The Perfect Storm for Amazon Sellers – Part One

If you are an Amazon seller, it is highly likely that you are experiencing a perfect storm. A perfect storm is a combination of events that produce a powerful event. The current storm comprises an economic crisis, too much inventory (a by-product of the last two years), and less space for fulfillment by Amazon (FBA).

Our perfect storm analogy was inspired by a hurricane in 1991 that hit parts of the East Coast (between Nova Scotia and Boston) and became the inspiration for the 2005 movie aptly named the Perfect Storm

In part one, we’ll help you to understand and define the elements of this perfect storm in the context of current events relevant to brands and Amazon sellers. We will also provide you with some additional perspectives to ensure that you and your business not only weather the storm but emerge safely on the other side.

The economic crisis for customers 

Consumers have faced economic headwinds for the last two years.  The monthly costs of living (rents/mortgages, groceries, etc.) have also grown but in many if not most cases, incomes have failed to keep up with inflation.  It’s also worth noting that during the pandemic, many consumers received stimulus assistance and/or tax breaks that artificially inflated consumer demand when that money was spent in stores and online. This “free money” triggered inflation, as seen in the graph below, starting in April 2021 and through 2021. When stimulus assistance ended in early 2022, consumers became both more price-sensitive and more value-conscious.

It has also become increasingly clear that consumers are forced to decide between discretionary spending and non-discretionary spending. Non-discretionary spending refers to items necessary for daily life – rent/mortgage, bills/utilities, groceries, etc. Examples of discretionary spending examples include meals at restaurants, hobbies, entertainment costs, electronics, etc. According to PYMNTS, Amazon’s share of discretionary spending remains at 14% of spending in 2022.

As a brand selling on Amazon, it’s crucial to understand where your products fall in the context of discretionary or non-discretionary spending.  

Are Those Discretionary or Non-discretionary Thunderclouds on the Horizon? What are the ramifications?  

If your products are discretionary – they are almost by default – higher priced items that in the current economic circumstances will likely be difficult to sell. Most consumers (except for those in the high-income brackets) are spending significantly less on discretionary goods. If you have an oversupply of discretionary inventory, you need to consider an economically-friendly bundle or merchandising tactic to generate sales and/or consider using secondary marketplaces to move these items. We believe brand owners unable to liquidate excess stock prior to the current economic crisis are facing uncertain and potentially disastrous times (in fact, the approaching thunderstorms could signal a huge problem). Pricing adjustments intended to generate revenues must be made in a manner that does not tarnish the brand image in the eyes of consumers.

If your products are non-discretionary, the forecasted storm is a bit further away.  However, you may see new emerging competitor brands selling the same items. Brand owners in this category will require strategy, innovation, and deeper analytics to drive profits on low-margin products. And as noted above, selling quantity packs or bundles will serve to increase the average order value. It’s also critical to have an awareness and understanding of how your margins may be impacted by logistics and marketing costs. Brands and sellers in this category MUST constantly factor in margin and profitability. A failure to thoroughly consider economics could result in flat loss-leaders and/or barely hitting break-even points. 

Additionally, it’s critical to understand how pricing and product availability impacts consumer perception of your brand and whether or not you’re providing a compelling value proposition. To summarize, and while it may seem rudimentary, brands have months, not years to adapt to this new economic reality. 

Business owners must also have a keen awareness of unit economics at a product/SKU level to ensure that adequate revenues are realized for every sale. It is also important to align these same costs relative to customer lifetime value metrics. Does it even make sense to sell a product at a given price based on replenishment cycles? If the answer is no – then immediate pricing and marketing cost-related changes must be made – and with urgency. 

A failure to grasp the per-SKU CAC (customer acquisition costs) as well as a limited understanding of replenishment cycles – especially for non-discretionary products – can kill a brand (and sink the ship) before the business owners might even realize they’re in the middle of a storm.

We hope that Part 1 of this article gives you sufficient context and helps to explain how we got here and where we’re going!  Please stay tuned for Part 2 (which we’ll post here in the coming days) and in the meantime, don’t hesitate to contact us with questions.  The Equity Commerce Perfect Storm Forecasting Team awaits.

Buy With Prime E-Commerce

How Marketplace-Native Brands Can (and Should) Leverage Buy with Prime

How Did We Get Here?

