Three tips for managing profitability on Amazon


May 18, 2022

Whilst many brands’ in-house knowledge on how Amazon works is improving, understanding the complexities to achieving profitability on the marketplace and navigating the challenges still presents a knowledge gap.

We recently shared a report with everything you need to know to build sustainable and scalable growth strategies on the marketplace which is available for free download here. In this blog, we share our three top-line tips for managing profitability on Amazon.

Managing the strength of Amazon

As Amazon’s share of the ecommerce market continues to grow, so does its power to implement tougher terms and policies that brands selling on the platform must follow. Whether you’re selling as a Vendor (1P) or a Seller (3P), being adaptive to these changes and navigating Amazon’s ways of working should be a priority.

 Yet while Amazon is potentially one of the toughest negotiators in online and retail, the visibility and ability to drive sales for brands remains compelling.

Take control of your margins

As a Vendor, protecting your margins is vital to the success of your trading relationship with Amazon. Brands are increasingly facing margin pressures from Amazon as well as greater control over pricing, chargebacks, and shortages; all of which can impact profitability.

 It’s no secret that brands should approach each sales channel uniquely, treating their sales, marketing, and profit strategy appropriately. In the case of Amazon, determining where your Vendor margins are being affected and creating an actionable roadmap will help to define your marketplace strategy in the long-run.

Consider a Hybrid model

A large proportion of retail sales on Amazon come from third-party sellers, and many consumer brands are gradually realising the benefits of selling via Vendor and Seller Central, with a Hybrid model.

 Whilst Amazon won't necessarily encourage its prominent Vendors to move to the 3P model, sometimes brands can't sell to Amazon profitably enough to cover their costs. When run strategically, a Hybrid model allows brands to better ensure product availability, get more control of their pricing, obtain meaningful data analysis that is only available via Seller Central and choose the product distribution mix that is most profitable to their business.

 The strength of Amazon means that every consumer brand should consider their marketplace strategy carefully and review it regularly in order to thrive. At Molzi by Brainlabs, our offering supports all elements of a sustainable Amazon business, with flexible services designed to meet your business needs as you grow. We provide a scalable, fully integrated suite of services that work together seamlessly with your existing team - think of us as an extension to your Amazon team!

 For more information on how we could support you in developing your Amazon strategy, or if you are interested in us becoming the authorised marketplace seller for your brand, please don’t hesitate to contact us.

 

3 tips for managing profitability on Amazon

 

Misha Pabari, Senior Marketing Manager

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