3 Key Challenges Blocking Your Path to Growth on Amazon


July 16, 2021

Amazon is not like any other retailer; it's all self-service. By just listing your products, you can get short-term success. But it's not going to be sustainable, and without a growth strategy in place, you're going to lose market share year on year – even as a big brand.

Internal knowledge inside brands on how Amazon works is improving. But there's still a fundamental knowledge gap about the mechanics behind how it all works. Addressing this gap relies on understanding all the moving parts needed to achieving growth on Amazon and navigating the challenges brands face. 

Let's explore the three key challenges hindering growth on Amazon today.

#1 Increasing shipping rates impact product costs

The cost of shipping products from China has significantly increased. Last year containers would typically cost between $3000 to $3500 to ship. They're currently at about $13,500, with some analysts forecasting this could increase to $20,000. The price of many products has increased because shipping costs have risen massively throughout the pandemic. Without managing this cost, it's going to impact the bottom line and, ultimately, affect overall profitability on Amazon.

#2 Ongoing challenges with Amazon Fulfilment Centres

Many brands also face ongoing challenges with Amazon fulfilment centres. Getting into the Amazon fulfilment centres for Prime Day or Q4 is always challenging; this year has probably been the worst before Prime Day, and Q4 2021 is likely to be as bad. Amazon is going through a period of overstock in its warehouses. So the warehouse capacity is quite limited. It means sellers need to think about alternative fulfilment partners and other ways to send the products to their customers. Can they streamline operations? Is there a direct fulfilment option that could reliably and quickly ensure customers get their products? There's likely to be an impact on margin, but it means you're fulfilling the demand and not missing out on sales versus your competitors.

 

#3 Navigating the Amazon way of working

The supply chain element is a common operational challenge for brands working with Amazon. In particular, global growth can be held back without the proper infrastructure, the right VATs or third-party logistics. In addition, if you don't know how you're going to set up operations and don't have the language capabilities, it can hinder growth in new markets.

Brands can also struggle with day-to-day operations, including managing the purchase orders received and packing the products sold to or on Amazon – for example, complying with the platform's stringent requirements around bubble wrapping and boxing. Terms of negotiations are also always tricky because Amazon does push for percentage points every year. 

And, if you have an extensive portfolio, maintenance of that portfolio and ensuring all products are optimised and correctly prioritised when looking at advertising take significant resources. 

There's also the challenge with what Amazon calls CRAP ASINs - can't realise any profit. Amazon has deemed these products unprofitable. But, for a vendor, it might be beneficial for them to have those products on Amazon. And there are options available to really streamlined margins and make it work.

Amazon has a specific way of working; it always focuses on what's best for the end customer. Amazon wants to offer the most competitive price and quickly provide genuine products. It's why the Buy Box exists; why they have the Brand Registry program; and why they're focused on anti-counterfeit measures. 

Often challenges are exacerbated, as Amazon doesn't always communicate with sellers about new features of platform changes - they just launch them. It's a reason brands turn to an experienced partner who knows how Amazon works and can be agile and adaptive when faced with the challenges of working on Amazon. 

 

Overcoming the challenges and unlocking sustainable growth

Consider whether your portfolio is optimised and ready to be sold on Amazon and ensure the supply chain can manage Amazon. For example, can you manage how Amazon processes the orders weekly, instead of how other retailers would work, with a monthly or twice monthly cadence? How are you looking to work within that portfolio and then scale it?

Streamline your supply chain and operations as much as possible; your costs can increase and quickly become unsustainable. Keep investing. And then, look at international expansion and work through the building blocks for success. Do you have the infrastructure to expand into the different regions, and how can you go now? How will you optimise later down the line; decide whether you have the resources in-house or prepare to use a third party?

Look at your order management process, making sure you have a system in place. Next, ensure your packaging is compliant with Amazon's requirements, that you're getting the shipments in on time. Amazon chargebacks, shortages and overages are a big part of the challenges vendors face; ensuring your operations are as tight as possible is critical to avoid these.

 

 

Want to know more? Discover how to overcome the challenges and unlock sustainable growth on Amazon. Download your copy of The Amazon Success Blueprint: Achieving Sustained Growth on Amazon.

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Ethan Kitching, Chief Commercial Officer

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