In the past decade, we have seen a new type of brand emerge from the e-commerce landscape.  We’re talking about the growth of direct-to-consumer (DTC) brands (like Casper, Dollar Shave Club, Warby Parker, Glossier, etc.).  Credit these brands for finding and filling product gaps thanks to a customer-direct approach while skipping the headaches and bureaucracy associated with brick-and-mortar retail distribution and selling via marketplaces.

DTC brands still face numerous challenges though. In many cases, after factoring in the rising customer acquisition costs (CAC) – bottom-line results can prove to be underwhelming. And as a percentage of total sales and revenue for a given product category, the DTC channel is still a drop in a much larger retail bucket.

DTC brands grew quickly during the late 2010s when venture capital was plentiful and customer eyeballs were readily accessible via social media – especially Facebook advertising. Fast forward to the 2021 iOS privacy update which severely impacted social media advertising – and now a looming recession – and it’s obvious these brands no longer enjoy the smooth sailing they once did.

In this article, we will discuss the basic differences between direct-to-consumer and Amazon marketplace-native brands. We’ll also begin to cover the rationale and logic behind why these brands should seek to build business away from the Amazon marketplace.  And we’ll close with that opportunity we’ve already deemed THE biggest opportunity of this year.  

The Current Chaos

Let’s begin by addressing the current chaos facing DTC brands. In the most simple terms, the entire sector faces crazy, ridiculous, and downright astounding customer acquisition costs. Much of these costs can be attributed to poor digital marketing efficiency.  Translation: Not enough new customers!  Marketing and advertising a DTC brand to a large audience is difficult. And it’s also tough to encourage those consumers to convert to purchasers.  To make matters worse, in 2022 many DTC brands saw those new customers they’d previously converted, churn out of play.

Direct-to-consumer brands leverage Shopify and other software as a service (SaaS) platforms like BigCommerce and WooCommerce, to build their brand websites via scalable and quality web development access at an affordable price. 

In many, these D2C brands have also resisted selling via marketplaces like Amazon due to the perception that marketplace participation would somehow negatively impact brand equity.  Let’s hope this does not prove to be a fatal mistake. Based on December 2022, Retail Touchpoints special report, it’s clear that consumers rely upon marketplaces just like Amazon, to discover new brands.  This means that if a DTC brand is not part of a marketplace, those products are less likely to be discovered. 

In contrast to DTC brands, marketplace-native brands are in their most basic form – brands that were created and designed to effectively (or functionally) only be available to marketplace consumers buying items on Amazon. These brands are built on SEO, keywords, and “white space” opportunities to rank high in Amazon search results. But beware, these particular Amazon waters can be especially treacherous. In fact, a major concern of marketplace-native brands is the very real fear that Amazon might launch an Amazon private-label version of their very same product (hello Amazon Essentials). 

It’s our position that these marketplace-native brands, similar to DTC brands, may be suffering from a myopic business vision when or if, they fail to recognize the opportunity to strategically leverage Buy with Prime to build their brand’s businesses away from Amazon by strategically using the best parts of Amazon to augment their own ecommerce business. 

We’re confident that in 2023 marketplace-native brands will begin to embrace and leverage Buy with Prime to find new audiences.  Of course, the other benefit is that thanks to the data brands own they’ll also be marketing to these new-to-brand consumers via email after they’ve made a purchase via Buy with Prime. 

No surprise, but as marketplace-natives, these brands are familiar and comfortable with both the good and bad of Amazon.  When these brands rely on that experience combined with Amazon’s legacy of innovations and their own scrappy presence, they’ll be positioned to grow their market share. 

It’s our view, on the other hand, that DTC brands built on Shopify and other SaaS platforms will play it safe while opting to wait and see how things shake out with Buy with Prime. It is worth noting that as of early 2023, only BigCommerce has created a native solution to help merchants easily adopt and try Buy with Prime. At the end of January 2023, Amazon will open the Buy with Prime program to US sellers.

Turning Chaos Into Opportunity 

One of the more interesting developing stories in 2023 is how marketplace-native brands will leverage Amazon’s advertising platform to grow business – and get this – to grow businesses away from the Amazon marketplace. It is as simple as creating a compelling e-commerce website via Shopify, BigCommerce, or Woocommerce. And then, this is important, focusing on sending traffic to the site via Amazon advertising.

