There are specific advantages to selling through your own storefront and through a marketplace like Amazon.
Luckily, you don't have to choose one or the other, and many entrepreneurs are reaping the benefits of taking a multi-channel approach to their ecommerce business.
With Shopify's latest announcement, merchants can now add Amazon as a Sales Channel in their Shopify store, which will let you create Amazon listings from existing products, sync inventory tracked by Shopify with your Amazon listings, fulfill Amazon orders from within Shopify, and more.
Our guest on this special episode of Shopify Masters is Brandon Chu, a Director of Product at Shopify focused on platform integrations, who will be talking about how to successfully launch with Shopify's latest Amazon integration.
You have to think backwards—from how your listing is going to show up on Amazon and how people are going to actually find it.
Tune in to learn:
The difference between being a reseller and a brand when selling on Amazon.
How to jumpstart your new sales machine on Amazon.
How to improve your ranking on Amazon’s product listings.
Listen to Shopify Masters below…
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Show notes:
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Recommended: Install the Amazon Sales Channel
Transcript:
Felix: Today, I’m joined by Brandon Chu, product director from Shopify, who’s currently leading the product team’s focus on conversational commerce sales integrations and the app platform. Welcome Brandon.
Brandon: Hey Felix. Thanks for having me.
Felix: Yeah, excited to have you on. We want to get in to some of our direct Amazon selling experience too, in a bit, but before we get there, let’s talk about the products that you guys are releasing over at Shopify. Tell us a little bit more about the things that you’re currently working on.
Brandon: Sure. Yeah. One of the … I kind of lead the group that manages our platform products. So these are ways that we help Shopify merchants of all types extend their products and get different functionality from partners that we work with or from other developers that build on our app ecosystem. A big component of that is actually sales channels themselves. When Shopify merchants sell on Facebook or on Pinterest, they’re actually selling through an integration that we’ve built with those partners, with Facebook and Pinterest, but on top of something we call channel platform. I manage that platform and work with the team to do that.
Amazon’s really exciting, because we just launched the ability to sell on Amazon through that platform as well. Similar to other channels, the whole idea is, you as a Shopify merchant, you can take this one record of all your products in Spotify in your shop and you can start extending those products and your brand outward to all these different sales channels. We’re adding Amazon, and that’s going to give you the ability to create listings with your Shopify products on Amazon, and then when orders come through Amazon, you’ll be able to see them inside of Shopify and fulfill them the same way you do today.
Felix: Cool, and what are some things or some activities that you’ve seen store owners do that are on Shopify with their own store, then also on a platform like Amazon? What have you seen them doing more on a manual basis that this integration’s going to help with?
Brandon: For sure. Right off the bat, it’s actually managing two complete different lists of products and inventory and prices and all those things, so they’re managing two systems. They’re getting paid through two different systems. Different sets of customer and customer support issues. Inventory management is pretty difficult when you have a lot of different systems, that could be selling at the same time. You might actually have only one warehouse, but you could have live the ability for your product to be bought on Amazon and on your Shopify stores as well and you may run the risk of actually selling something that you don’t have inventory for.
I think like, outside of just being able to list your products on there, the big benefit is being able to continue to use Shopify as the center to manage your business and to keep all of that back office, nitty gritty operational stuff as an entrepreneur, as someone in commerce and keep it in one place. There’s a definitely like, all this nitty gritty work that we did to make it so that orders are syncing between the two. If a refund, or a request for a refund comes from Amazon’s marketplace, you see that in Shopify. You can initiate the refund. All those types of things. It’s just simplified for Shopify merchants and to make it so that they can, again, just stick with one system.
Felix: Very cool, and are there things that maybe a lot of Shopify store owners will still need to do by going to Amazon directly, when they have this integration set up? The features that are still to come?
Brandon: Yeah. There are a few, for sure. I think, and to come is the right word. Thank you for saying that. There are things like sponsored ads in Amazon, like the ad products themselves. Seeing some reporting data around ratings your getting from customers on your selling account, because one of the nuances here is that, unlike Shopify where a customer can come to your online store and they really feel like they’re interacting directly with your brand, a customer that’s buying through Amazon’s marketplace … We can all empathize, cause a lot of us buy on Amazon. We’re thinking we’re buying through Amazon, or at least like Amazon’s brand is very top of mind. They go through Amazon to rate the sellers, to rate the products, and I think a lot of the reporting behind that and seeing how your product and brand is being received inside of Amazon’s marketplace, that’s something that you’ll still need to go in to what they call Seller Central on Amazon, in order to see.
Felix: Very cool. The things that a lot of store owners are kind of curious about as well is that because of the crazy growth that Shopify has gone through, so many merchants are coming on to the platform, so many new entrepreneurs coming on. I think part of that growth is a lot of people are saying, “Oh, I want these things. I want that. I want all these new features. I want to pull the company in this direction because that’s what their business is doing.” Now when it comes to the product development process, at Shopify, when you guys sit down, obviously you don’t have all the time in the world and all the resources in the world. You have to prioritize what the company should be working on. Tell us a little about that process. How did you guys decide to focus on Amazon as the next integration partner?
Brandon: It’s a great question. I think, before we even get in to why we decided Amazon, I think that, as a company, our vision is really around making commerce better for everyone, and we really take that to heart in what we do every day. I think the conversation always starts about, “How is this work and this effort going to make lives better for our merchants,” and often, most of the time, that means, “How do we get them more sales in more places?” That’s what most merchants care about and we know that and we take that to heart. We kind of use that as the lynch pin of discussing where it is that we should be investing as a product development company.
