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Successful CPG Brand’s Amazon Strategy: Grow Your Brand & Revenue


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Online sales made up 90% of the growth in the CPG industry last year, highlighting a fast-growing segment in an otherwise slow-growth industry. A common theme we are seeing among CPG brands is implementing an omnichannel strategy to satisfy customers and stay competitive in today’s CPG marketplace. With Amazon’s prominent ecommerce dominance, it’s critical for brands to adopt an Amazon strategy.

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Successful CPG Brand’s Amazon Strategy: Grow Your Brand & Revenue

  1. 1. Successful CPG Brand’s Amazon Strategy Trends and Best Practices for Succeeding in Amazon’s Competitive Marketplace
  2. 2. Today’s Logistics ● Session recording and slides will be sent ● Submit questions to our panelists ● Join in on our poll questions throughout ● Resources available as handouts Persephanie Arellano Webinar Coordinator
  3. 3. Overview Solutions
  4. 4. Today’s Speakers Russ Dieringer Executive Director, eCommerce Council Tony Heuer Marketplace Channel Analyst Leo Carrillo III Manager, Amazon Marketplace Channels Erik Simon Head of Business Development & Marketing
  5. 5. Today’s Agenda ● Latest Updates on the Growth of CPG Online Purchases ● Amazon’s Annual Performance & Grocery Plans for ’19 ● Ad Strategies to Improve Your Amazon Organic Rank ● Developing a Customer Lifetime Strategy for CPG Brands ● Proactive Process for CPG Inventory Management ● Benefits of Auto-Repricing & New SKU Creation ● Q&A
  7. 7. Cleveland Research Company eCommerce Council Designed for manufacturers selling into Amazon and other omnichannel accounts like Walmart and Home Depot ● “Sharegroup on Steroids” ● 143 Members with 98% Renewal Rate ● Proprietary, Forward-Looking Research ● Annual Summit ● Weekly Roundtables ● 1-on-1 Analyst Engagement Russ Dieringer Executive Director, eCommerce Council Important disclosures may be found in the appendix
  8. 8. Copyright 2017 - Q4 Amazon Virtual Summit Q&AMarket Snapshot 2019 eCommerce Performance Benchmark What CRC Will Cover
  9. 9. Copyright 2017 - Q4 Amazon Virtual Summit US Market eCommerce AND Stores Growing • Healthy economic growth • Low unemployment rate • Decade long bull market run Healthy Consumer Source: US Census Data
  10. 10. Forecasting ’19 to Slow • Law of Large Numbers • Profit Focus • More competitive market • Potential Disruption from 1P to 3P transition • Potential Offsets • Return to top-line growth focus • Advertising business • Grocery • B2B Amazon Outlook Source: Company Filings, CRC Estimates
  11. 11. Copyright 2017 - Q4 Amazon Virtual Summit Multifaceted Business Amazon’s growth has been driven by multiple components over the last few years, helping lead revenue higher and, importantly, profitability. Components Driving Growth Source: CRC Estimates
  12. 12. Survey Background SURVEY BACKGROUND SALES MIX IN 2018 Amazon2 49.3% eCommerce1 11.0% CATEGORIES food & CPG 35.4% hardlines 42.5% other 16.5% softlines 5.5% eCOMMERCE BUSINESS SIZE $3-5M 4% $5-10M 17% $1-3M 11% $20-50M 21% $10-20M 11% $50-100M 15% > $100M 18% Annual Performance Benchmark ● 130+ companies completed the survey in late January 2019 ● Mixture of CPG, Food, Hardlines and Softlines companies ● Focused on better understanding growth, profitability, future opportunities & Amazon program performance Source: CRC’s eCommerce Performance Benchmark, 2019 1) eCommerce figure is the percentage of total sales 2) Amazon figure is the percentage of total eCommerce sales
  13. 13. What will mix look like tomorrow? CURRENT & EXPECTED SHIFT OF SALES TO eCOMMERCE Source: CRC’s eCommerce Performance Benchmark, 2019
  14. 14. How optimistic are brands for ’19? Brands saw growth decelerate from 2017 to 2018, at least partially driven by retailers focusing more on profitability last year eCOMMERCE GROWTH EXPECTATIONS Source: CRC’s eCommerce Performance Benchmark, 2019
  15. 15. What channels are brands focusing on? Source: CRC’s eCommerce Performance Benchmark, 2019 WEBSITES SUPPLIERS SELL THEIR PRODUCT ON
  16. 16. Opportunities Beyond Amazon Source: CRC’s eCommerce Performance Benchmark, 2019 WAYFAIR KROGER AMAZON WALMART TARGET HOME DEPOT LOWE’S GROWTH IN 2018 EXPECTED GROWTH IN 2019 Note: The data in this chart refers to the eCommerce portion of these retailers.
