Here’s a scenario we frequently hear:
A B2B manufacturer decides they want to sell their products on Amazon Business. They decide to pilot a few of their regular best-sellers. After all, these products sell well through their traditional distributors. They set up their account and fulfillment, send off a palate of goods to Amazon, and get their listings up and running.
Then they wait. And wait. And wait.
A few sales trickle in, but it’s generally crickets. Frustrated, they decide Amazon isn’t for them. They pull their products and end the experiment, potentially missing out on a major revenue source.
Sound familiar? Unfortunately, this is the same story for countless B2B manufacturers who want to dip their toe into Amazon, but fail to spend the time needed to develop an assortment strategy. Sure, testing their best sellers from other channels seems like a good approach. But it’s more hit-or-miss than an actual strategy. The truth is that just because a particular product works on one channel doesn’t mean it will work on the world’s largest marketplace.
So how do you choose which products to sell on Amazon? Instead of testing a handful of products, B2B manufacturers need to take a detailed and diligent approach to developing an assortment for Amazon Business that considers a handful of key factors.
In our experience, figuring out your assortment for Amazon is like trying to solve a jigsaw puzzle. Let’s take a closer look at three key things you need to understand in order to give your products a fighting chance.
Understand Long-tail Search
One key piece of the Amazon assortment puzzle is understanding how Amazon search works. Amazon has invested significant resources to make their site’s search engine get the right products in front of the right people. But with three billion products, it’s incredibly hard for one or two products to stand out. Even if a product listing is perfect and a buyer is searching on a brand name, it’s still a needle and haystack situation.
This is particularly true if your products serve a particular niche. You might end up only getting five sales on a product each month, but that could mostly be because there are a limited number of brand and nonbranded searches for that product in any given period. Even if you have optimized your product listing, it’s still likely competing with similar products and the Amazon search engine isn’t ranking it high.
But that doesn’t mean it won’t work. Because on Amazon, it’s not about quantity. It’s about profitability.
Understand Profitability
This is the single most important factor to B2B selling success on Amazon. And it’s also one of the most difficult to figure out. Before listing any products or conducting any trial runs, it’s essential to Identify which products will likely do well on the platform requires a thorough analysis of your entire assortment.
Before you even do that, though, you need to determine whether you’re going to be selling through Amazon’s Vendor Central (also called 1P) or Seller Central (also called 3P). The selling model you choose will dramatically impact your profitability. If you’re unfamiliar with these models, check out our blog post discussing the difference, advantages, and disadvantages of each.
There are a number of factors that go into the costs associated with each model. You might find that some products work great under 1P, while others thrive under 3P. The good news is that you don’t have to choose just one. You can take a hybrid approach, selling different products under each.
Understand Fulfillment
Fulfillment is a core part of the Amazon experience. Today’s B2B buyers often choose to make purchases on Amazon because they know they can get their order delivered quickly. The thing is that there are a number of ways to approach fulfillment, and costs can vary greatly from product to product.
As you think about selling on Amazon, it’s important to understand that you want products that are profitable (as mentioned above), but also that can achieve high-velocity and volume. Typically speaking, these are items that are:
Relatively small and lightweight, less than 10 lbs.
Can easily fit into a package
Has a reasonable freight cost to retail value ratio
The cost to produce your product does not matter when it comes to fulfillment. For example, anvils are relatively inexpensive to produce, but they’re bulky and heavy, and therefore difficult and costly to ship. Conversely, small items such as a circuit board have a high profit margin work extremely well because you can ship them inexpensively while still turning a significant profit.
Fulfillment costs can vary, not only on size and type of product, but also how you choose to fulfill them. There are essentially four options, but know that you can choose a hybrid approach based on fulfillment costs for each product.
Fulfilled by Amazon (FBA): You ship your products to an Amazon warehouse and they handled the entire fulfillment process.
Fulfilled by Merchant (FBM): You fulfill all orders through your own warehouse.
3rd Party Fulfillment: There are a variety of 3rd party companies that specialize in fulfilling Amazon orders.
Distributor Fulfillment: You can actually partner with one of your current distributors to handle orders that come through Amazon.
Like everything in business, there are tradeoffs for each fulfillment method. If you’re testing the waters, it’s good to start with smaller and lighter products until you get a feel for how things work and their associated expenses.
These are just a few of the puzzle pieces that go into choosing an assortment for Amazon. It’s essential to get the full picture so that you can make smart—and profitable—decisions about your Amazon product assortment.
To get the full picture, download our comprehensive e-book, The Amazon Assortment Puzzle: How to Find the Right Product Mix for the World’s Largest Marketplace.