Amazon came up because, you know we had a sales channel platform, we did a lot of really cool things, like going first to market with Facebook shop and Pinterest, etc. There was still the clear market data point that tons and tons of gross merchandise volume in the commerce market as a whole flows through marketplaces. Amazon, if I remember the stat from just this Black Friday, is doing, a third of all Black Friday sales are coming through AMazon’s marketplace. That is something we can not ignore in our responsibility to help our merchants do well. With Amazon, it was very very obvious that we need to enable our merchants to sell there. They need to have at least the ability to put their footprint at Amazon, because they have tons of customers. They have over 250 … This is off the top of my head, but over 250 million customers, all with credit cards connected to their accounts. Tens of millions of customers are Prime members, so they’re people that, they buy quite a lot. This is just like, it was kind of a no brainer, I think, in terms of us working with them.
Felix: Gotcha. If someone wants to take advantage of this integration and expand in to Amazon, how should they prepare for a launch like that? Whether they be a big store or small store, does it matter? Give us an idea of what merchants should prepare for once they hit the go button to integrating in to Amazon?
Brandon: Yeah, it’s a great question. I think, right off the bat is, depending on your context as a merchant, if you are the sole brand owner of whatever it is that you sell, that’s a very different situation than if you are someone that potentially is reselling another person’s brand or you are maybe licensing out your own brand for other people to sell. I say that because, one of the unique things about Amazon’s marketplace is that multiple sellers can compete to sell a listing. This is a very fundamental thing on Amazon that I think all merchants should understand. As an example, if I go and type cup on Amazon.com, and I see this white mug, I’m assuming that’s gonna be the top ranking. Any merchant in the world, any seller that has the right to sell that mug, can make an offer to sell that mug. It’s sort of hidden from us as consumers, cause when we go and click that mug, we see one price and it says, “Buy now.” That price may say like $6.
What’s fascinating is that if you look on the right hand side of Amazon’s website, you’ll see it says, “Also available from 20 other sellers.” When you click that, you start to see actually 20 different offers to a consumer, to sell this mug. That’s the unique thing about Amazon and about marketplaces generally, that is something that could be new to a lot of Shopify merchants. If you are selling something that other people can sell, then you may actually have to compete with them on a few different items. Those items, a lot of it has to do with price. A lot of it has to do with whether you are selling your product through Amazon fulfillment, meaning you show up as Amazon Prime. It could be your seller rating. These are all things that Amazon takes in to consideration when it shows the customer a price.
Going back to that mug example, as a consumer I see that $6. Amazon figured out that that $6 offer is the one that’s the best for me. They did that by comparing all the offers from the 20 different sellers and saying waiting price and shipping time and all those things I mentioned, which is the best offer to actually present to this customer?
Felix: Makes sense. So if you are selling a product like that, that is going to fall in to a product listing that has multiple sellers, can you still integrate your Shopify store in to Amazon? How does all that flow together if there are also multiple other sellers that are going to appear in that listing?
Brandon: Great question. Yes you can, and the reason … In the flow of actually using the Amazon channel, we ask you as you add a product that wants to get listed on Amazon, we ask you, “Is this something that other people could be selling, or is it your own brand that you own?” If it’s something that other people could be selling, it actually brings you to a flow where you can actually search Amazon live and you can see Amazon. You can search for listings that could be similar to your product, and you can actually make an offer, you can be another offer on one of those listings, through the Shopify integration.
That’s like where I would search for, if I’m selling white cups, I would search white cups in the Shopify/Amazon sales channel, and it would show me all the top search results for white cups, and I would say, “Oh, this is actually the cup that I’m selling.” The same one that maybe 10 other people are selling. I’d be able to make an offer on that. I’d be able to set my own price for that. I’d be able to set my own inventory for that offer, etc. All under my seller account.
Felix: That’s a great point, that you mentioned that there are other sellers. I’ve seen it before where they’ll say, “There are the sellers for this product.” The only time I ever really stumbled in to there is if it’s not a Amazon Prime product I really want, and I go looking and kind of price shopping through all these other sellers, but barely ever go in to that page. I think we’ll kind of segway in to your experience on Amazon now. When you are one of those listings that are not, I guess ranked high, because you’re not FBA, Amazon Prime, you don’t have a good great seller rating yet, cause maybe you’re just getting started, or your price is not super competitive. How do you even compete in a space like that, when there are people that are much more entrenched than you, selling this product?
Brandon: Absolutely. It’s a very very good question. I’ll be honest, for the most widely sold products, like if I went in there and tried to sell some generic looking USB stick, for like a gigabyte USB stick. You’re in a tough spot, because it’s going to be tough to compete. It’s such a generic, homogeneous product. That there’s probably hundreds of sellers doing it and your margin’s going to be basically zero. I think that, there’s two different worlds of Amazon, and one again, we haven’t talked much about if you’re the brand owner, but why don’t we get to that later? Let’s say still that you’re competing against others. There are things you can do to improve your chances. I think that one is buying sponsored ads is a good way to get some visibility to your listing. The second is that, you should consider fulfilling some of your inventory through what they call FBA, which is Amazon’s fulfillment warehouse. What that really entails is like, “I’m going to make this offer on that mug and what I’m going to do is, instead of using my warehouse, I’m going to ship those mugs, or at least a portion of my inventory, to Amazon’s warehouse.”
The reason why you wouldn’t want to do it, is that once things get in Amazon’s warehouse, they have much more control over how they can actually get those products to the customers, right? That’s actually what is required to happen for you to have Prime and for you to be a Prime seller. Just like you mentioned Felix, when you look, if it’s not an Amazon Prime one, then that’s when you start to look through. Amazon Prime is a very very influential item in the buying decision for a customer, and it’s also a very important item in influencing your ranking, in terms of if your offer is the one that’s shown relative to other sellers. Definitely look in to Amazon Prime as a way to … And fulfilling a portion of your inventory through Amazon, as a way to sort of jumpstart your rank.
Felix: Gotcha.
