- Posted by Dominic
- On November 26, 2018
There is no secret that Amazon wants you to sell more and more on their sites and they use different strategies to help you do it. Encouraging price promotions, retail marketing placements, emails, social media ads, Google ads, and also AMG and AMS activities. All of these are promoted as “activities to help you sell more on Amazon“.
And they do work. Last year, Amazon sales have increased by 18% compared to Black Friday in 2016. This made many vendors and 3P sellers very happy. Black Friday 2017 also helped Amazon’s shares hit an all time high of $1172.25 on Friday morning.
Events like Black Friday Week, Cyber Monday, Christmas Rush, Prime day, etc. were all created to help both sellers and buyers sell more, and buy more at lower prices. They work so well, that year over year we are looking at new sales’ records.
If as a vendor/seller you are selling more on Amazon, then where is the catch?!
The Amazon business model is simple: the more you sell, the more money Amazon makes. If you are on a margin guaranteed program, then that also ensures a certain profit margin for Amazon (if you don’t reach it, you have to pay for it from your own pocket).
You would think that that’s enough to maintain a good business model, but it is not for Amazon. They also offer different marketing activities based on different price plans: Retail Marketing, AMS and AMG. Read more about the Marketing activities offered by Amazon.
AMS and AMG are auction based platforms, meaning that each vendor/seller is competing against each other to get placements for certain keywords (on AMS), or on certain sites (AMG – AAP). To help you sell more with these two platforms, Amazon suggests you increase budgets, build new campaigns, and increase bids. These suggestions come even more recommended during peak seasons like Black Friday and Prime Day.
Do these suggestions help you sell more? Yes.
Is this strategy sustainable for vendors/sellers for the future? No.
By bidding more and increasing your budgets, you may be getting more impressions and generating more sales, but you are increasing your spent. This money goes directly to Amazon. That’s where the “magic” happens. Through these recommendations, Amazon is trying to create a more competitive environment. And they manage to do it. I am noticing an increase in ACPC every month, especially during promotional events like Black Friday/Cyber Monday week. This works extremely well for them as it is increasing their profit. Vendors and Sellers though, can only see an increase in their spend. Don’t spend more and you won’t win the so-much-desired placements.
Did you know that the AMS spent has increased by @100% during Black Friday Week?
You may call it a vicious circle. Others call it one of the best business models. The truth is that the one that benefits the most from the increase in competition is none other than Amazon.
Where do your beliefs lie?! Are you one that will call this the best business model, or are you one that will call it a scam?! Leave your comments below.