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When is Amazon Marketplace right for your brand?

Jun 11, 2024 - Alyssa Wolfe
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When is Amazon Marketplace right for your brand? |

Shoppers are constantly evolving in where they shop. One of the most prominent examples of these shifts occurred during the pandemic when shutdowns drove consumers to purchase online. The result was a surge of ecommerce growth. However, other factors influence where and how people shop: Digital natives enjoy social commerce, while those with Amazon Prime may prefer to shop on Amazon. The bottom line is that your brand's growth often depends on multichannel selling.

The key to expansion and growth is sales channel diversification. That doesn't mean adding without a plan or strategy; it means researching when and where it's best to sell in new channels. For each channel, it's vital to assess readiness, timing and financial implications for your brand. Once you've determined a channel is a good fit, delve into strategic planning. This is particularly true for Amazon Marketplace.  

Introduction to Amazon Marketplace

Amazon Marketplace is an ecommerce platform where third-party sellers can list and sell products directly to Amazon's extensive customer base. As a channel, sellers benefit from access to Amazon's vast and diverse audience, significantly increasing their potential market reach. Sellers gain credibility and trust by associating with the well-established Amazon brand. The marketplace provides robust marketing, advertising and sales analytics tools, helping sellers optimize their strategies and grow their business efficiently. The platform offers logistical support through Fulfillment by Amazon (FBA), which handles storage, packaging and shipping.

While the benefits are extensive, Amazon Marketplace isn't for everyone – or at least not for every brand or growth stage. For example, it might not be ideal for a startup brand because the intense competition and fee structure can erode profit margins, making it challenging for new businesses to achieve profitability. Startups may struggle to differentiate their brand in Amazon's crowded marketplace, potentially limiting their ability to build a unique brand identity and customer loyalty.

Companies can determine readiness for Amazon Marketplace by examining several aspects of their current business. If it's a channel they're ready to explore, it is critical to develop a solid strategy: Amazon Marketplace success depends on multiple elements, including marketing, fulfillment and channel management.

Assessing your readiness for Amazon Marketplace

Expanding into Amazon Marketplace can be a game-changer for retail brands, but it's crucial to evaluate your readiness before diving in. Here are important areas to consider:

Product suitability

Evaluate if your product fits Amazon’s customer base: Ensure your product aligns with what Amazon shoppers are looking for. For instance, consumer electronics, home goods and beauty products often perform well. However, niche or highly specialized products may not attract the same level of interest. Let’s say you sell artisanal, handcrafted jewelry. Research if similar items are popular on Amazon. High demand and positive customer reviews for such products could indicate a good fit.

Competitive Analysis

Checking existing competition on Amazon: Conduct a thorough analysis of competitors selling similar products. Assess their pricing, customer reviews and sales rankings to understand your competitive landscape. Think about it like this: If you plan to sell organic skincare products, you’ll want to identify top competitors in that category. Note their strengths and weaknesses and determine how you can differentiate your offerings.

Operational readiness

Ensure you have sufficient inventory and logistics in place: Amazon customers expect quick delivery. Make sure you have robust inventory or order management system and can handle increased order volumes without delays. If you currently manage inventory manually, consider upgrading to a robust, automated system that keeps track of stock levels across all channels in real-time and can provide demand forecasting that prevents stockouts or overstock.

Assessing your ability to meet Amazon’s fulfillment and shipping standards: Familiarize yourself with Fulfillment by Amazon (FBA), which handles storage, packaging and shipping. Make sure your operations can meet Amazon's stringent requirements. If you choose to use FBA, verify that your packaging meets Amazon’s guidelines and that you can consistently replenish stock to their warehouses. For example, if you use a 3PL for omnichannel operations, your service should ensure that stock gets to Amazon. Working with a fulfillment provider familiar with marketplaces is crucial.

By carefully assessing these areas, you can decide whether your brand is ready to expand into the Amazon Marketplace, setting the stage for potential growth and success. The next step is timing.

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Timing your entry into Amazon Marketplace

Expanding into Amazon Marketplace can be a pivotal move for retail brands, offering a new avenue to reach millions of potential customers. However, timing is crucial to maximize the benefits and minimize the risks. Understanding your brand's growth stage and aligning your entry with market demand and seasonal trends can significantly influence your success.

Growth stage considerations for entry

  • Pros and cons of starting with Amazon: For early-stage retail brands, entering Amazon Marketplace can be both a boon and a challenge. On the plus side, Amazon offers vast exposure to a large customer base and robust infrastructure for shipping and fulfillment. For instance, a small home decor brand might find instant visibility and sales spikes by leveraging Amazon’s reach. However, the cons include high competition and potential challenges in maintaining brand identity. The fees associated with selling on Amazon can also cut into already thin margins, which might be detrimental for a developing business.
  • Leveraging Amazon for scaling up: Brands in the growth stage can use Amazon to significantly scale their operations. With established product-market fit and operational capabilities, these brands can capitalize on Amazon’s logistics and customer service infrastructure to reach new heights. A mid-sized electronics company, for example, might use Amazon’s fulfillment centers to handle increased order volumes during peak seasons, ensuring timely delivery and customer satisfaction without overextending their own resources.
  • Diversifying sales channels with Amazon: For mature brands, Amazon serves as an excellent channel to diversify and enhance market presence. To illustrate, a well-known apparel brand might list its products on Amazon to tap into new customer segments while continuing to drive traffic to its primary ecommerce site. This approach helps balance risks and expand reach without putting all eggs in one basket. Moreover, mature brands can use their established credibility to stand out amidst competition on Amazon.