  17. 17. Copyright 2017 - Q4 Amazon Virtual Summit Amazon in 2018 • Net 10% saw better than expected performance • Grocery brands were generally disappointed due to Fresh lagging, little integration with Whole Foods, and difficulties in programs like Pantry Brands’ Experience on Amazon Last Year MUCH BETTER THAN EXPECTED BETTER THAN EXPECTED IN LINE WITH EXPECTATIONS WORSE THAN EXPECTED MUCH WORSE THAN EXPECTED Source: CRC’s eCommerce Performance Benchmark, 2019
  18. 18. Copyright 2017 - Q4 Amazon Virtual Summit Largest Dollar Growth Opportunity Percentage sales may be slowing, yet absolute dollar growth remains the largest on Amazon… Source: CRC’s eCommerce Performance Benchmark, 2019
  19. 19. Less Profitable • Delisting items (CRAP) • ASIN suppression • SIOC requirements • Increased asks • AVS program more expensive than SVS • Private label • Greater ad spend required Profitability Comparison SIGNIFICANTLY MORE PROFITABLE AMAZON 2019 PROFITABILITY EXPECTATIONS RELATIVE TO OTHER ETAILERS MODESTLY MORE PROFITABLE EQUALLY AS PROFITABLE MODESTLY LESS PROFITABLE SIGNIFICANTLY LESS PROFITABLE Source: CRC’s eCommerce Performance Benchmark, 2019
  20. 20. CRaP Impact NONE < 5% 5 – 9% 10 - 19% 20 - 29% 30 - 39% 40 - 49% 50% + % OF ITEMS DELISTED DUE TO AMAZON’S CRaP METRIC 40% 30% 29% VENDORS’ EXPECTATIONS OF AMAZON DELISTING ITEMS IN 2019 VIA THE CRaP METRIC Same amount of items will be CRaP’d out vs. 2018 Fewer items will be CRaPed out vs. 2018 More items will be CRaPed out vs. 2018 % of Products delisted Source: CRC’s eCommerce Performance Benchmark, 2019
  21. 21. Copyright 2017 - Q4 Amazon Virtual Summit Amazon Programs Varying degrees of success • Amazon Business saw the best growth • Prime Now saw the biggest step up in brand participation compared to a year ago • Pantry was a bona-fide disaster Amazon Program Opportunities PARTICIPATION, 2018 AMAZON BUSINESS SUBSCRIBE & SAVE AMAZON PANTRY PRIME NOW AMAZON FRESH GROWTH, 2018 Note: Participation refers to the percentage of vendors that have participated in each program for at least one year. Growth refers to the 2018 Y/Y percentage growth of programs vendors participated in for at least one year. Source: CRC’s eCommerce Performance Benchmark, 2019
  22. 22. Growth & Profitability Where are the best opportunities ● Retail market remains healthy ● Amazon remains the largest growth opportunity from a dollars perspective ● CPG brands see additional opportunities with Walmart & Kroger ● Profit focus will remain in ’19 – update your financial plans, focus on fastest growing Amazon programs, be prepared to spend more on advertising this year The Year Ahead Appendix: Antitrust Disclosures It is the policy of Cleveland Research Company to comply fully with the antitrust laws set forth by the United State Federal Government and various state laws. Our research is intended to be utilized as a resource in accordance with those established antitrust laws and regulations. The information transmitted is intended only for the person or entity to which it is addressed. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer.
