Amazon absolutely dominates today's ecommerce landscape.
The online retailer captured 53 percent of online sales growth in the U.S in 2016, up from 40 percent in 2015 according to Rakuten Slice (a company that mines customers' e-receipts). That is an upward trend that is quite impossible to ignore.
As many have quickly discovered, of course, a failure to establish a strong presence on the network (or any presence at all really) often results in sellers languishing at the bottom of search engine results pages, buried in the social media feeds of popular networks, or grasping for any opportunity whatsoever to capture the attention and purchasing dollars of prospective buyers. While retailers do not have to sell on Amazon it often serves them well if they do.
Sellers promoting their products on Amazon, however, are faced with a variety of challenges. There are some practices of course that can help ensure that an investment of time and resources is not wasted. One of those techniques is to optimize for the Amazon Buy Box (where a reported 82 percent of purchases from third-party sellers are made).
The Buy Box is the area on a product detail page (see the image below) where Amazon customers can immediately begin the purchasing process by adding the item they searched for to their shopping cart (unaware, in effect, that they have bypassed other sellers). At Amazon, multiple sellers can offer the same product and if there happens to be more than one eligible seller offering the product (which there often is), merchants compete for the Buy Box for that product (showing other sellers below the Buy Box). Winning the Buy Box could make the difference between five daily orders or 500.
To capture the Amazon Buy Box, sellers must approach the initiative with immense care, thoughtfulness and, of course, technical sophistication. Let's take a look at some basic and advanced tactics for capturing this incredibly important ecommerce real estate.
One of the most important steps retailers should take if interested in winning the Amazon Buy Box is to first make sure they are eligible.
ESTABLISH ELIGIBILITY
Buy Box eligible sellers are those who have met performance-based requirements outlined by Amazon, including sellers' time and experience on the service, the customer shopping experience that is being provided (e.g., the speed of delivery, shipping options, price and of course customer service) as well as the method of fulfilment.
To check your own eligibility as a seller, visit Seller Central, select the Inventory tab and then "Manage Inventory" and then "Preferences." Within "Column Display," locate the "Buy Box Eligible" tab. Select "Show When Available" from the drop-down menu and look at the Buy Box eligible column for each SKU. If it says "yes" sellers are eligible. Just being "eligible" of course does not mean that sellers will show up or that they will make a sale as there are many other factors at play which influence whether sellers' products are shown to prospective buyers, including:
- Customer Support: Sellers need to have an average response time of less than 24 hours for customer inquiries.
- Fulfillment: It has been well documented that using Fulfillment by Amazon (FBA) does provide an advantage as Amazon is expert at fulfilling/delivering orders quickly and efficiently. Those opting to deliver and fulfill without using FBA should ensure shopping times are accurate and as promised, that the pre-fulfillment cancel rate is less than 2.5 percent, the late shipment rate is less than 4 or 5 percent and on-time delivery is also high.
For many, the benefits of using FBA (better chance at the Buy Box, storage savings, lower shipping and handling times, improved seller ratings and access to Prime members) outweigh the drawbacks (fees to store slow-selling products that can be more than product value). Other variables include:
- Fulfillment: It has been well documented that using Fulfillment by Amazon (FBA) does provide an advantage as Amazon is expert at fulfilling/delivering orders quickly and efficiently. Those opting to deliver and fulfill without using FBA should ensure shopping times are accurate and as promised, that the pre-fulfillment cancel rate is less than 2.5 percent, the late shipment rate is less than 4 or 5 percent and on-time delivery is also high.
- Sales Volume: Sellers that have a track record of product sales are more likely to win the Buy Box, simply because there is more data that Amazon can use to make their determination. Those just getting started selling a product will need to compete on other factors.
- Feedback: While there is debate about the specific numbers, sellers with significant amounts of positive re-views indicates to Amazon that they are trustworthy and have many satisfied customers. Ideally, the negative feedback score should be less than five percent.
A seller's eligibility to win the Buy Box is going to change over time based on the criteria outlined here and is subject to change. Amazon indicates that "sustained sellers' performance" and a low ODR (order defect rate) will help both achieve and preserve a seller's Buy Box eligible status. Amazon also indicates that specific performance metric targets can vary by category and are subject to change. Earning Buy Box eligible status in one category does not automatically qualify a seller for Buy Box eligible status for all categories.
What most sellers struggle with is that there is not one proven way to capture the Amazon Buy Box; many variables actually come in to play. Ultimately, it is impossible to win the Buy Box consistently. In the best-case scenario, sellers can only win a percentage of the Buy Box since Amazon rotates the winners periodically (possibly every hour).
COMPETITIVE PRICING
Price, of course, is perhaps the easiest variable in the Buy Box algorithm to manipulate. Sellers can control price themselves and do so in real-time - and a lower price can increase the share the seller captures the Buy Box.
Prices do not necessarily have to be the lowest for every product but it should be competitive; those consistently charging more have a far lower likelihood of capturing the Buy Box.
What is interesting about pricing for the Buy Box is that it does not include the price of the product alone. Instead, Amazon considers the total cost to the consumer, or what is known as the "landed price" which includes seller fees, budgets, margins, return costs, shipping costs and budget. That is a lot to consider for most merchants but many are leveraging technology to make the most of the opportunity.
Amazon is much more likely to feature sellers in the Buy Box who use an automated practice called algorithmic pricing (when the prices of a product are automatically adjusted in reaction to a change in the status of a competitor's product price), even though their prices may be higher than those who do not. A study from Northeastern University revealed that algorithmic repricing is directly correlated with a higher share of Buy Box share and profits; reason enough to consider such a solution. Most repricing solutions make adjustments every 15 to 60 minutes.
There are likely other (unknown) factors in play to capture the Buy Box, and sellers do not need to be perfect in order to do so, but the closer to the ideal the better the chances will be to increase sales and profits on the platform.
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