Why Scale with Amazon FBA?
If you’re an online seller, you already know Fulfillment by Amazon (or Amazon FBA) is an effective tool that can help your business grow with less manual effort. Most eCommerce companies have to work hard and keep a healthy cash flow before considering opening an FBA selling account.
The competition is fierce and justified, in part, by the impressive recent data:
- Amazon has roughly 215 million monthly visitors in the United States alone, only beaten by Facebook and Google. Basically, it's free visitors to this site.
- Amazon Prime members typically spend roughly twice as much as non-Prime members, which makes Amazon even more attractive as a shopping option.
- A total of 76 million households will have access to Amazon Prime by 2022.
- Amazon's fast shipping led to almost 80% of people choosing to shop on the site in January 2020.
Sellers can ship their products directly to Amazon warehouses for bulk storage with Amazon FBA. Upon a customer's purchase, Amazon takes care of shipping and customer service. Amazon Prime benefits are another attractive feature for customers, and many sellers take advantage of it.
Additionally, Amazon assumes all risks and is liable for any delivery or logistics issues. There are fewer risks for sellers, and they don't have to invest in optimizing their fulfillment. On the downside, there is a cost to this service and if anything goes wrong, the customer typically blames the seller, not Amazon.
2022 Amazon FBA Trends
For Amazon and eCommerce in general, the year 2021 turned out to be quite an eventful (and successful) one. A growing number of consumers are taking their shopping online, so as a result, an increasing number of sellers are trying to capitalize on this growth wave. Amazon reports that more than half of the products in their store come from independent sellers.
Despite the success Amazon had in 2021, there's anticipation in the industry that future years will be even more successful. Consider the following trends and changes to help you prepare for what you might face selling on Amazon this year and how they may affect FBA sales.
1. Costs associated with advertising will continue to rise over the next couple of years
Data from December 2018 from Amazon Advertising explained:
- Amazon's advertising programs have been consolidated into one umbrella program called Advertising.Amazon.com, providing more options and greater access (and therefore increased competition) for first-party vendors and third-party sellers. The majority of vendors and sellers participate in advertising currently, and more are doing so daily.
- Seller Central and Vendor Central offer Sponsored Products Ads to all sellers, and they have become the preferred PPC method for Amazon advertisers.
- As Sponsored Brands Ads (formerly Headline Search Ads) become increasingly popular, all brand-registered sellers are now eligible for these ads. These ads offer different placement opportunities from Sponsored Products Ads and direct links to the brand's Amazon store page.
- Considering that product display ads appear on competitors' product detail pages, they have gained much traction.
- Bid values increase as a more significant number of sellers participate in ads.
In 2022, it is foreseeable that Amazon Advertising will cost more to promote new sellers and new brands. From 2020 to 2021, Amazon's cost per click increased by nearly 52% and this trend will continue throughout 2022.
There are several actions eCommerce companies can take to decrease CPCs; for instance, you can optimize your listings for conversions, update all product images to look as attractive as possible, enroll in Brand Registry, and create exceptional-quality content descriptions and videos for your listings to increase conversion rates.
2. Sellers will procure a significant part of their goods from domestic manufacturers
Considering the uncertain nature of supply chains and how they negatively impact businesses around the globe, some industry analysts believe that it is inevitable that more and more sellers will start sourcing products from manufacturers or suppliers in the countries where they currently reside.
The cost of sourcing products from a country like the US will probably be higher per unit than from China, where labor and materials are less expensive. However, you will receive your items quicker and cheaper than if they were shipped from China.
There may also be an opportunity for your company to source from within the continent. It could, for instance, be cheaper or of higher quality to buy materials from producers in Canada or Mexico instead of the US –if your company’s base is the US. It is possible that the purchasing of goods made in the country they belong to may also become a growing trend for certain customers.
In some cases, it may be more challenging for companies to procure anything within the US than it is to procure it overseas. For example, if that is your situation, it is relatively easy to locate a supplier for almost any product you need through a site like Alibaba. You can have it delivered to your doorstep from China.
The search for exactly what you need in your home country, even the US, may take some additional research, nevertheless. It's still true that sellers who can procure inventory from a trusted source at a reasonable price will benefit from their competitors' difficulties obtaining merchandise.
According to this trend, these are all circumstances you will have to factor in when making a supply decision in 2022.
3. Secondhand and refurbished products will be a focus for Amazon
As part of Amazon's strategy to compete with other storefronts such as eBay, Etsy and Facebook Marketplace, the company will aim to sell more used and refurbished merchandise. It is more environmentally friendly to buy secondhand products, but it could also help shoppers find the products they're searching for when there is a shortage of new versions.
At the moment, Amazon does have some programs that support sustainability, such as FBA Grade and Resell and FBA Donations, but it does not list used goods.
Amazon Renewed and Amazon Warehouse are two pages buyers can find if they know how to search for them. However, if a customer doesn't know what they are, they wouldn't be able to find them from the Amazon homepage easily.