  23. 23. Copyright 2017 - Q4 Amazon Virtual Summit Follow the link to download the full copy of our annual performance benchmark study: Download CRC’s Benchmark Study Russ Dieringer Executive Director, eCommerce Council
  24. 24. POLL QUESTION WHAT CPG CATEGORY DOES YOUR BRAND FALL UNDER? ● Grocery ● Supplement ● Beauty & Personal Care ● Home Supply ● Baby
  25. 25. Growth of CPG Online Purchases
  26. 26. ● Online sales made up 90% of the growth in the CPG industry last year ● U.S. digital shoppers are looking for convenience on ecommerce for everyday items Source:EMarketer
  27. 27. ● Brands can’t afford to not sell on Amazon in order stay to relevant and competitive in today's marketplace
  28. 28. Positioning on Amazon
  29. 29. ● Amazon serves as a revenue and brand growing opportunity for CPG brands ● Digital shoppers research products online before purchasing ● Positioning your brand on Amazon allows you to attract customers through your products details and insight
  30. 30. ● CPG brands selling on Amazon enables extensive enhancive branding options ● Increase your conversions on the Amazon Marketplace Enhanced Branding
  31. 31. Advertising Strategies for CPG Brands
  32. 32. ● 70% of all people shop on the first page listing on Amazon ● Use Amazon Advertising to boost your organic ranking
  33. 33. Bidding Strategies for CPG Brands
  34. 34. 1. Keyword bidding 2. Bidding on product detail page 3. Brand vs non brand competitor terms
  37. 37. What’s a Good ACOS? AMZ FEE COGS PROFIT BEFORE PPC SPEND BREAK EVEN ACOS TARGET ACOS TARGET PROFIT MARGIN 25% 25% 50% 25% ---------------------------------------------------------- ACOS < 50% : ADS ARE PROFITABLE ACOS < 25% : HIT YOUR TARGET PROFIT MARGIN ---------------------------------------------------------- 50% 25%
  38. 38. Lifetime Value
  39. 39. New to Brand Metrics for CPG Brands ● Measures orders & sales of your products generated from first-time customers of your brand ● If the shopper has not purchased from your brand within the 12 month look back window, the order is considered new-to-brand
  40. 40. Why is understanding Lifetime Value important for CPG Brands
  41. 41. Brand Agnostic to Brand Loyalty $ubcribe & $ave
  42. 42. Copyright 2017 - Q4 Amazon Virtual Summit Grow Revenues by Generating More Search Results - Without New Products
  43. 43. A platform that helps eCommerce merchants manage inventory, listings, shipping & more on Amazon & 20+ other marketplaces. About Solid Commerce Listing Tools Inventory Management Content Management Automatic Pricing & Repricing Orders & Shipping Management Dropship Management ● 1st group of integrators to support Seller Fulfilled Prime ● 1st group invited by Amazon to Seller Central App Store ● Member of Amazon’s Marketplace Developer Council ● Full ability to sync FBA with non FBA Warehouses
  44. 44. Select Customers: In 2018 Solid Commerce Managed: Packages Shipped Inventory Managed Retailers, Brands & Manufacturers Gross Merchandise Volume SKUs Managed
  45. 45. Erik Simon VP, Marketing & Business Development Today’s Speakers
  46. 46. The Whole Presentation in 1 Line You Can Grow Revenues by Generating More Product Search Results - Without Any New Products
  49. 49. Virtual Kits & Bundles (Creating More From Less)
  50. 50. Wouldn’t it be great if 2 SKUs Created 4 ASINs? SKU 1 SKU 2
  51. 51. They Can: 1 + 1 = 4 ASIN 1 ASIN 2 ASIN 4 ASIN 3
  52. 52. Virtual Kits & Bundles - Explained • Product combinations are created only in software • No physical bundles exist in your warehouse • Products are stored individually • Products are combined into kits & bundles at time of sale & shipment
  53. 53. Virtual Kits & Bundles Can Create New “Inventory” ASIN 1 ASIN 2 ASIN 4 ASIN 3
  54. 54. Virtual kits & bundles = ASIN Alchemy Virtual kits & bundles = ASIN Alchemy Unlike Alchemy, virtual kits & bundles really creates “ASIN Gold”
