Three Expert Tips to Help Vendors Improve Profitability on Amazon

Three Expert Tips to Help Vendors Improve Profitability on Amazon

Vendors on Amazon not only have their products competing with others on the marketplace, but as they are usually manufacturers or wholesale sellers, they may even be competing their own products across the web too.

It is as Vendor eat Vendor world out there so it is imperative that vendors do all they can to improve their profitability and make their products successful on Amazon.

Below there are three simple tips to get vendors started.

1.    Prioritise Higher Margin Products

Some may think that increasing the volume of sales of fast-moving, lower-margin products is the right way to increase profitability, however, because the margin for these products is low, any additional advertising efforts will just reduce this margin further, meaning the profit from each sale becomes less and less. Instead, vendors should focus their Amazon PPC advertising efforts and best promotions on their highest margin products.

These are the products that will give the biggest return from each sale so by driving more traffic through advertisement and increasing conversion urgency with discounts and offers vendors can increase the sales of these products, which in turn will improve their rank and help organic sales long term.

2.    Be Wary of Retail Partners and the Offers Given to Them

Vendors that sell to multiple retailers usually have little control over the retail price, they agree a wholesale price with the retailer and then that is the end of their involvement. The issue this causes is that Amazon approaches its business strategy consumer first, and this involves matching or even beating other prices out there.

Amazon will base their pricing on the availability and price being offered by other retailers. This means that if a vendor has supplied other retailers with their product and has supplied these to them with a discount or incentive, this could have an impact on Amazon’s offered wholesale price.

These retailers get a vendor’s product for cheaper, offer to their consumers for a competitive price as a result, Amazon sees this and lower the price of the vendor’s product on their site, which in turn causes them to give a lower wholesale price.

However, vendors can  manipulate this cycle by reviewing the discounts they are giving to those they distribute to. By choosing to restrict the price in which other retailers can get products at, means they will have to price in a way to have a fair margin which also means Amazon can charge a bit more too, resulting in a higher buy price for the vendor.

3.    Regularly Review Stock and Remove Unprofitable Products

Not everything is going to be a bestseller and it is the vendor’s responsibility to keep a close eye on their underperforming products to search for and remove those heading towards being unprofitable.

Not only do unprofitable products draw focus away from higher-margin products and potentially each advertising spend which could be used on these more profitable lines, if Amazon feels the effect of a product’s poor sales, they may demand that the vendor make up the difference.

If you are a vendor that is struggling with profitability or think there is room for improvement, then hiring professional Amazon consultants to help is a great next step.

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