Brandon: Other than that, I think it’s a combination of the price that you offer. Can you offer a more aggressive price than other sellers? When you’re just starting out, you may want to actually do that, because it’ll allow you to get more customers buying from you and then you get more seller ratings and better seller ratings and help you again rank up. You may have to pay some short term … A short term price on margin, in order for the long term kind of help of the business on Amazon.
Felix: That’s a good point, that you might want to sell at a discount early on, so that you can kind of get this velocity, which I’ve heard that Amazon takes in to consideration.
Brandon: Oh yeah.
Felix: Making sure that you have a lot of sales when you first launch in to it. Now, I think the question that people have in there head is, "How do I handle pricing now, between my own site and Amazon listing. Amazon listing is going to be much cheaper or even a dollar or so cheaper than their own Shopify site, with all the Amazon kind of prestige, like you’re saying. It’s a really highly regarded brand. The customer service is amazing. Maybe it’s Amazon Prime. Maybe the product gets to the customer even faster through Amazon. How do you balance all of that when you have kind of your own Shopify store, launching to Amazon for the first time and you have to essentially price it differently?
Brandon: That’s a very very good question, and honestly, there’s no easy answer to that. I think you have to accept that as a short term kind … A short term structural problem in your pricing, until you can build up enough of a seller reputation on Amazon, to ensure that you can give the sane price on both. That’s kind of a very short term game you may play just to kind of give some velocity, like you mentioned, but absolutely, the perception of consumers and the price checking that they’ll basically do through Google and Amazon will … Smart consumers will find that arbitrage pretty quickly. You can also take as a data point that, I don’t remember the exact figure, but I think last year across over 50% of all product purchases in North America, the consumer starts by searching on Amazon first. Not even Google anymore.
Amazon is … It’s that trade off. It’s that trade off of tons of customers, but then tons of competition. I think that’s the game that I think that a lot of merchants still should play, just because there are so many customers there and because if you build up a good reputation on Amazon, and you figure out how to find the right … To list the right products for Amazon. You don’t need to list, again, your whole inventory, right? Your other stores, your online store, whatever channels, they can have your whole brands catalogue and you can list a few items on Amazon only, and those can be the ones that you say that, “Okay, I’m going to sell them through marketplaces.” I think it’s about fine tuning that and figuring out what of your product catalogue makes sense for a marketplace like that.
Felix: And because the seller profile holds so much weight in determining rankings, have you ever heard of brands that are, I guess renting a seller profile or who are selling their products through maybe a wholesale, to someone who already has an established seller profile? Is that something that goes on?
Brandon: You know, I haven’t personally heard it, but I , without even knowing, I could say for sure it goes on. I mean, Amazon, there’s just such a big opportunity on Amazon that someone’s going to try to gam the system. I think that especially over the last couple years, with product reviews as well, like fake ones. Amazon has been doing a pretty good job of figuring out how to clean that up and to actually punish sellers that go kind of down the grey or black hat route. I think, I would, for the long term benefits, stay clear of things like that as something sustainable. For sure, because you’ll probably get caught. I’ve definitely seen a huge crackdown, even as a consumer, of just take downs of fake reviews all over the place.
Actually, speaking of reviews, I didn’t call it out specifically around product reviews, but another big benefit of … Going back to this white mug example, cause it’s the simplest. I could search for that white mug and I could see the listing on there, right? I can make an offer on that, just like other sellers, but I can actually chose, if I wan, “You know what? I’m going to make another listing. I’m going to make another listing of a white mug.” And because I’m making the listing and no one else knows that that listing exists, I’m the only seller on it, so if anyone comes to that listing, they’ll be able to see my offer.
That’s a decision that merchants can make and that’s actually what a brand owner needs to do, because, of course, them being the only owners of that product, none of their listings would exist on Amazon if they’re just starting out. The trade off though, is this. When you make an offer on an existing listing, you’re already getting the value of that listing having product reviews. OF that listing getting sales velocity, because the listing, when I do a search as a consumer for white mug, they don’t care who sold it really. They actually just say, of all the people selling it, how many mugs were sold? That’s what Amazon uses as sales velocity to calculate if it should rank high. You’re riding on the shoulders of all the other people that have been selling it and all of the product reviews that have been given to it, before you even joined Amazon.
Felix: Yeah, and there’s a benefit, but then also potential danger in that too, right, because now you are also depending on them, making sure that the customer service is great, that the product is great. Otherwise, a bad review could also impact your own sales, because people might associate those reviews with the products that you’re selling, even though it’s all underneath the same product listing. You’re all different sellers and you might have different, who knows, manufacturers or definitely different customer service. Do you have to … I’ve never heard anyone talk about this, but how much do you have to worry about that?
Brandon: I have personally worried about that, so I haven’t told the story really about my own personal experiences, but even before I joined Shopify as a product manager, I on the side was just doing some commerce businesses, and I sold on Amazon. I’ve been … I still am. I’ve been selling on Amazon for like three years now and I’ve definitely had my own branded products, like I sold Google cardboard kits that I’ve branded to different items. I’ve sold things like selfie sticks, pretty homogeneous goods, but I’ve definitely had cases of other … I will create the listing and I will do the work to get that listing ranked high, and sales are coming in nicely, but then someone else jumps on to my listing, and they start trying to sell my product.
It’s really … That I think, as a brand owner, jumping in to that sphere, you do have to monitor. You do have to monitor if other people trying to sell and represent your product as theirs. You have to go through a process to take them down, if you know for sure … In some cases, I was literally the only person that could be selling it, so they’re definitely selling a forgery. You have to go through a process to do that and the process is filing a case with Amazon, through the Seller Central portal I was mentioning, and actually providing some evidence. I’ve had to do things like, I’ve had people try to sell my Google cardboard kits or a different brand or generic version of it, under my brand and I’ve had to buy theirs in order to get evidence to show Amazon that theirs is different than mine and to get them to take it down.
There’s a bit of, just because Amazon is so big, there is a bit of diligence you need to do as a merchant on it, to protect your own brand and to make sure that there’s nothing kind of malicious happening.