Using market research and demand trends to time your entry

Understanding market demand is crucial for timing your entry into Amazon Marketplace. Conduct thorough market research to gauge the demand for your products. For example, a beauty brand might notice a rising trend in organic skincare products and decide to launch their new line on Amazon during this peak interest period. Utilizing tools like Google Trends, Amazon’s own sales data and third-party market analysis can provide valuable insights.

Seasonal considerations and product relevance

Seasonality can play a large role in determining the ideal timing for entering Amazon. Products with high seasonal demand, such as holiday decorations or summer apparel, should be introduced ahead of their peak season to capitalize on the buying frenzy. A sports equipment brand, for instance, should plan to list its new range of winter sports gear in late summer or early fall, ensuring ample preparation time for marketing and inventory management to meet the seasonal demand spike.

Assessing financial implications and resource allocation

Expanding into Amazon Marketplace requires a thorough understanding of the financial implications to ensure it aligns with your brand’s goals. Begin with a detailed cost analysis to understand Amazon's fees and commission structure. For example, Amazon charges a referral fee on each sale, which varies by category, and there's also a fee for Fulfillment by Amazon (FBA) if you opt for their logistics services. Calculating the potential return on investment (ROI) is crucial; consider the increased sales volume against these costs to determine profitability.

Resource allocation is another critical aspect. Budgeting for marketing, inventory and potential staffing needs is essential to sustain your operations on Amazon. Marketing on Amazon involves costs for sponsored product ads and other promotional activities to increase visibility. Inventory management becomes more complex as you need to maintain sufficient stock levels to meet demand without overstocking. Additionally, you may need to hire staff to handle the increased workload, including order processing, customer service and logistics.

Time management is also key. Some struggle to balance efforts on Amazon with other sales channels. Effectively allocating time helps your brand continue to thrive across all platforms. For instance, dedicating a team to focus solely on Amazon can help streamline operations and maximize efficiency, allowing other teams to focus on existing sales channels. Another option is outsourcing some or all of your marketplace management.

Strategic planning for Amazon Marketplace integration

When expanding into Amazon Marketplace, begin by setting clear goals for what you want to achieve on Amazon. Think about questions such as:

  • Are you aiming to increase brand awareness?
  • Are you looking to drive significant revenue growth?
  • Do you want to acquire new customers?

For example, a brand focused on health supplements might aim to leverage Amazon’s vast customer base to boost sales and gain market share. Define key performance indicators (KPIs) to monitor, such as sales volume, conversion rates and customer acquisition costs. These metrics will help track your progress and make data-driven decisions.

Preparing your listings is a critical step. You’ll want to:

  • Optimize product listings for SEO and customer appeal by using relevant keywords and creating compelling titles and descriptions.
  • Add high-quality images that showcase the product from multiple angles and include zoom features.
  • Add detailed descriptions highlighting features, benefits and usage instructions to convert browsers into buyers. For instance, a skincare brand might emphasize their products' natural ingredients and benefits to attract health-conscious consumers.

Marketing and promotion on Amazon require a targeted approach. Utilize Amazon’s advertising tools, such as Sponsored Products, Sponsored Brands and Sponsored Display ads, to increase visibility and drive traffic to your listings. Cross-promotional strategies can also be effective; promote your Amazon listings through your website, social media and email marketing campaigns. Brands can try things like running a limited-time offer exclusively for email subscribers to purchase new arrivals on Amazon at a discounted rate.

Managing and scaling your Amazon operations

Effective inventory management is vital for success on Amazon. Decide whether to use Fulfillment by Amazon (FBA) or Fulfillment by Merchant (FBM). FBA can streamline logistics and improve delivery times, but it comes with additional fees. Conversely, FBM gives you more control over your inventory and shipping processes. Develop inventory tracking and replenishment strategies to avoid stockouts and overstocking.

Customer service and feedback management are crucial to maintaining a positive reputation on Amazon. Provide high-quality customer service to ensure customer satisfaction and positive reviews. Efficiently handle returns and refunds to maintain customer trust and comply with Amazon’s return policies.

Monitoring and adapting your strategy

Regular performance analysis is essential to optimize your Amazon operations. Review sales data and customer feedback to identify trends and areas for improvement. Adjust your strategy based on performance metrics to enhance your listings, marketing efforts and customer service practices.

Staying compliant with Amazon’s policies is non-negotiable. Understand and adhere to Amazon’s guidelines to avoid account suspension or penalties. Keep up with policy changes and updates to ensure your operations remain compliant. For example, a brand selling electronics must stay informed about Amazon's product safety and certification requirements to avoid listing removals.

By strategically planning your integration, effectively managing operations and continuously monitoring and adapting your strategy, retail brands can successfully expand into Amazon Marketplace and achieve their business goals.

Invest in expert help for Amazon Marketplace expansion

Marketplace management services offer several benefits when expanding into Amazon Marketplace. These services provide expert knowledge on optimizing product listings, ensuring your items rank higher in search results and attract more customers. They handle the complexities of inventory management, customer service and compliance with Amazon’s policies, freeing up your resources to focus on other aspects of your business. Marketplace management services can also help with targeted advertising and promotional strategies, driving sales and enhancing brand visibility on the platform. Contact today to find out more.

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