From launch to profit: Essential lessons for starting and thriving on Amazon

"Launching on Amazon is like running a marathon."

Over the past few years, we have seen an uptick in businesses coming to us to consult and execute an Amazon launch for them.   We have worked with DTC businesses interested in capturing demand with a lower customer acquisition cost, traditional retail and brick and mortar brands developing their first marketplace strategy, and some new businesses with an opportunistic position of trying to build a brand (and full business) on Amazon. While each of these businesses comes with its own set of pros, cons and operational nuances, what everyone wants to see is quick profits. The reality is that launching a brand or product on Amazon is like running a marathon. It’s exciting, painful, takes time and is completely worth it in the end...most of the time. Let us take you through the critical points of the journey, the situations a business will find itself in and the steps toward building a profitable business.  

Training: Preparation and expectation setting 

When a company decides it is time to go forward with Amazon, it is time for rigorous preparation.  All pre-launch planning should also be clearly paired with setting expectations.  Ask yourself:

• Why are you launching on Amazon and will the plan in place get you there?
• Does that mean putting up your entire assortment on Amazon? (Likely not.)   
• Have you secured the proper funding?  (The answer needs to be yes.)   
• Do you have your organization rallied around thoughtfully testing Amazon and aligned that it takes time to get to profitability through building rank and/or testing your way to an optimal assortment? (Do this now!)   

If you end up pulling the plug without pivots or time, it will be a failed exercise. 

So, how does one make sure expectations are not only set but also used to drive toward launch and execution? If you improperly train for a race because you think you know better than trusted methodologies, the result can be under delivery or even harm. The same applies here when it comes to working with an experienced partner, putting in the right work and trusting each other. 

It is important to have thoughtful planning sessions around the proper assortment, channel positioning and budget to support the launch. Some of the biggest risks in early-stage launches come from being too aggressive with an assortment or not having the ability or desire to invest in driving traffic once products are live. Our recommendation is to plan for the best data-driven assortment at the start and then add more or pivot into stronger selling items. Some businesses want to list every product that exists via other retail outlets. In our experience, this often leads to higher fees because the media budget cannot support the entire portfolio, traffic isn’t strong enough to gain visibility across products and storage fees start building up. Focus first and then grow. (There are, of course, a few exceptions to this strategy which is highly driven by select categories.) On the budget planning, we see companies want to launch but are not prepared to invest in traffic drivers and awareness. This is a very quick path to disappointment. If you build it, it does not mean sales will automatically come. There needs to be intention behind the launch and that means being okay a little discomfort with over-investing in the beginning.     

Mile 1: The launch

You can see your products live on Amazon and sales are starting to flow. Excitement sets in and there are high fives all around. While the launch itself may be reason to celebrate, focus and pacing becomes critical. On Amazon, one of the most crucial pieces of pacing with a product launch is inventory forecasting. Although you can create multiple scenarios, there is no absolute way to determine exactly which products are going to take off or how quickly they will take off. If a product has remarkably quick success, there is the risk of going out of stock and losing momentum. Unless you are operating via FBM or at least have a backup FBM plan in place until the business has been able to exhibit more scale, everyone is at the mercy of Amazon check-in windows. In this case, the ability to restock may take longer and the energy felt at the start may begin to wane.  

On the flip side, sometimes even the most conservative replenishment plan can be negatively impacted if seasonality of a product takes a significant dip once natural buying trends change. Our team launched sunglasses in June and giftable snacks in November – both categories experience highly seasonal behaviors and the sales rebound for each varied tremendously. These experiences have led our team to develop go-to-market execution strategies that can balance multiple if-then scenarios with an Amazon launch.  It is not a one size fits all and you will not know what is best until you are in the race.   

Halfway through  

Still feeling good. Some of the hard stuff is behind you and there is still momentum. At this point in a product launch, our team would be driving traffic to your products through branded campaigns but starting to expand more into competitive and category targeting. Efficiency metrics might show a decline when this happens, but the objective is to start pulling back on where you have started to gain a right to win, and you can start to benefit from organic tailwinds. The timing on this varies by product and sometimes, pending the type of launch, there might be a need for a completely different strategy. Launching a new to world brand (which comes with a distinct set of challenges) clearly does not have brand awareness to lean into, so we need to digitally force the brand into the category consideration set.  

Once there is momentum, we are also looking at trends in ratings and reviews because this can impact sales pacing for new to platform entrants. Low review counts or reviews with fewer than 4 stars can stunt ability to scale. We have been able to uncover early on when there may be a value barrier (price) vs. competitors, especially in scenarios where a new to world brand is trying to make a debut. It is also possible to see the variation in shopper sentiment on Amazon vs. DTC. DTC-driven organizations have more room for storytelling and brand building, which gives more permission around how you can communicate your products across multiple digital touchpoints. In the constrained boxes of Amazon, traditional brand communication can backfire and result in negative reviews. We’ve seen this happen with apparel and sizing, particularly with unique fits and product design. Expectations on Amazon vary from expectations on a branded site, so it is important to communicate in a way that resonates with each type of shopper. Regardless, this is where it is necessary to start digging in to use available data and begin optimizations for success.  

