Many believe that having more Amazon sellers will equal higher sales. In marketplaces like eBay this may be true however on the Amazon marketplace the only ones who benefit from multiple sellers is Amazon and their customers.
The truth is, having more sellers does not increase your sales. Allowing multiple sellers to sell your products on Amazon actually does the opposite of growth by creating an competitive environment within Amazon that drives selling prices down where margins erode and sales volumes plateau.
Amazon has many moving parts that can make it confusing to understand. Let's keep it simple and break Amazon's marketplace down to learn how having 30 sellers rather than 3 will not make a difference in your sales.
Offers
Like many other marketplaces, Amazon allows multiple sellers, referred to as "3rd Party Sellers", to sell the same product in new or used conditions.
Contrary to belief, of the 353 million products sold on Amazon, Amazon is the seller of only 12 million of those products. Chances are, a majority of the purchases you personally have ever made on Amazon actually came from a 3rd party seller without you even realizing it.
Amazon gives 3rd party sellers two different offer type choices:
FBA - Fulfillment By Amazon
FBM - Fulfillment By Merchant
FBA is where Amazon acts as a fulfillment center. The seller ships their stock to Amazon where they will logistically handle the warehousing, all of the shipping and returns when the seller receives an order. These offer types are Prime Eligible and cater to Amazon's Prime subscribers.
FBM is where the seller themselves is responsible for their own warehousing, shipping and return management when an order is placed. These offer types are not Prime Eligible.
The Amazon Product Page
What makes Amazon different than others, like eBay, is where they list these multiple offers in their marketplace.
Rather than displaying multiple offers for the same product in Amazon's search results, like eBay does, Amazon places these offers on a unique product page.
Even though Amazon doesn't necessarily hide this from their customers, unless you're looking for it, you'd miss where to locate these offers.
Otherwise, Amazon's product pages are no different than a product page in your typical webstore where all of the product information is displayed in a nice informative layout. These pages include a title, product images, featured bullets, videos, and a description. You will also see the selling price and a single "Add to Cart" button. Each product page is unique though the assignment of a single SKU, used to eliminate duplicate product pages in their catalog.
Product pages are produced either by Amazon or from 3rd party sellers. Amazon accepts "contributions" from sellers to edit product pages which are governed by a complicated algorithm and/or Amazon's dedicated catalog team.
Multiple offers are visible to customers if they locate and click the "Other Sellers on Amazon" link where they will be taken to a list of available new and used offers.
Rather than initially displaying this list of offers to the customers, Amazon places a single "Add to Cart" button on the product page.
When the "Add to Cart" button is clicked, Amazon will dynamically choose a seller, based on rules, for the customer. This process is often referred to as the "Buy Box" as shown in this image.
Like I mention above, the "Buy Box" has a set of rules that determines which offer gets chosen for that sale at that time. As shown here, you can see the seller "DickerDeals" will get the sale when the "Add to Cart" button is clicked.
We will dive into the buy box logic in another post but for now, know that price has everything to do with gaining control of this buy box.
Search
With over 353 million products in Amazon's catalog, Amazon has become the worlds largest product search engine.
When you search on Amazon, the unique product pages populate the results based on keyword logic specific to Amazon's own unique search algorithm.
When a customer clicks to view the product page and makes a purchase, along with other factors, Amazon will rank that page higher or lower in the search results. This is considered an organic rank.
Similar to Google, product pages that appear on page one for popular keywords will generate more views and ultimately more sales. This is where product page optimization can play a major role in what keyword results a product page may or may not appear in and effect page traffic/sales.
Putting It All Together
This is the big Ah Hah moment you've been waiting for! So lets put it all together:
A customer completes a search on Amazon
A list of unique product pages appear in the search results
The customer views each product page until they find a satisfactory product to purchase
The customer clicks the "Add to Cart" button on the product page to make their purchase
Amazon's algorithm chooses an available offer, based on rules, to give that sale too
And that is it. The product page is what produces the order, NOT the seller offers.
What is important to understand here is the fact that customers do not look at the multiple offers on a product page. Even though Amazon doesn't necessarily hide this from its customers, they surely do not make it well known nor is it convenient.
Instead, Amazon developed an algorithm that will choose the best priced and most reliable offer to give the sale too without the customer even knowing about it.
That said, having 30 offers or 3 offers on a product page will not increase that product pages sales. Instead, product pages themselves produce sales based on its ability to rank within Amazon's search results. If a product page is optimized with properly placed keywords, well developed creative and copy then that page will ultimately drive more traffic and will result in more people clicking the "Add to Cart" button regardless of the number of available offers.
Below are two examples of how sales are distributed based on the number of sellers on a product page.
Example A - 30 Sellers:
A product page produces 300 orders per month.
30 FBA offers priced the same and the lowest on the produce page.
300/30 = 10 sales per FBA seller per month.
Example B - 3 Sellers:
A product page produces 300 orders per month.
3 FBA offers priced the same and the lowest on the produce page.
300/3 = 100 sales per FBA seller per month.
Important: In either example above, if one offer drops their price just $.01 below the lowest priced in the group of offers, Amazon's algorithm will give them all of the sales that page produces. This is where the term "Race to the Bottom" derives from.
Brands that have product pages similar to Example A, with 30 sellers, are more likely experience:
Constant MAP violations & low selling prices
Unpredictable purchase order sizes
Poor product page quality
Inconsistent product information & poor branding
Flattened sales volume & missed opportunities
Having Fewer Sellers will Increase Your Sales
Unlike Example A, Example B with 3 sellers will gives brands the following advantages:
Authorized sellers will be able to maintain an agreed selling price & avoid margin erosion
Purchase order sizes will be larger & predictable
Authorized sellers will be able to improve the quality of the product page
Authorized sellers will gain the ability to market & drive paid traffic to the product page
By limiting the number of authorized sellers you not only avoid the common pitfalls of selling on Amazon but you also open the door to improving the sales of your brand on Amazon.
Brand Ascend Increases Amazon Sales
Limiting sellers is only part of the equation. Choosing a professional seller with the experience and resources to improve your Amazon product listing is the other half of that equation. This is where Brand Ascend separates itself from other 3rd party sellers.
Brand Ascend has developed a proprietary marketplace marketing flywheel system that implements up-to-day best practices for improving Amazon product page rankings and sales. We not only manage and distribute your brand on Amazon, we also work with you to improve your Amazon product pages and increase sales.
Reach out to us to learn more.