  55. 55. ASIN Alchemy Helps You Sell More • With virtual kits & bundles, 2 SKUs = 4,5,6 or more ASINs • More ASINs = More Search results from limited product set • Occupying more search results = more sales • Virtual kits & bundles can help you sell more
  56. 56. 2 Steps to Virtual Kits & Bundles 1. Creation - Configure Product Combinations 2. Real-time Inventory Updates
  57. 57. Step 1: Creating Virtual Kits & Bundles 100 Baseballs in stock 75 Bats in stock Inventory software tells me 33 Multipacks – Unique ASIN 75 kits – Unique ASIN
  58. 58. Step 2 = Real-time Inventory Updates As you sell individual components and virtual multipacks, you need need inventory software that can provide real-time updates on how many individual components and multi-packs or now available
  59. 59. Example: Real-time Inventory Updates Had 110 Baseballs in stock - Now Have 42 Had 75 Bats in stock - Now Have 28 Inventory software tells me Was 33 Multipacks – Now 14 Was 75 kits – Now 28
  60. 60. Summary: Virtual Kits & Bundles = ASIN Alchemy • Just as Alchemy was a belief in creating gold…. • Virtual kiting & bundling can create Product Gold by creating multiple listings without need of actual physical bundles • Is especially useful when dealing with 100’s or 100’s of SKUs • In Amazon, works only for merchant fulfilled product, not FBA
  61. 61. Dropship Automation (Selling what you don’t have)
  62. 62. Common Problem: To Sell What You Don’t Have • Drop shipping Solves the age-old problem of how to sell products without investing in inventory But…. • Drop shipping creates a new problem when selling online
  63. 63. Main Drop Shipping Challenges • Updating quantities for multiple Products = time consuming • Maintaining Profit margins for fluctuating costs = difficult & tedious • Sending orders to suppliers in real-time in time consuming • Retrieving tracking numbers from drop shippers and returning these to Amazon in real-time is difficult.
  64. 64. Drop Shipping Without Automation is Not Scalable Inventory Levels Orders Tracking 2 Suppliers = 6 Connections with Amazon Store Suppliers Store Connections Inventory Levels Orders Tracking
  65. 65. Automated Drop Shipping is Highly Scalable Inventory Software Inventory Levels Orders Tracking Suppliers Inventory Levels Order s Tracking 2 Suppliers = 1 Connection with Amazon Store Store Connections
  66. 66. Summary: Automated Drop Shipping Grows Sales • Speeds inventory quantities • Automatically updates profit margins for fluctuating cost of goods • Automates return of tracking information to maintain seller ratings • Is an inventory multiplier for your Amazon or eCommerce Website
  67. 67. Think of Seller Fulfilled Prime as a Sales Engine • Seller Fulfilled Prime is a shipping program. But…. • As an engine that makes all your self-warehoused inventory Prime eligible, it is also a sales engine. • More Amazon Prime inventory = more Buy Box wins = more sales
  68. 68. Prime is Where the Money Is
  69. 69. Prime Buyers are the Best Buyers • Prime subscribers order more times per year • Prime subscribers spend more on average, per order • Seller Fulfilled Prime gives you access to his audience without the need of FBA • Amazon estimates SFP sellers see a 30% - 40% increase in sales
  70. 70. SFP Inventory = More Sales • If you can fulfill the requirements of SFP, and you are not doing so, you are leaving money on the table. • By making all inventory Prime eligible, SFP becomes a sales engine. • Simply using Seller Fulfilled Prime = More Sales
  71. 71. Quick Recap: Grow Revenues by Generating More Product Search Results Without More Products 1. Use virtual kits & bundles to create more Products and therefore more listings from limited inventory set 2. Grow product catalog via dropship automation 3. Sell more SKUs as Prime via SFP label printing
  72. 72.
  73. 73. Q & A Russ Dieringer Executive Director, eCommerce Council Tony Heuer Marketplace Channel Analyst Leo Carrillo III Manager, Amazon Marketplace Channels Erik Simon Head of Business Development & Marketing