Amazon will be more likely to highlight used products in its marketplace in the future due to this trend. By doing this, buyers will be able to compare products based on the grade assigned to them. It is also possible for Amazon to add a section to its homepage where buyers will have a more direct option to shop secondhand.
4. Brand owners will be able to enjoy more programs from Amazon shortly
If you are enrolled in Amazon's exclusive Brand Registry program, you already have access to several tools and features. For example, you can get the following tools:
- A+ Content
- Amazon Stores
- Video ads
- Virtual Bundles
- More ad solutions are available to non-brand registered, third party sellers
It may not be feasible for you to reach your full sales potential if you are not enrolled in Brand Registry yet and have a unique product offering. As part of this initiative, the trend may point out that Amazon can work even more to generate tools and programs designed to help enrolled brands grow and scale.
As a result of this trend, Amazon might also add a “profit and loss dashboard” to its Seller Central platform. This way, brands can view how much they receive each day, week, month, and year, especially after applying various Amazon fees. In Seller Central, you cannot view your actual profit and loss as of today, so this feature is highly sought after.
5. Amazon will create more social media-like features
In today's marketplace, an eCommerce brand's growth will be determined by how well it utilizes social media and leverages influencer marketing. This capability will enable it to grow its customer base. Some of the transformations and enhanced features this trend foresees are:
- More influencers: In the past couple of years, Amazon has begun moving into one of the most lucrative areas of marketing, influencer marketing, with its Amazon Live program. It is possible to live stream your product or brand on Amazon after you're enrolled in Amazon Live for Brand Registry. You will be able to do this once you are rated highly by Amazon Influencers as one of the top brands.
- Enhanced Amazon Live: Amazon allows brands to display their live streams directly on the product detail pages of their products. This way, prospective customers can watch live streams and gain an insight into what your products are all about. Viewers will be able to browse different creators on the Amazon Live page, which will feature Amazon Influencer streams.
- Increased Amazon Posts: In addition to the Brand Registry, Amazon has another program called Amazon Posts exclusive to Brand Registry customers. It closely simulates how Instagram works, allowing consumers to browse a brand's unique profile, enabling them to find their products.
- Social media resemblance: Amazon will continue developing social media-like platforms as a tool that brands and influencers can use to promote their products organically. You will see a rise in tools like "Posts" being incorporated into a product's details page to allow buyers to learn more about its features.
- More video content: As video has become a standard medium and is often preferred by customers, we also predict that Amazon will create a short-format video feature that will allow customers to watch clips about products before buying.
You can leverage all these trends and utilize them to your advantage by working hard with your team and using your knowledge and expertise. Having a stable and healthy cash flow is also one of the things you need to consider. In the following section, you will learn how cash flow affects your Amazon Seller business, as well as one ingenious way to deal with financial challenges that may arise eventually.
Having an Adequate Cash Flow Can Help You Run a Successful Amazon Seller Business
When you work with Amazon FBA, you may know that cash flow can be an issue for your business. Since your cash flow is held hostage every two weeks, it affects your ability to operate in real-time in a highly fast-paced industry.
The cash flow of any business is a critical financial indicator. The Harvard Business School defines it as “the net balance of cash moving into and out of a business at a specific point in time.” It’s a critical way of measuring the health of a business.
In the same way that positive cash flow doesn't always imply profit, a negative cash flow does not always mean that the company is losing money in the long run. In any case, small business owners should keep it on their radar when reviewing their finances. This is generally done with the help of a cash flow statement, which outlines how a company's cash is being spent over a specific period of time.
Considering that cash flow is one of the most significant indicators of your company's health, it's not surprising that it can have a substantial impact on your performance. Suppose you don't have the funds to support your business operations like maintaining inventory levels, promoting your brand, driving reviews, and making your regular payments. In that case, you may find it challenging to run your business altogether.
An organization's lack of successful cash management can cause headaches, be a source of undesirable surprises, and even stop growth. You may experience significant difficulties with your ability to function like an Amazon seller if you are experiencing cash flow issues with your FBA account.
Introducing a Solution to Amazon FBA Cash Flow Issues
Your FBA activities may be causing you to become cash-strapped, so you may be trying to find financing. Thanks to eCommerce-specific financing solutions, online businesses and their unique business models can be quickly funded.
If you are an Amazon seller, this type of funding is an excellent way to access the budget you need. With these financing options, as opposed to traditional bank loans, you will be able to receive funds directly into your account, with limits related to how much your sales generate. You can utilize the plug-and-play system that allows them direct access to your store with these companies.
The main difference between eCommerce financing and traditional bank loans or credit cards (which can still be a positive part of your capital stack) is that they require no monthly payments and don't charge late fees or interest. Instead, payments are deducted automatically when your customer pays you. By doing so, you'll have access to cash whenever you need it.
Amazon sellers looking for a financing solution based on 2022 trends can benefit from a leading financing company, whether they are new to Amazon or experienced sellers. Your Amazon Seller Central account can be integrated with them to determine how much cash you need and when you need it. Find out how you can benefit from interest-free, real-time, on-demand funds synced to sales.
By minimizing costs, you can optimize your business needs with the help of your trusted financial partner. Reach out today for more information.