Felix: Gotcha. One last question on this, before we move on to the brand owner and their process for getting on to Amazon. When you are going through the process of choosing, that you are selling something that already exists on Amazon, how much does it need to match the original product, because me, as a consumer, I’ve never run into … I buy a lot on Amazon and I’ve never run in to a situation where I bought something and it wasn’t what it looked like I guess, in the photos. How do you make sure that the cup that you are … I’m sorry, the cup that you are selling is actually matched up well enough with the other cups that are already selling through that listing, enough for you to I guess join their listing?
Brandon: That is a great question. It’s actually the opposite of kind of the scenario I just talked about, where you could actually, almost accidentally be selling the wrong product under a listing. You kind of need to make sure, and there’s a few different ways, like you can check for it. A, if it’s a brand like … I don’t even know cup brands, unfortunately. Let’s say the brand’s called Coral or something. Is your brand … Do you have a Coral mug and is it the same dimensions?
The dimensions for every product are listed on the listing, like there’s actually quite a lot of product details, so there’s a few good things you can use to really make sure it’s the same. A definite one you can use is the UPC number, so if you have a UPC number, and especially products that lots of people sell there’s usually UPC numbers. That’s like a sure fire way to make sure that you’re selling the right product. You can actually search for the listing by UPC number, so that you can go right to it, if you want.
Absolutely, it’s the … The onus is on the person making the offer, to make sure that they’re selling the right thing, or else, over the long run or maybe even the short term, you’re going to get taken down and Amazon actually won’t like that. If you do it too many times, they could freeze your seller account.
Felix: A lot of times, on the podcast, I’ll talk to mostly brand owners, not necessarily people that are selling another brand … I guess reselling another brand’s products. Now, I’m curious, where is the money to be made then, if you are selling the same exact product and you are competing for this number one listing. Not even number one listing, but number one listing in the number one listing, right? You’re matched up with others. Where’s the money to be made? How do you make the money? Is it just from reducing your cost? Where is the margin?
Brandon: It’s the Walmart situation, like you’ve got to go for volume. You got to ratchet up your volume and if … I’ll be … If you’re in the US, or Amazon.com and you’re like the top ranking for like USB, you’re selling like a serious amount of stuff. You’re selling, I want to say tens to hundreds of millions of dollars worth of USB sticks. You’re not going to make a lot on each, but you’re going to win on volume and that’s going to allow you to get economies to scale and lower down your price with your suppliers. I think that’s the game for the people selling kind of like the resale products. I think that, in the long term, that is the game.
Felix: Right. Okay, so let’s talk about being a brand owner, when you want to set up this integration with Amazon through Shopify. What’s that process like and how can a brand owner prepare for the integration?
Brandon: For sure. The process is actually quite similar, in terms of just onboarding off the channel. When you create a listing, you’ll say that you’re a brand owner and then we’ll know that you want to make a new listing, right? I think where, what you need to set up is, you have to think backwards. From how your listing is going to show up on Amazon and how people are going to actually find it.
Right away I can tell you, if I add a new cup to the cups category … I don’t even know if that’s a real category. It’s going to be basically at the bottom. On Amazon.com, the bottom means like page 11,000 of a search for cups. You know right away that as you add this new listing, no one’s really just going to find it organically, unless a couple of things. Either your brand has some strong consumer love and they may actually search for your brand. Then your thing will pop up right away. The second is, if your product is actually quite unique, then you may not have a lot of competition.
When you’re thinking about what to name your listing, what to write in the description, you should actually do some searches on Amazon as a consumer, for what you’re thinking, and see how much you’re competing against in those areas. The fewer products that show up, you’re probably competing against less people for that type of search query. It’s something to keep top of mind. Always think backwards from what the customer is doing.
Yeah, and the last thing I think is, there’s a metafield sort of area for an Amazon listing called Keywords. Those are just specific words that any consumer could type in in their search query, that you’ll rank higher for. Those are some things to consider. If I had a mug, I’d put in mug as a key word, white … I don’t know, desk or office or something like that. To kind of focus in and get higher search rank.
Felix: Now one thing I’ve noticed recently is that, I’ve seen some on maybe just two stores, but I wonder if it’s a growing trend, is that some stores will, some Shopify stores will list an option for you to go over to Amazon to buy their product. They’ll make it prominent. They’re not trying to hide the fact that they’re selling on Amazon and maybe some people are doing this to initially just to drive that velocity, that sales volume, to build some reviews on Amazon, so they can get that channel automated/get it going. Grease the wheels. What are your thoughts on that? Have you seen any other stores, have you seen people doing this, where they try to drive their traffic, typically the opposite direction that most people try to do, which is Amazon to Shopify, but now I’m starting to see a little bit of Shopify to Amazon listing.
Brandon: For sure. I mean, yes I’ve seen it and yeah, I’ve even done it myself. I think that it makes a lot of sense, when you have a new listing out there, Amazon’s a snowball. You start as a snowflake and every time you get another sale, you’re increasing your probability of getting another sale. As soon as that snowball starts to build up, putting more momentum behind it is a really smart thing to do. That’s definitely what I think a lot of merchants, if you see that, that’s what they’re trying to get, they’re trying to increase their rank.
What’s really amazing about Amazon is that, for any given search query, for the one million mugs that show up when I type cup, about I would say 90% of those listings have never even had one sale. As soon as you get one sale, you’re going to jump 90% in rank. As soon as you get the second sale, you’re going to jump another 90% from where you last were. It’s a very much like what they call like a power law, where the top listing for a given search query is probably going to get … I’m making these numbers up, but they’re generally correct. 30, 40% of all sales for that search query. The second listing’s going to get 20%. The third listing’s going to get 2%. It actually drops off like a cliff, and after the first page, you’re talking about sub 1% of sales go through on the second page.
