Viewpoint

AmazonPay to Play in 2023

2022 was another wild year for eCommerce and Amazon. Even as consumers have tightened spending, Amazon has had another strong year. The company’s share price dropped during the first half of the year, but it managed to bounce back in the second half, and early reads predict that Amazon had one of its strongest performances in Q4.

As brands deep dive into their annual performance with Amazon, profitability and investments will no doubt be a huge focus. Earlier this year I wrote an article on profitability challenges with Amazon and going into 2023, I predict that profitability will remain an area of intense scrutiny. Amazon is facing major profitability hurdles (albeit caused by factors outside of retail), and its focus to increase gainful growth throughout the business will remain at the forefront. Businesses that continue to invest in Amazon (in staff, advertising, terms, operations, etc.) will recognise that Amazon is an account where you have to ‘Pay to Play’.

Advertising

Advertising is already one of the best ways to drive traffic to your Amazon listings. In 2022, we saw huge investments made in advertising, and those that invested heavily during Q4 were able to create strong sales. But in 2023 it’s going to be more important than ever to have diverse, far-reaching ads to stay ahead of competitors; this will affect sellers on Amazon as well as retailers on other platforms. We’re experiencing a rise in eCommerce on social media, and advertising is going to have to follow suit. Of course, if every seller raises its advertising game, it will become more difficult to stand out from the competition. Brands will not be able to survive without headline ads and video ads. These will become the norm going forward.

A crucial technique brands and sellers can follow to adapt to more competitive advertising in 2023 is by advertising off-platform. One of the biggest advertising trends is going to be marketing off-Amazon and directing customers to your specific listing on the Amazon website. This of course means that financial investment in Amazon Ads will have to increase, and that you’ll have to Pay to Play to get to the top spots on Amazon in 2023.

Resources

As Amazon continues to move to system-based operations, businesses will need to grow or employ individuals with Amazon specific skills to navigate the marketplaces’ complex ecosystem. Team members will have to be dynamic and tenacious to deal with scenarios where the computer says no. Teams will have to be able to troubleshoot and find new ways of tackling problems, as case management will be, in large, the only way to interact with Amazon.

AVS (Amazon Vendor Services) can be viewed as a Pay to Play mechanism that could become your voice at Amazon, especially as your brand will never be a singular focus area for Vendor Managers. Getting their attention can become strenuous, so investing in AVS could save a lot of time, but of course comes at a huge price. Amazon is a labour-intensive account which you’ll have to dedicate more time and effort to versus other retailers. Another choice could be to invest in onboarding an agency to provide support with the ongoing Amazon challenges, a move that could lead to long-term gains. Agencies have experience with the Amazon “hands-off-the-wheel” approach, and they understand how to remedy the situation when relationship building at Amazon Support level is just not enough.

Operations

I predict that Amazon will move to a JIT (Just in Time) ordering model as, despite having investe3d heavily in increasing its warehouse capacity, the company is running out of storage capacity and doesn’t want to hold excess amounts of stock. I believe that Amazon will reduce Vendor Lead Time and start reverting back to pre-Covid timelines. Businesses will have to invest with their 3PL’s to ensure they streamline Amazon operations. Chargebacks will reach unprecedented highs in 2023 and brands will be forced to constantly scrutinise all Amazon charges. Unfortunately, this will become another huge drain on time, as more staff will be required - all dedicated to operations. Teams will have to be savvy about how operations are managed to prevent it from becoming a cost centre.

As we move into Terms negotiations, ensure that you get the detail right on your Joint Business Plan with Amazon. We have faced constant economic challenges this year, and the upheaval will continue into 2023. It’s important to highlight all areas of investment upfront and to take a comprehensive view of what will impact your bottom line in 2023. Those that Pay to Play will no doubt be more successful with Amazon. Don’t be afraid to gravitate towards other tools to manage your Amazon partnership, including the Hybrid Model.

When kicking off 2023 planning, ensure that your internal teams understand the fundamental reasons behind your 2022 profit performance. This will help you build a comprehensive eCommerce strategy that is aligned with your strategic objectives. Ultimately, 2023 will require brands to have deeper pockets than ever before.

Asha Bhalsod - Asha has 10 years eCommerce account management experience, including at Amazon and managing the Amazon/ eCommerce businesses at Tomy UK and Melissa & Doug. She now runs Etopia Consultancy, to help brands create their eCommerce strategy and grow their Amazon business, and can be contacted on asha@etopiaconsultancy.co.uk for guidance with trading on Amazon.