I hope you’ve had a great start to your 2024 year so far. It seems like everyone came back on Tuesday, ready to hit the ground running and I’ve already had so much fun getting through the madness of the new year. As you get into today’s email, the year may have changed, but the rules are still the same — as you read this email, I hope you’re sitting back, feet up, beverage in one hand, and phone in the other. Today we’re going to go through the high-level of Amazon 101.

Since the first quarter is generally slower, I want to bring some more resources/learning to this community, even if I am not the expert myself. In the case of Amazon, for example, I’m not an Amazon expert, but I know someone who is, and I interviewed him for this email. His name is Rob, and he runs an agency called Aisle3. Rob works with many of my portfolio companies: Cadence, Lalo, Caraway, and others.

Before we get into that, did you listen to the new season of Limited Supply? We are back!! Moiz and I did a podcast talking all about overpriced SaaS companies, how to balance good customer experience without getting ripped off as the merchant, TikTok Shops vs Meta Shops, and how to generate more top-of-funnel as a brand. Listen to the latest episode of Limited Supply on Apple Podcasts or Spotify! It’s an hour long, so go for a run, get a massage, or listen to us while you get ready in the morning.

At Sharma Brands, we are also hiring for 2 roles. If you are that person, or you know who would be a good fit, please share these links with them:

Lastly, a friend of mine is looking to become your UX/UI production arm if you’re a media agency, freelancer/consultant, or a vendor to eCommerce brands. If you need a team to just handle UX/UI design and development for web pages or landing pages, fill out this form. It comes out to about $2k per page.

Ok, let’s get into today’s email… Amazon 101! If these types of deep-dives are interesting, let me know. I know we’ve done a few in the past — customer experience, organic social, shipping/logistics and now this.

In today’s email, I want to cover: 

  • When and how to launch on Amazon
  • Why to launch on Amazon
  • What it takes to launch successfully (a checklist of things you need to do) 
  • The fees brands should know about/be aware from Amazon 
  • The power of Amazon ads 
  • Data and what’s available to you
  • What brands can expect from launching on Amazon 
  • Some of the common misconceptions about selling on Amazon and a bit more

And obviously, I won’t cover every single detail about how to be successful on Amazon in this one email but I hope that it gives you a strong overview and some helpful nuggets to take away. If you like it, reply back with which part, and I’ll do a full email on it!

When to Launch

In general, in Rob’s view, you should aim to launch on Amazon AFTER you have figured out some of the fundamental things that you need to succeed via DTC. You want to launch on Amazon once you have a proven product with proven creative, messaging, and reviews that’s in market generating at least $50K to 100K/month, or more, through your own DTC website.

$50-100K/month in revenue means that you have struck a chord with some initial consumers and people want what you are selling. You’ve likely iterated your way to figuring out some of the foundational pieces of your funnel that you need to succeed (on Amazon, or otherwise). You’ve developed a strong offer, you have a good product, you’ve A/B tested and found working ad creative, you have refined your copy and positioning to a point where it converts, and from reviews and customer feedback, you feel like you have a pretty strong sense of why consumers are buying from you. 

At $100K+/month, you also likely have the capital and time to make the investment into expanding to a new channel like Amazon which can take a few months to set up and go live. 

Why Launch on Amazon

The Why to launch on Amazon is pretty obvious. As Rob puts it, Amazon built the biggest digital mall in the world, with hundreds of millions of wealthy consumers excited and purchasing every second of every day. 

To give you some context (and there are different reported metrics elsewhere) but Amazon controls roughly 49.5% of all ecommerce sales in the US. 

According to SimilarWeb, Amazon saw 2.6 billion visits in November of 2023 and regularly gets over 2 billion visits per month. They did $514 billion in net sales revenue in 2022 and 31% of U.S. adults now spend between $50-$100 per month on Amazon purchases. It’s literally the world’s biggest digital mall.

It’s obvious that if you have big growth ambitions, you are likely going to want to be on Amazon at some point in your eCommerce journey. The goal is to launch and kickstart the viral loop of getting recommended by their algorithm which in turn sparks a flywheel of reviews and new sales. As Rob said, people use Google and social to learn. People use Amazon to buy. It’s by far the most powerful individual channel for eCommerce today.

How to Launch on Amazon 

According to Rob (and I fully agree) it takes about 3 months to successfully launch a new product on Amazon the right way.

Obviously, it all depends on how prepared you are as a brand and how many SKUs you want to launch with but it does take some effort to do well and go live. 

To make it super simple, here are the general steps:

Step 1: Amazon Account Setup:

  • First, you have to register for an Amazon Seller account.
  • Next, you have to choose the right seller plan (Individual or Professional). (Note: anyone with a brand will be a professional seller) 
  • From there, you will set up your account details, including tax info and your business bank account, etc. 

Step 2: Product Listing/Catalog Creation:

The next step is creating and refining your product catalog. For every product you want to list, you will need to add a product title, detailed description, and then bullet points to describe it.

In general, you should start with your top selling SKUs. If you have dozens of products, start with your 1-5 top performers and expand from there. 