Absolutely, you should understand how high your listing is ranking and you can do that, in Seller Central you can actually see the sales rank. In the short term, when you first start a listing, for brand owners, definitely it makes sense to do that on your online store, push some people to Amazon, get your ranking going. Also, just … This is, Amazon loves this, but buy ads straight to your Amazon listing.
Felix: Yeah, I’ve heard this. I was going to say as an aside, but I’ve heard people doing this, especially when you are selling in to markets that might not be I guess English speaking, if you have a English speaking site, because Amazon, [inaudible 00:29:59] is so familiar to people that they might not even need to be able to read your product listing. I’m not sure Amazon does any kind of localization or not, but they’re just so familiar with it that, if you drive ads to Amazon listing directly, especially when you don’t have localization or you don’t have the translation on your site. I’ve heard of stores doing that a lot in generating sales.
Now when you say drive the ads directly to their listing, are you talking about just Facebook ads or Google ads?
Brandon: Yep.
Felix: Any kind of i guess off Amazon platform?
Brandon: Yeah, exactly. That’s exactly what I’m talking about. It’s a tough play, because you’re also … You’re usually buying those ads and getting those clicks to go to your online store or your other sales channels, that you own and you generally don’t have to pay a fee for sales on those channels, cause you own them, right? When you sell on Amazon, we didn’t actually talk about this, but depending on the category that you sell, Amazon’s going to charge you a fee. I mean, and that’s overall fair, because they’re bringing you a lot of customers, right?
Now, when you buy an ad from an external place, you’re paying for that customer to acquire them to go see your listing on Amazon, then you’re paying Amazon again when the sale happens. Your margin’s going to be very low on that flow. Again, it’s a short term kind of tactic, it’s something you do to kind of get some steam and momentum behind your listing. Then, you know what? One day you’re just going to start to see … You’re going to start to see the organic sales, and that’s sort of the power of Amazon. It’s not going to happen across the board for every single product, but the ones that do start to get velocity and get some good customer reviews. You will see strong organic sales.
Felix: I bet that Amazon, they just know so much, they just have so much data on the users purchasing behaviors that I bet that conversion rates on Amazon listings is probably unmatched compared to the ones that you can create yourself. Especially early on when you’re maybe just testing out your products or getting your store started.
Let’s talk about selling on Amazon. Like we were kind of alluding to a few times now already. We talked a little bit off air about you having experience selling on Amazon. Tell us about that. How did you … Don’t get in to details about the products you’re selling right now but, what was the process like? Why did you get in to selling on Amazon and how did you find the products to sell?
Brandon: That’s great. I’ll tell the story of the first product I sold on Amazon. The first product I sold on Amazon was actually selfie sticks, and this was back in 2013ish, when selfie sticks were a little bit more of a craze. It all happened, I was in actually South Korea with my wife and I just saw everywhere, like everyone’s having these freaking selfie sticks. It’s kind of annoying actually. They’re only like two bucks. I was just like, “I wonder if people will eventually use this back home?” That was just like the base of it, and I bought, I just bought like 20 of them when I was in Korea and I just brought them back on the plane home.
This is before … Honestly, I hadn’t sold anything online before any of this. I brought them home and I listed them on like Craig’s List. Unbelievable, like unbelievably, I’m getting emails fast. I sold those 20 in under a week. I’m selling them for like $20, cause I guess it was rare here at the time and I was like, “Wow, that’s interesting. How can I ever scale this thing?” I just started researching around and the real reason I chose Amazon was because I had learned that if you used FBA and get your products in to Amazon’s warehouse, you don’t have to do anything. Me, I mean I have a full time job. I work in software and stuff like that, so I can’t do this full time, so I needed to find a way to do that scalably. I actually went on Amazon because I actually wanted to use their fulfillment service.
I bought a small case of a hundred selfie sticks and I found the supplier through Ali Baba, just messaging some manufacturers in China. Got them really cheap. I just went through the process one time of sending them that inventory to Amazon. I mean, I could talk about that quickly actually. To do that, you just basically go in to your Amazon account, you say I want to … You have to create a listing first, for that product. I created my first listing on Amazon, it was a selfie stick. Then I created a shipment to Amazon through Seller Central, and I have to label all the selfie sticks, and then I just send it to any of their warehouses. They tell you which warehouse to send it to, and it’ll be a warehouse that’s pretty close to where you’re shipping from.
Once you send it, inventory just shows up on your listing and all of a sudden, your listing shows as Amazon Prime. That was kind of it for me and honestly, despite everything I just said about how to kick start when you start a new listing, I kind of struck gold the first time, because unbeknownst to me, people really wanted selfie sticks in North America. They were just searching for them. There was such low competition, that I sold those hundred units in two days and that is when I was like, “Wow, this is really crazy.”
Then, okay, I just started ratcheting it up and ordering by the thousands. Eventually the tens of thousands, and then … All in Amazon and they were just selling through, selling through. It was around like … It was approaching Black Friday and Christmas and like, wow. I was like, “This is the craziest thing ever.” You know what? Long story short, that business didn’t last forever, because selfie sticks got really annoying and there was a huge kind of cultural push against them, but through that process, I was like, “Amazon is powerful.” I think that that’s the big takeaway from it, and after that, I did … I started just doing research, thinking about what different products I could see.
Then I was also doing the opposite, where as some of the products that were doing well on Amazon, I was like, “Hey, I don’t want to just be reliant on Amazon, because if someone starts competing against me, I can lose all my margin.” Also, the other downside of Amazon is, you actually have … You don’t own the customer relationship, and this is really really critical I think, for a lot of Shopify merchants to understand, is like you’ll know where to ship it. You’ll know the name of the customer, but you won’t even know their email address. Amazon officegates that, because Amazon wants to maintain the relationship with the customer. You can still talk with them, but it’s through some kind of cryptic email system, where there’s kind of hidden email addresses. I realized that as my business on Amazon was scaling and that’s when I did the reverse and I started building Shopify stores for some of the more successful, branded products. This is all actually before joining Shopify, so it’s pretty funny.
