6 minute read
Viewpoint
A strategic review of Prime Day and opportunities ahead
Profitability is the most talked about topic with Amazon. If it’s not Amazon declaring how unprofitable an account is for them, it’s brands assessing how their most profitable account has now become the most unprofitable account. Whether Vendor or Seller, the mood is the same, as Amazon continues to demand funding to support price matching and raising seller FBA fees. The simple truth is that it remains extremely challenging to trade with Amazon.
As we approach Q4, the toy industry’s most crucial period, it’s time to take stock of Prime Day performance and plan strategically for the final quarter of the year. September is a pivotal period - a chance to refine strategies, capitalise on learnings from Prime Day and prepare for the all-important holiday season. With consumer spending expected to surge, decisions made now will determine whether companies simply ride the wave or truly maximise profitability.
Prime Day has firmly established itself as a significant event for the toy industry, offering a preview of consumer behaviour and trends that often carry through to the holiday season. Noticeably, however, not every toy brand wants to be part of this event – a trend that we saw increase this year. Nevertheless, July’s Prime Day provided valuable insights, both in terms of what worked and where there is room for improvement.
One of the standout trends was the effectiveness of holistic promotional strategies. The days of relying solely on deep discounts are over. Brands that thrived during Prime Day combined aggressive pricing with enhanced A+ content, targeted ads and strategic use of Amazon’s Vine programme to generate buzz and drive conversions. Those who opted for a more simplistic approach found it harder to cut through the noise. The consumer is smart and has many tools available to them to identify genuine discounts.
However, Prime Day also underscored the challenges of an increasingly saturated market. With so many products vying for attention, toys that lacked a unique selling proposition struggled to maintain visibility, even with substantial discounts. This underscores the importance of product differentiation, not just to capture attention but to maintain profitability in a competitive market.
It's also important to highlight that if a brand is struggling to make profit on Amazon, root cause analysis is important. Is there an effective channel management strategy that protects your brands and products? Is there a cohesive promotional strategy across your retail channels? If you have a tight distribution strategy, Amazon’s profitability won’t be impacted, allowing you to be free to grow a healthy Amazon business.
Strategic planning for Q4: optimizing for profitability
As we gear up for Q4, the lessons from Prime Day should inform our approach. The objective is not merely to boost sales, but to do so in a way that maximises profitability, ensuring that every action we take delivers a strong return on investment.
1. Inventory management and pricing optimization
Effective inventory management is more important than ever as we approach the holiday season. Accurate forecasting will help minimise overstocks or understocks. Both scenarios carry risks; overstocking can lead to profit-eroding discounts, while stockouts can result in missed sales opportunities.
Pricing strategy is equally critical. Dynamic pricing tools, which adjust prices in real time based on market conditions, can help maintain competitiveness while protecting margins. The key is to strike a balance that drives sales without sacrificing profitability. As the holiday season approaches, this fine-tuning will be essential.
2. Amazon Advertising: fine-tuning for peak performance
Amazon’s advertising platform is a powerful tool, especially during peak shopping periods. However, as competition intensifies in Q4, optimising ad spend for maximum impact is essential. This starts with analysing the performance of Prime Day campaigns – finding out which keywords and ad types delivered the best return on ad spend (ROAS). This data can be used to inform Q4 strategy, ensuring that investment is in the most effective channels.
A full-funnel approach to advertising is particularly important as we head into Q4. While lower-funnel strategies (such as retargeting) will drive conversions, upper-funnel efforts - like brand-building video ads - are critical for keeping a brand top of mind as consumers begin their holiday shopping. Balancing these approaches will help maximise both immediate sales and longterm brand equity.
3. Elevating product listings and brand presence
Amazon product listings and brand store are digital storefronts, and in Q4, they need to be in peak condition. High-quality images, detailed product descriptions and engaging A+ content are fundamental, but this is just the starting point. Companies should consider how they can tell their brand’s story in a way that resonates with holiday shoppers. Whether it’s emphasising the uniqueness of products, highlighting commitment to sustainability, or showcasing brand heritage, content should be designed to connect emotionally with the audience.
Each brand store should be optimised to guide customers through the purchase journey. This might include creating gift guides, featuring best-sellers, or highlighting seasonal promotions. Regularly updating the store with fresh content as the holiday season progresses will help keep shoppers engaged and encourage repeat visits.
4. Harnessing Amazon’s activation tools for Q4 success
Amazon offers a variety of activation tools that can help drive sales during Q4. Beyond traditional discounting, consider using vouchers, which offer a visible discount on search results pages, and promotions, which can increase basket spend.
The Amazon Deals page, particularly during Black Friday and Cyber Monday, can significantly boost visibility and sales. While securing a spot requires investment and planning, the potential return is substantial. As we move into the peak season, experimenting with different promotional mechanics early on can help identify what resonates most with shoppers, setting the stage for a successful holiday period.
Looking beyond Q4: building sustainable profitability
While Q4 is the immediate focus, it is also essential to consider how implementing strategies now can drive long-term profitability. It’s essential to address just how important Amazon is in terms of company growth. If it’s a long-term business partner, then it’s time to invest time in thought out strategy in distribution, channel management and promotions. These key areas will help navigate around the complex conversations around Amazon profitability that simply aren’t going away.
As we stand on the cusp of Q4, the toy industry is poised for one of its most exciting - and challenging - periods. By leveraging insights from Prime Day, optimising Amazon presence, and focusing on both immediate and long-term profitability, toy brands can make the most of the opportunities ahead.