For the copy, you need to think about your positioning alongside the SEO. You want to use relevant keywords that will help you rank better via Amazon search. 

Next is your creative. 

From here, you have to create and upload product photos and videos that adhere to Amazon's guidelines. These aren’t the same as ads. 

The guidelines are:

  • The product should fill 85% or more of the image frame.
  • You can only show the product being sold without any props, sets, or any extra accessories.
  • You can’t use graphic designs or illustrations. It has to be real photos of the product you sell. 

Step 3 is Inventory and Fulfillment:

Once you have your product pages created, you need to decide whether you will fulfill orders yourself (FBM) or through Amazon (FBA).

For context, nearly half of US Amazon sellers use FBA to pick, pack, and ship their orders.

There have also been studies that show that using FBA increases total sales. 

If you choose FBA, you then have to decide on how many units you would like to start with and create palettes to send your inventory to Amazon's fulfillment centers.

You’ll also want to have some kind of ERP for managing stock levels and reordering. If you sell out on Amazon, it can really hurt your momentum and sales, because unlike Shopify, you can’t just email customers telling them that the product will be back in stock soon. 

Also, your product isn’t siloed in a walled garden on your own site. On Amazon, if your product is sold out, Amazon will immediately recommend 25 other competitor products that will steal your sale. Your potential customer will just bounce and choose an alternative. 

Step 5: Getting reviews and the Vine Program 

As many people know, reviews on Amazon basically make or break a product and unlike with other platforms, you can’t quickly hide or remove negative reviews. 

To get started generating authentic reviews, Amazon created the Vine program to connect merchants with pre-vetted reviewers who will leave unbiased reviews before you start spending money on Amazon ads to promote your product or storefront. 

Here’s how it works: 

  • Merchants enroll their products into the Vine program, typically before the product is launched or when it needs more reviews.
  • Amazon invites trusted reviewers, called Vine Voices, to select and review products based on their historical reviews and area of interest.
  • Vine Voices members receive free products from you as the merchant and are required to publish a review within a specified timeframe.

This program is obviously super helpful to brands just getting started on Amazon but fair warning, the reviews might not go in your favor. 

If you sell a subpar product, vine voices will let you know! 

The 4th step is to Launch and Promote:

Once you have everything else set up from the checklist above, it’s time to launch and promote. 

The best way to do this is to use Amazon's internal ad tools which I’ll talk more about in a second. 

You’ll also want to coordinate your other channels on paid search, paid social, email, and SMS to drive awareness to the page. 

From here, you’re going to need to prove your value to the market, stack positive reviews and sales, and increase your product’s authority all while competing with millions of other products on the Amazon platform. It’s not easy, but it can be an incredible channel for growth if you get it right. 

What are the fees when selling on Amazon?

The other thing to know is that selling on Amazon isn’t cheap. They have a wide variety of fees that all sellers must pay. 

Here are the big ones that you should know about. 

For professional seller accounts: 

The right to sell: Creating a professional seller account costs $39.99/month. This is the basic cost of entry to start listing products on Amazon. 

Referral fees: Amazon takes a referral fee for every sale on the platform. The percentage varies widely depending on the product category. It typically ranges between 6% to 45%, with most categories falling between 8% to 15% of the total sale.

Fulfilled by Amazon fees: This set of fees are related to FBA. This depends on the size and weight of the items you are shipping but it’s typically 18-35% of the total sale price of each item sold. 

Ads: 

The best way to kickstart distribution on Amazon is to use their internal ad tools. Rob had a great metric that he calls “TACOS” or “Total Ad Cost of Sales.” As a ballpark, this could be anywhere from 10-30% depending on what you sell.

There are also other fees for returns, monthly inventory storage fees, long-term storage fees, etc. 

And I think this makes sense. Merchants should know that Amazon can’t become the 5th largest company in the world without taking some serious fees for themself. It’s expensive, but for good products, it can also be an absolute game-changer for their growth. 

The goal with selling on Amazon is that you will make up for what you lose in margin by selling in volume with the biggest eCommerce retailer in the world. 

The power of Amazon Ads & the data you get

One of the common misconceptions is that you don’t get much valuable data from Amazon — that’s true as it relates to your orders, but the Amazon Ads platform gives you enough to properly optimize and continue scaling spend. 

From the ads platform, you get a bunch of valuable and familiar data about the performance of your campaigns. For example you can see all of these metrics and more including:

  • Impressions:  The number of times your ad was displayed to potential customers. i.e total reach. 
  • Clicks: The number of times customers clicked on your ad. 
  • Click-Through Rate (CTR): The percentage of impressions that resulted in a click.
  • Cost-Per-Click (CPC): The average cost you pay each time someone clicks on your ad. 
  • Total Spend: The total amount of money spent on a particular campaign or ad group. 
  • Sales: The total product sales generated from ad clicks within a certain period. 
  • Advertising Cost of Sales (ACoS): The percentage of direct sales generated from the campaign compared to the spending on that campaign. This is the most important metric for understanding the efficiency and profitability of your ad spend here.
  • Return on Ad Spend (RoAS): The total revenue generated for every dollar spent on advertising. 
  • Conversion Rate: The percentage of clicks that result in a sale. This helps you understand how effectively your ads are driving actual purchases.
  • Detailed Page Views: Data on how customers interacted with your product's detail page after clicking the ad.
  • Keyword and Search Term Data: Insights into which keywords and customer search terms are driving impressions and sales. 
  • Comparative data: i.e showing how different campaigns or ad groups are performing against each other.