Felix: Nice.
Brandon: That’s kind of how the whole journey started and, since then it’s been very much just playing the game of Amazon, finding some opportunities, realizing what’s good and what’s bad about it. The highest level thing it that you just get a lot of demand, but you have to compete and you’re going to have lower margin. That’s the game. Yeah.
Felix: Yeah, this leads me to another question is, when you are launching a new product, how do you decide which ones should be launched through Amazon versus your own store? IS there a better timing for launching Amazon versus your own store? What do you … What kind of products or what kind of stage should you be at when you try to consider either your own store or through Amazon?
Brandon: That’s a great question. I think … I don’t know if there’s a timing aspect to it, per say. I think it’s all about what people search for on Amazon. I think that … And that’s always evolving and expanding, but as a consumer, Amazon crushes thinks like staple, like basic staples, electronics. More like goods that are a little bit more homogenous. The more customized your product is, the more … Also higher price it is, those types of things are harder to sell on Amazon, because people don’t actually associate Amazon with necessarily those types of products. I’d make a distinction right there. What in my catalogue is something that people are probably searching for everyday on Amazon and maybe I should get some representation there. What’s beautiful about that is you start to actually get to expose your brand to more mainstream audiences, and they may search for your brand after and link back to your store. Now they see all this other awesome stuff that you’re selling. That’s kind of how I think about it and I tend to keep more higher priced, more customized, lower inventory type items on my fully owned Shopify properties, as opposed to Amazon.
Felix: Kind of like a more general gateway in to your brand. Those kind of products, you tend to put on Amazon, and then the higher priced, more customized and more branded products, you have on your own site.
Brandon: Absolutely.
Felix: You mentioned earlier about how, launching on Amazon is like a snowball, right? The more you can put behind it, the bigger and the faster it grows. When you are launching a product, let’s say a general product that you can put … That makes sense to put on Amazon. How do you set up the biggest I guess initial snowball?
Brandon: Great question. I do a lot of … I’ve done pointing from my online store, other properties to Amazon, saying, “Hey, we now sell on Amazon. Check it out.” It just goes to my, the equivalent of my merchant profile on Amazon, that shows all my listings. The second thing that I do is I do buy ads outside of Amazon, outside of … On Facebook, on Google, that point directly to my listing. That’s the second thing I do.
The third thing I actually is, I use sponsored ads inside of Amazon. One way you can actually kind of hijack the system … Not hijack the system, but just basically use their ads the way they’re intended is, you can buy sponsored ads on Amazon. What that does is that, for a given search that you would have shown up anyway, like you would have shown up let’s say on the 10 thousandth rank. It will show you much higher. It will show you above the fold. Maybe like the second or third listing. You pay for that, it’s like a pay per click, same idea, but they have their own internal version of ads, that you should also pay attention to, because A, I don’t think lots of people are using them as much as they should, because it’s kind of new. It’s less than maybe a year and a half old, as a tool. I think that there’s still more benefit to gain in the short term from that.
Those are basically the three things that I do. If I ever have other conversations with customers that like, “Oh, is it going to ship to my area in time, or etc.” Taking advantage of Amazon and its fulfillment because, Amazon will fulfill seven days a week, in a lot of countries, in a lot of times. Whereas your other warehouse, you may not be able to fulfill on Sunday. You can tell a customer that wants it that day, “Hey, go buy it out of my Amazon listing, cause they’ll actually deliver it to you today.” Which is pretty cool. I think leveraging the full stack of Amazon is pretty important.
Felix: Do you brand the products that you sell on Amazon, or do you sell sort of a white labeled product, without a brand? What are your thoughts on that?
Brandon: I prefer to brand. I always feel like if you do an unbranded play, it’s just opening the door for people to compete against you. I mean, if you sell … Like say you’re importing a bunch of stuff from overseas and it’s a pretty generic product. Pay to put a logo on it. Build a brand around it. By doing that, you’ll have a defensible position with which to say, when someone else tries to sell it, that they’re not the same. Right? I think that, in the long term is what you need, in order to make Amazon a sustainable channel for yourself. As soon as people can start selling against you, it’s just a race to the bottom at some point. I think that that is the real reason why branding is … Even if it’s much harder up front, it’s something that you need to do.
Speaking of that actually, Amazon does have a , what they call the Brand Registry. What you do is, it’s a process, like you do have to go back and forth and go through an approval process, but you have to prove that you own this brand, that you do. Once they do that, you get special permission to list things under this brand, and no one else can. I think that that is actually … You can programmatically enforce to do that and it also means that your ability to take down someone who’s trying to sell something like it, like say they make a bastardized version of your brand name to try to get similar keyword hits. You can take them down with much more authority and much quicker, when you’re brand registered. That’s something I definitely recommend people to do. There’s no extra cost to it. I think it’s just like a process to go through.
Felix: You mentioned ads twice, in the list of three things that you would do to kick off a new listing, kick off a product. When you buy these … When you set up these ads, not the sponsored ones, but ones like say on Facebook for example. Do you design them differently than or do you have different messaging or copy or images when you are driving traffic to your own store versus an Amazon listing?
Brandon: Not really. No. I actually .. Actually, we should talk a bit about that, with the listing and the stuff in a second, but not so much on the ads, like the external to Amazon ads. Actually, what’s fascinating is that the click through is actually higher, because the link has a … Just Amazon has such a strong brand value, right? When consumers see an Amazon link in a little URL snippet in the ad, they’re actually more likely to click on it than if it says your domain. Which is really interesting.
Felix: Do you know how much of a difference it’s made, just roughly, for you?
Brandon: Yeah, for me it was about a 20% lift.