What makes Amazon’s advertising so interesting in 2023 – is the opportunity to use it to drive customers off of Amazon. Google, Facebook, and “traditional” advertising solutions do not offer a complete funnel experience – from search to purchase. The opportunity to design and create advertising audiences to target Prime customers (now more than 200 million worldwide!) and to send that traffic to a brand’s DTC website should be considered a HUGE assist for marketplace-native brands seeking to build and strengthen real direct-to-consumer businesses – and again, without the hassles and expense of customer acquisition and logistics – thanks to Buy with Prime.

In summary, marketplace-native brands have a massive opportunity in 2023!  They should utilize Amazon’s own advertising and logistics tools. And use them to grow businesses that are out of the reach of Amazon’s marketplace management team. Expect a deluge of direct-to-consumer brands to jump towards Buy with Prime once Amazon Advertising becomes more adopted and ubiquitous.

We understand that parsing data, considering marketing options, and at the same time, building a brand is a huge effort. If you’re seeking answers and assistance to challenging questions like these – we would welcome the chance to be your resource.  We know that we’ll have a lot to talk about.  Please reach out to Equity Commerce so we can start today!

Buy With Prime E-Commerce

Buy with Prime – The Biggest Opportunity of 2023?

Costs of Logistics and Customer Acquisition: The Two-Headed Beast!

Let’s assume you’re the owner of a small or medium-sized e-commerce company.  What are your two biggest challenges?  Based on recent conversations with business owners like you, we predict the double-headed costs of logistics and customer acquisition are at the top of your list.  Getting products prepped and ready for shipping and finding the right customers for your brand are likely your consistent and ongoing challenges. 

In an unrivaled bid to address both of these costly problems, Amazon unveiled the Buy With Prime program in the fall of 2022.  The beauty of this new solution is that it answers those two costly and challenging questions by providing the best of Amazon (world-class logistics and ease of reaching customer traffic) without sacrificing control or the requirement to sell directly on Amazon.

In this post, we discuss the invite-only Buy with Prime program and how it was designed with a purpose – to help small businesses to offer better customer experiences.  

Say Hello to Prime and Prime Benefits

The Buy with Prime program enables brands and sellers that utilize Shopify, Woocommerce, BigCommerce, and Adobe Commerce/Magento Direct-to-Consumer (DTC) websites to seamlessly sell their products to Amazon Prime members (now more than 200 million worldwide!).

By using familiar Amazon Prime logos and icons on DTC product detail pages and websites, brands, and sellers can quickly communicate a sense of trust to consumers who might be new to the brand and/or first-time visitors to the brand website. Buy with Prime also brings additional value and consumer confidence since it enables DTC brands a quick and recognizable payment and checkout option via Amazon Pay.

Buy with Prime also allows e-commerce businesses to leverage Amazon’s world-class logistics prowess to offer speedy two-day (or even quicker in some markets) shipping and free returns. Sellers and brands can also take full advantage of Amazon multi-channel fulfillment (MCF) to fulfill orders placed off of Amazon via other marketplaces and as noted earlier, via DTC brand websites. 

Buy with Prime also provides brands and sellers the opportunity to unleash the power of Amazon’s advertising platform to grow revenue and to reach and acquire new customers when they embark on a product discovery journey away from Amazon. 

What’s the Catch, this is Amazon After all…?

One of the first questions that Buy with Prime raises for brands and sellers is who owns the valuable data generated from the program.  The answer is simple. Brands own their data.  And the data is secured by the same technology that secures And for those that might have read too fast, it is worth repeating that brands do not have to sell directly on the Amazon marketplace to participate in the Buy with Prime program.

As a slight caveat, we should also note that brands and sellers will be wise to use Buy with Prime strategically to ensure that they do not cannibalize their other marketplace sales. In addition, Buy with Prime does not currently support bundles or product unit-quantity packs. This means brands and sellers should think long-term about the appropriate product mix that will sell best while also matching strategic goals via Buy with Prime. 

In conclusion, we are enthusiastic fans of the Buy with Prime program.  We believe the program offers a compelling and attractive new opportunity for brands and sellers to grow their businesses away from Amazon by selectively using the best and most powerful parts of Amazon.

If you’re seeking answers to challenging questions related to logistics and customer acquisition – we have a lot to talk about.  Please reach out to Equity Commerce so we can start that conversation today!