor for making a purchase decision, so you shouldn’t necessarily make your product the cheapest option.
Tip: Try bundling before dropping the price.
4) Not having overstock for FBA Sellers: With recent changes to storage fees, especially long-term, sellers must be really aware of their sales cycles and consider one of two strategies: a) Reduce purchase volume and increase order frequency. In this case, you may want to negotiate an “open-order” price with your supplier. b) Include a stop in the supplier-to-Amazon route, where you store items yourself and send to Amazon as needed.
5) Having a good customer service in place for FBM sellers: Highly related to #2, customer service is the ultimate source of positive and negative reviews. Don’t cut corners on customer service, and remember, you can sell a bad product with good customer service, but bad customer service will kill the very best products.
6) Guarantee on-time delivery for FBM Sellers: The biggest disadvantage of FBM is Prime Shipping. Getting Prime and landing the buy box is dependent on strong shipping structures that guarantee timely delivery.
We hope you have found value in this post and can’t wait to see you rule the marketplace with your products and offers.
More about SellersFunding
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From landing on our website to getting funded, the process will take 24-48 hours to complete. Our dashboard will give you all the information you need to understand your funding options and how you compare to the market.
There’s a strong case for having funding options ready to pull the trigger when needed, and avoid having to apply in a hurry and get less-than-desirable conditions. The only remedy for that? Anticipation. We invite you to create a free, read-only account with Sellers Funding and get to know your pre-approved amount calculated by our own Visinger Score, without making an inquiry to your credit.