The wall 

You know the end is not that much further, but you begin questioning all decisions at this point because you still cannot see the finish line. You are fatigued and are feeling the pain. Frankly, this is where we see a lot of companies getting very anxious about the fees Amazon charges. Although the implication of fees would have all been shared in the upfront planning and expectation setting, this is where it starts to feel real. The business has been scaling but the fees have also continued to grow. Stick with it. It will flip for the positive soon. While the fees will not go away, they can be managed between balancing inventory and the flywheel beginning to push organic rank. All the work that went into a successful launch should begin to pay off. It is important to stay on top of fee management and investment, however, to ensure the burn is reducing. If the burn is stagnant or increasing, focus needs to shift on quick changes in strategy.  

DTC businesses seem to be the most comfortable in this stage of an Amazon launch because so many of them have recently spent time, energy and money working toward positive margins. It is close to home for them. The businesses that struggle the most in this phase are the ones who have long-standing retail operations with healthy margins and do not remember the early days of investment.   It is harder for this type of business to accept losing money on any unit of operations, especially when having to report back to boards and shareholders.  New to world businesses struggle here too, but for a different reason. Cashflow is so constrained in these businesses that every day without positive income can incite panic, and rightly so. A business needs positive cashflow to continue to invest in operations, so the interdependencies make it particularly challenging to fund next steps.  

Regardless of which type of business you are, remember that you signed up for this challenge. You committed to it, so you need to give it time. We typically recommend a year and no, that does not mean a year from when you first considered it. This means you need to give it a year of sales where the team in place has effectively monitored, pivoted and tested all paths to viability. As an example, one of our clients had a very large DTC business across multiple food and beverage categories. The categories they (and transparently, we) expected to scale on Amazon did not. Their top products struggled to break through the competition. CPCs were expensive and while the brand had great equity, it did not compare to the market share leaders in those categories. What worked, however, was leaning into the slightly fringe variations of top categories. The winners were products that had less commercial availability across retail outlets and could win against competition on an intent-based shopping platform. This is where we started to gain traction. Amazon is the best place to capture specific demand. You can learn a lot about shopping behavior and sales opportunity from keywords and media performance. This is important in any product lifecycle on Amazon, but critical at the onset.  

Finish line

Finally, you approach the finish line and have started turning a profit. The business might still be in its infancy, but you can enjoy a brief moment of celebration. When we’re asked how long it takes to get here, the answer varies. The reason we stick to the guidance of a year is because sometimes the pivots along the way are the things that change the pace and get to the finish line. It does not always take a year, though. There are many variables that impact speed to profit – price, COGS, demand, media costs, return rates, competition, etc. We have seen direct-to-consumer brands turn a profit within their first month on Amazon because of rapid success and very quick scale. These businesses are like those people who can finish a full marathon in less than 3 hours. Lucky, but more importantly, they are well trained and highly invested. Traditional brick and mortar brands that expand onto Amazon typically see positive profit within 4-6 months. What’s important here is to ensure the go to market strategy is focused and not expanding with an unwieldy catalog. The new to world brands? This group is most challenged and has a high failure rate. They struggle with price, a positioning that is differentiated enough to break through, or do not have enough money to invest in finishing the race. The best performing new to world brand we have worked with was net positive on Amazon within four months. Of course there is variability in each of these models, so it is not a guarantee.  

Cautionary bragging rights    

You ran a marathon. You had a successful launch. Now what? As a runner, you might sign up for a new race or shift to focusing on a PR instead of a goal of completion. In business, it’s time to start refining the role of Amazon as a channel, how to best accelerate it and optimize for certain objectives. Is it to maintain a healthy, profitable business with steady growth? Make up topline business goals across your organization with a high growth strategy? Accelerate new to brand customers?  Whatever your business chooses, it is important to not lose the foundation that was established in making Amazon a viable channel in the first place. Losing focus at this point can result in competitors increasing their tactics against you and eating away at what you built to date. The growth plan that was mostly designed as an offensive strategy needs to be balanced across offense and defense as you continue to grow into the future.    

A good partner will be with you along the way to guide you through this, so you aren’t left to figure out the next steps. We are fortunate to have led many clients through launches and an Amazon maturity cycle across multiple business models and categories. Each of these resulted in lessons learned and processes built to drive the most success.       

To learn more about Cart.com's marketplace services, contact our team today.