Etopia

Winning with Amazon

Etopia’s Managing Director, Asha Bhalsod

Etopia’s Managing Director Asha Bhalsod takes a closer look at the Hybrid Model when managing Amazon.

Historically, brands have assumed that the best strategy for managing Amazon is either through Vendor Central or Seller Central.

With market conditions turned on its head, and lines blurred between the two strategies, there’s no single route to market if you want to win with Amazon. A sound Amazon retail model is a hybrid one.

What is the Hybrid Model?

The Hybrid Model is a concept that’s been around for many years and through it, brands are able to enjoy the best of both the Vendor and Seller Central worlds. While Amazon Vendors have lower fees and access to more sophisticated tools, Amazon Sellers are able to enjoy more analytics, margins and control. Each platform has their mutually exclusive advantages. Yes, brands will have a variety of options available to them, both practically and strategically. However, you must meet the criteria of being a vendor on Amazon, and you also need to manage a Seller Central account full time.

Why should brands adopt a Hybrid Model?

As a global marketplace, you’ll have a great tool at your disposal in challenging situations with Amazon. That doesn’t mean adopting a Hybrid Model will be plain sailing – the biggest challenge might actually be your relationship with Amazon.

In recent years Vendors have been scrutinised more and Amazon has made a definitive shift towards chasing profitability. “Net PPM” or Net Pure Product Margin has become a buzz word (or swear word depending on which side you’re on) and needs to be tracked monthly. In fact, Net PPM should almost be fixed! Amazon will constantly evaluate their Net PPM against your products. The risk of Amazon not making enough margin from your brand and its products could lead to detrimental consequences for your business. And at the end of the year, when those margins are unmet, trading term negotiations get very tough…

Trading Terms

Amazon is renowned for its tough stance when it comes to trading terms. Through Seller Central, there are no trading terms negotiations, and if you don’t have access to a Vendor Manager, your agreements will auto-renew. With no one to fight on your behalf, incremental increases will go unchallenged, and Amazon will push to grow its profit margins. Negotiations must be skilfully handled, taking a comprehensive approach to your business, and considering both current and future activities across the board.

If Amazon demands an increase in terms, this no doubt poses profitability challenges. If negotiations are “stuck” and there is no “win-win” solution, transitioning to a Hybrid Model will improve your control of business profitability.

CRAP lines – it’s not a swear word!

CRAP = cannot return a profit… If a product is popular but unprofitable (for Amazon), Amazon will not store it in any of their warehouses, and they’ll stop reordering the line. Unprofitable lines will simply get CRAP’ed. The most common reasons for CRAP status are price pressure and high shipping/storage costs in relation to the value of the goods. You can funnel the CRAP list lines through your Seller Central account – it’s all about taking the relevant lines that are not on Vendor Central and putting them on Seller Central.

Seller Central and Vendor Central are two completely different teams within Amazon. Since hybrid selling compromises Amazon’s ability to control the end-to-end customer experience, Amazon is not a fan of the Hybrid Model. The Born to Run programme was conceived a few years ago, and rumour has it that it was Amazon’s attempt at

discouraging a cross-over to the Hybrid Model. However, The Born to Run programme is a great tactic to use to launch new ranges through Vendor Central.

Importance of logistics strategy when defining these models

When assessing if the Hybrid Model is suitable for your business, logistics will play a pivotal role in decision-making. Through Seller Central, there are two methods of fulfilment, FBA (Fulfilment by Amazon) or FBM (Fulfilment by Merchant). Although FBA can be expensive, the service is substantially more comprehensive. Amazon will pick, pack, ship, handle returns and deal with customer queries. Your sole responsibility is to send the items to Amazon. FBM is a little different. You sell directly to customers through the Amazon platform, and all logistics and enquiries resides with you as a brand. You will however be paying reduced fees.

So, if you opt to move to a Hybrid Model, you’ll have to consider what the correct

logistics strategy is by analysing profitability and capabilities.

Importance of resources to managing these models.

Setting up a Hybrid Model is time consuming, and it’s vital to have adequate internal logistics in place. You need the right people in the right jobs across the business to manage your Amazon account. And that ranges from Account Management to data analytics to strategy creation and implementation.

Amazon is not just a sales account or a marketing platform. It can’t be treated as just another marketplace to sell your goods on. Amazon must be forefront and centre when planning out your e-Commerce strategy as a whole. Sales and marketing strategies need to be evolved continually to make room for new ways of working, the Amazon way. You need an Amazon mindset to fuel and inspire your Amazon-first approach.

To book a consultation or learn more about the Hybrid Model approach, email asha@etopiaconsultancy.com

To learn more about Amazon, please feel free to reach out to me! asha@etopiaconsultancy.com

N EWLAUNCHINUK

HarrogateH t Booth C44

furniture. toys. accessories.

Explore the benefits of silicone tableware with BLW Essentials

Weaning with less mess

Non-toxic

Our silicone products are made from 100% food grade silicone and do not contain any fillers.

FDA approved

Our silicone tableware products have been tested and comply with FDA standards.

Practical and stylish

Our products are designed with little ones in mind, making the weaning process less messy.

For further information email

contact@blwessentials.com

or visit www.blwessentials.com Follow: blwessentials