Felix: Wow, definitely … This is definitely significant.
Brandon: Yeah, it was pretty significant, for sure. I mean, I had to pay for it, because those sales were way lower margin, but definitely you can see the difference in that. Something we didn’t actually talk about is, Amazon actually has some fairly strict rules about how to present products, so the imagery that you put on, on Amazon, depending on your category, you may need different imagery than you use on other channels. I’ll give an example. If you sell clothing on Amazon, it actually needs to be on a mannequin. Another thing is, a photo of any product on Amazon has to have at least … It has to have a white border. It has to be … They check for the pixels in the corners and along the edges, and they have to have a white background, basically.
There’s things like that, because for Amazon they need to create consumer consistency. It’s actually quite miraculous, cause when you do a Amazon search as a consumer, you’ll look and they all actually are presented the same way. These products. That’s amazing, because all these sellers uploading those images themselves. How the hell does that happen? The way it happens is they have really strict rules. It may not happen the day you list it, but they will take you down eventually, if your photo is off of the rules. They have some algorithms that do it, but then they also have humans that check it too. It’s pretty amazing.
Felix: Very cool. Yeah, that’s interesting that you mention it, because I’ve never noticed it myself. It almost seems like, I think you were saying earlier that Amazon is the seller behind all of this, because they have so much consistency. They enforce so much consistency that it doesn’t seem like there’s hundreds of thousands of people that are behind the scenes, selling different things, from different parts of the world. I think it’s an amazing operation that they got going on.
Brandon: For sure.
Felix: Now, when you run the sponsored ads, this is … I haven’t heard of too many people using Amazon’s sponsored ads. Can you give us an idea of the cost? Is it comparable to buying on Facebook, or through AdWords or is it more expensive? What do you usually see?
Brandon: I’ve actually found it comparable, at the most. I’ve actually found it cheaper in most cases. I was getting, on some of the selfie stick thing, I was maybe 20, 25 cents a click, which is insane for any product, let alone … It was … That’s constantly changing. I think, it being a new product, there’s probably a little golden air up, where it’s a little bit cheaper and exploitable. Not exploitable, but just like higher margin for people. It seems like it’s working thus far, for sure.
Felix: Do you keep these ads, the external ads that are driving to a listing or the ones within Amazon, these sponsored ads, do you keep them running all the time, or is it just at the beginning to build the initial traction?
Brandon: Oh, only at the beginning. I only do it at the beginning. I mean, to me it’s … It just doesn’t work. The margin’s just not there to do it sustainably and I think, part of the reason that Amazon deserves its fee, is because it’s supposed to bring you customers, right? That’s what it’s supposed to do, so I try to get to that state and then let it do what it’s supposed to do.
Felix: You buy these kind of sponsored ads to kick off the organic sales, to kick off the velocity and then the reviews, so that you can move up in the rankings?
Brandon: Absolutely. Getting those reviews, there’s other ways that Amazon has actually created tools for you to do. You can work with, what they call verified reviewers on Amazon. You can send your product to basically like a full time Amazon product reviewer, and they will … their job is to objectively review your product. That’ll get you an actual product rating. I think like, there’s a lot of stuff out there. Even if you just Google, it’ll be like tons of content on there about how to actually get more ratings and stuff like that. It’s something that people should invest the time in.
Felix: Cool. Now when you are designing the actual product listing itself, the product description, the photos, what tips do you have to offer there? If someone doesn’t have a lot of time or is just learning how to put together those things for the first time, where should they focus their attention, on maybe the top two things?
Brandon: Yeah, I would say focus on keywords. It’s not like you’d name a product on your own stores. It’s like where you care about the elegance of it or how great of a phrase it is or what not. This is a keyword stuffing type of situation, where you’re just trying to put in words that are going to rank well for people that are likely to buy your product. Describe it. I would say, that white mug? I would not name it “white mug”. I would name it like, “white mug, office mug, circle handle, something, something, something”. Like that, I would actually put that as the name in the listing. Then I would supplement that with other types of searchable criteria in the description. They should … You have to do it within reason, it should still describe the product and be a coherent title and a coherent description. Definitely, the choice of words is very important and if you’re thinking about what it should be, just think back to what are people that you think would love your product, what are they searching for? To get it in front of them. That’s kind of like the number one difference, and pretty unique to marketplaces versus other kinds of store fronts.
Felix: Makes sense. Now, when you …I want to take it to the beginning. When you are thinking about launching a new product in to Amazon, what kind of research are you doing? How do you validate that it’s a product worth pursuing? What is your process like?
Brandon: Yeah. I will look … I use a few tools. It’s not that different demand wise than I think every Shopify merchant looks for any type of product. You can use things like Google Trends and all these types of things. Have some kind of awareness of just what’s trending socially and stuff like that, but if those things are trending in the general populace, they will also be trending on Amazon, that’s for sure. The other thing I do is, is take a look at the competition. If you’re interested in a product area, like a notepad or something like that, look at how many people are selling it and at what price points and just start to do research that way. It’s as much a function about finding products people look for as it is about finding how much competition there is already for those products. It’s finding that sweet spot where it’s like, “You know what? Given how many people want notepads, it doesn’t seem like there’s actually as many great sellers of notepads on Amazon as there should be, or there’s not as much diversity and selection as there should be, so that’s an opportunity for me.” I think that’s for me a spark of, “I should dig deeper here.” That’s kind of what I’m looking for. It’s almost like, to go to an economics kind of metaphor, it’s like a supply and demand imbalance, is what you’re kind of looking for.
Felix: Now, but what if you find the top listings, the top 10 sellers on there and their listings or their descriptions have typos in them and just not well put together. Is that also, do you find that as an opportunity to come in and offer the better presentation and potentially better customer service?