Sure, it’s not as good as Meta and you don’t have as much control over your placements or the ad creative or targeting, but there is still a lot of helpful data that you can get about the performance of your campaigns. 

What you don’t get is the first party data from the customer side that you own. The reality is that Amazon basically only provides you with a hashed email and a zip code for each customer. Put side by side against Shopify, where you will get their full name, email, phone, address, all past purchase info, demographic data from Meta, heatmaps about session data etc., you have to remember you’re goal here is volume and convenience for the customer.

You can also use tools like BRIJ with packages that go out as Amazon shipments to bridge that gap between the CRM you’ve built with Shopify and the orders coming in from Amazon, or any retailer. 

It’s probably the single biggest tradeoff that brands make when entering this channel. First party data capture from the selling platform vs volume and having your own store in the world’s largest online mall — remember, volume and convenience.

What to expect when launching on Amazon

That said, if you have a strong product that consumers like and you have taken the proper time to launch correctly, Amazon can be an enormous growth channel for your brand. 

Rob says that it typically takes another few months to get the flywheel really going where eventually you can start getting favored in their algorithm and generate a bunch more organic sales. Tentpole DTC brands that have crushed it via their own channels often find that they can add multiple 8 figures in topline revenue in a way that’s fairly straightforward by expanding to Amazon.

The truth is, nearly half of all online purchases in the US are made on Amazon, and if you are at scale and your brand isn’t there, you are likely leaving money on the table. There are many arguments for why not to do

Amazon such as the one I talked about above regarding not owning the customer data but in general, most brands will end up there over time.

Amazon clearly isn’t slowing down and will continue to provide a phenomenal experience for customers. It may

not always feel like that for brands, but customers have to come first and if you want to make money, it’s a good idea to meet them where they already are. 

I’m personally a fan of having a diversified omni-channel approach to sales that includes selling via DTC, retail, brick and mortar, marketplaces, affiliate stores, etc. Each channel has the potential to add more and new customers alongside incremental contribution profit to scale your company. 

As a business owner or CMO, you just have to remember that Amazon is a tool. It’s up to you to decide if it’s the right tool and path to achieve the growth ambitions that you have for your brand. 

That’s it for today. I hope that you enjoyed this overview of how to get started on Amazon. Thanks again to Rob who helped with this piece. Find him on LinkedIn if you have any other questions! 

Now, onto some fun stuff…

Vendor of the Week:

Tandym — The easiest way to increase your contribution margin by 10%.

On Limited Supply, we've talked a lot about "Contribution Margin," or how much money is left in the bank account at the end of the day. Unfortunately, there aren't a lot of tools that help you truly see a higher contribution margin at the end of the year, but I found one that I'm a big fan of, Tandym.

Tandym helps you be more like 80% of the top 100 retailers who all use their own branded credit cards with their most loyal customers. Have you ever wanted the Target Red Card but for your own Shopify store? That's exactly what Tandym does, and it only took me 30 minutes to set up for my brand, Long Wknd.

Tandym, on a product level, is THE branded payment option for DTC brands. It helps you make your loyalty program stronger, increase NPS, etc... but their tool overall really contributes to more profit at the end of the year. By cutting card processing fees to less than 1%, increasing AOV, and developing more loyal cohorts, most Tandym customers see a 10% increase in their contribution margin.

If one of your goals is to increase your contribution margin in 2024, then I highly recommend you book a call with Tandym. Plus, if you're a brand that does more than $5M/year in revenue, you'll get a $100 Amazon gift card for checking out their demo. 

Click here to book your demo!

LP of the Week:

Today’s LP of the Week is from Postable. They wanted HOOX to build them a LP that focused on getting people to send holiday cards out to their clients/cusotmers/network.

CLICK HERE TO SEE THE LANDING PAGE!

This landing page tackled head-on what people are thinking about when it comes to this topic of writing and sending out holiday cards. Is it fast? Is it easy to do? Is there lift on my side? These are the types of things we think through as we strategize your LP. Book a call with HOOX if you’re ready to increase your conversion rate.

That's all for this week

I hope today’s email was valuable for you, albeit a little different than usual. I am also about a month out from having my new website where I can finally link back to older newsletters, and about 2 weeks out from a Nik Sharma version of Chat GPT. It’ll live inside Chat GPT, but you’ll be able to ask me anything and it’ll answer just like me.

Also, if you’re a brand owner and looking to build out a financial model for your business, but don’t know where to start… my friend Matt Mullanex (who started Huron for men) is building this out for you. You can submit your info on this form and he’ll reach out to you!

It’s Sunday night, so I hope you get 9 hours of sleep tonight, and have an incredible upcoming week. I’ll see you next Sunday, same time, same place. 

Have a great upcoming week!