Brandon: That’s a great question. I’ve never had the instance where it’s like the presentation was actually meaningful. It’s more like, are there crappy reviews? If the top 10 listings are like three out of five stars, because there’s no one that is actually serving a good product for this kind of search, that’s an opportunity. If there’s something with tons of typos and terrible imagery, but they’re all like 5,000 five star reviews, honestly I don’t think it matters. That’s my personal perspective. I don’t think it matters to consumers. They see the social proof from 5,000 people that this is awesome, they’re going to buy it.
Felix: Yeah. I rarely look at the product description. I usually just jump right in to the reviews. If someone in there says exactly what they use it for and it’s what I need it for, I’m going to buy without even caring about what else comes with this particular product.
Brandon: [inaudible 00:52:40]
Felix: Now when you, for your process, when you discover that there’s an opportunity, do you go ahead and just source a large inventory? How do you get … Do you get started slowly on Amazon, cause I’ve heard where you, if you sell out on Amazon and let’s say you are doing FBA and you sell out, that could have a huge impact on where your ranking.
Brandon: I have lost … As much as I’ve made in my side business, I have lost as much from being out of inventory on Amazon. It is … But then I’ve also lost a bit from overstocking too much. I think like I, my personal approach is to take a small batch, to put in some inventory in to the FBA warehouse and see how that velocity starts to scale. It’s when I start sensing the snowball. When I start seeing that rank, it’s just going up every single day, then I will … That’s kind of what I’m looking for, to make the push to do a big buy of inventory, because I remember being out of stock on the … I think it was on the 13th of December. Just before people were buying stocking stuffers and everything and it was just like, it was a nightmare. I couldn’t get … I’m sourcing from China. I couldn’t get inventory until like February after, and I probably lost half the sales I could have made that year, because of it.
It’s a pretty interesting risk game, because with the scale of Amazon comes this new sort of scale, when it comes to inventory management and inventory risk, because since it’s so important that you’re on Amazon Prime, to do really really well, because as consumers we look for Prime products, that means you need to get your product in to their warehouse and it needs to be there when people are buying. That’s hard for people to manage a separate warehouse, especially if there’s a long supply chain along the way. It’s something pretty unique I think as well to Amazon. At least for a lot of smaller companies, it could be your first time dealing with some serious inventory demands. Amazon’s a right place for that to happen.
Felix: When you do get your products in to Amazon’s hands, in to their warehouses, have you ever had to I guess do anything else other than that, or your focus then is just strictly on marketing and customer service. Do they really take care of everything and they don’t even bother you for anything after that?
Brandon: I mean, for the most part, they’re pretty good, where they take the shipment and then they count it all up. I do a reconciliation to make sure that they counted up everything I’ve sent. Other than that though, it’s pretty hands off. The sale comes in, they automatically ship it. I actually don’t even need to know that either. It’s only when a bad review comes in or a return happens … Actually, even a return … That’s the other beauty of the FBA warehouse. They’ll handle all your returns for you too. If it’s in an unsellable state, they will actually throw the product away and they will reimburse you for a fraction of the cost. It’s not going to fully cover you, but it’ll make it a bit easier to stomach. If it’s in a sellable state, they’ll just put it back in inventory for you.
The time I’ve saved being able to do that is almost infinitely invaluable for me, because I couldn’t even have done it anyway. I have quite enjoyed I think that fulfillment experience. It’s been pretty strong. I think I had … I mean, I have had cases of lost boxes. I have had cases where they have miss scanned something and my inventory showing up in the wrong area and then it leads to the product that really is supposed to be there to be out of stock, and it’s costing me sales and stuff like that. It happens, but it hasn’t happened so much that I think it’s actually something you need to worry about.
Felix: At the end of this kind of buying process for a consumer, we mentioned this a little bit earlier, that you can not email … You don’t have the emails of the customer. You don’t own the customer, but there is some messaging available, where you can send a message, but you don’t have … You don’t know what the email is. I’ve gone to tons of them [inaudible 00:56:52] buying on Amazon. Do you do most messaging after the customer has made a purchase?
Brandon: I do messaging usually when a customer comes back with a question about how the product’s used or something like that. I don’t … Here’s the thing. You can’t market to them, right? I can’t take that huge customer list that I’ve gotten, or that … Sorry. All the customers that have bought from me on Amazon, I can’t actually re-target them or do anything with that. It’s very much reactive. All my kind of communication with customers is just if there’s a problem, basically. What you do have to do though, because Amazon does monitor this, to their credit for consumers purposes, is you need to respond in under 24 hours. If you don’t, you start to actually lose some seller rating. I definitely stay on top of the email that’s associated with my account. I respond … Even just a response. You don’t have to resolve it, you just need to respond, within 24 hours. They literally show in Seller Central, customer messages that are above and below that 24 hour threshold and they show it very very clearly to you and then they show you how much it has hurt your seller rating too.
Felix: Awesome. Thanks so much for your time Brandon. Where can merchants find out more about the Amazon integration that Shopify’s kicking off?
Brandon: Log in to Shopify. Log in to Shopify. The sale channel from the left sidebar and you will see it. There is updated docs in our help page, as well as there’s a landing page on slash Amazon, so you can check all those things out.
Felix: Nice. Can they, your listeners follow you anywhere online, to learn more about what’s going on over at Shopify?
Brandon: Me personally?
Felix: Yeah, you personally.
Brandon: Yeah, sure. I’m on … Let’s see. I’m on Twitter, so @BrandonMChu, so B-R-A-N-D-O-N-M and then C-H-U. That’s probably the best way.
Felix: Okay, cool. Yeah, definitely we’ll follow along with you, just to see … Maybe get some sneak updates on what’s to come on Shopify. Thanks so much for your time Brandon.
Brandon: Thank you Felix.
Felix: Thanks for listening to Shopify Master’s, the e-commerce marketing podcast for ambitious entrepreneurs. To start your store today, visit Shopify.com/masters to claim your extended 30 day free trial.
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