In the 20 years since it went live, Amazon has risen to the top of the retail food chain, swallowing categories from celery to web services and everything in between. Researching products and buying on Amazon has become second nature to consumers. The portion of shoppers who use Amazon to begin their search for online purchases has doubled in the last five years, reaching 39% in Q3 2014. Amazon is the fourth most visited Internet site in the U.S., with 178 million unique visitors a month.
Given the staggering scale of Amazon, every organization needs a strategy to address one of the greatest forces reshaping global retail. Best practices will vary by brand and category, but several important do’s and don’ts for brands have emerged from L2 research.
DO: Diligently manage a brand’s presence on the channel
DON’T: Turn a blind eye
This is not a platform that organizations can afford to flat-out ignore, since almost every brand has a presence on Amazon. Thanks to the gray market flourishing on Amazon’s third-party marketplace, brands can easily lose control of distribution and risk a poor brand experience for consumers (anything from misleading MSRP prices to expired or otherwise unsafe products). In Fashion, for instance, nearly 9 in 10 brands in L2’s Index can now be found on Amazon, but fewer than 10% of brand searches returned links to official brand storefronts.
Brands that refuse to engage with Amazon, like the Estée Lauder Companies, tend to have the most gray-market products on the site. The Estée Lauder brand and the company’s Clinique brand have some of the highest number of listings on Amazon among brands not officially distributing on the platform. By contrast, some brands negotiate with Amazon to regulate third-party sales or restrict them altogether.
L’Oréal Group was one of the first to systematically work with Amazon to clean up SKUs for some brands while offering others (more mass brands) for official distribution. L2 found that between January and April 2014, product listings for L’Oréal’s La Roche-Posay shrank from 942 to just 81. For Kiehl’s products, all listings feature affiliate links to the brand site, requiring navigation away from Amazon to make a purchase. Procter & Gamble has allowed Lacoste fragrances and SK-II to be officially sold on Amazon in return for limited third-party sales of higher-priority brands.
DO: Reap the benefits of repeat purchasing, especially if you’re a CPG brand
DON’T: Wait till most consumers have already ordered their first basket
Over the next 12 months, an estimated 40 million “first baskets” will be created in the U.S. as Americans get in the habit of ordering consumer packaged goods online. While in-store shoppers can be fairly promiscuous in terms of brand preferences, online shoppers tend to stick with what they’ve previously purchased, just fine-tuning the core list. Grocery, beverage and personal care brands have a unique opportunity to drive considerable lifetime value and redistribute market share. All of them should be in a relentless fight to get into that first basket.
To drive CPG purchasing, Amazon now offers Prime Pantry (which lets shoppers order goods in bulk), the auto-replenish program Subscribe & Save, and grocery delivery service Amazon Fresh, in limited markets. There’s also the new Dash Button. P&G has been particularly aggressive in pursuing first baskets, letting Amazon ship directly from its warehouses. P&G accounted for almost a third of available products when Amazon launched Pantry in 2014 and offers about three-quarters of available Amazon Fresh coupons. It’s also participating in the Dash program.
DO: Optimize for Amazon’s search engine
DON’T: Assume that the biggest brands will dominate here
Amazon now sees roughly three times the search volume for products as Google. The power of Amazon as a starting point for product search is evident in the fact that two-thirds of Sportswear brands in the L2 Index pay for a sponsored link to their brand homepage on Amazon — approaching the 76% that visibly engage in paid search on Google.
Search is the new shelf space: 81% of consumer clicks go to products that appear on the first page of Amazon search results, with the first three products claiming the lion’s share at 64%. Amazon’s search algorithm considers variables including sales volume (the most important factor), reviews, price, availability, selection and keywords. Brands that officially distribute on Amazon have on average two to three times more visibility in high-volume, unbranded long-tail keyword searches than brands that do not (4% versus 2%). Product descriptions can function as a repository for keywords to optimize a listing for both Google and Amazon search, and brands can pay for greater word count.
Smaller brands are not necessarily at a disadvantage in search. Since consumers go online to find favorite brands with limited brick-and-mortar distribution, top sellers on Amazon can differ significantly from those in stores. Environmentally conscious brand Seventh Generation appears in 20% of Home Care-related long-tail searches on Amazon, beating out Clorox, Lysol and Tide. Mrs. Meyer’s Clean Day and Method, two other earth-friendly brands, also rank in the top five. In the Personal Care and Beauty industries, Burt’s Bees is among the top five performing brands in a similar search analysis.
DO: Actively solicit user ratings and reviews
DON’T: Dismiss the idea of paying for review volume
Ratings and reviews can be highly beneficial, both in boosting search results and inspiring consumer confidence. Twenty reviews seems to be a tipping point, and products with 20 or more have an 84% higher conversion rate than products with fewer reviews. The majority of SKUs for brands officially distributed on Amazon, however, have under 20 reviews — and in Watches & Jewelry, Fashion and Hair Care, a wide majority of product listings fall below that mark.
Brands can increase review volume through Amazon’s Vine program, which provides select consumers (“Vine Voices”) with free product in exchange for writing an Amazon review. Of the 10 brands with the most reviews, Vine accounts for anywhere from 2% (Aveeno) to 40% (Pond’s) of total volume. P&G is a heavy user of Vine, accounting for 29% of Personal Care brands that use it, 50% of Beauty brands and 22% of Home Care brands. Unilever frequently uses Vine for Beauty, Personal Care, and Hair Care & Color products. Higher-budget products infrequently feature Vine reviews.
Volume is an important metric for reviews because there’s a strong tendency for the average rating to remain consistent at 4.2 across verticals and distribution strategies.
DO: Optimize the branded experience on Amazon
DON’T: Fail to take advantage of Amazon’s merchandising toolkit
Enhanced product pages present an opportunity for brands to differentiate their products from competitors as well as third-party sellers, while branded storefronts discourage customer defection by aggregating product listings and showcasing wider collections. But despite the incentive, many brands do not fully utilize the toolkit of Amazon-provided features to optimize a customer’s branded experience on the platform. Even image quality on Amazon tends to pale in comparison to what’s found on brand sites.
Best-in-class brands include Gucci, which consistently provides additional information and branded content on each official product listing found on Amazon, and Kate Spade, whose watch listings link directly to a watch-specific customer service line. Citizen product pages regularly include six thumbnail images of the watches, video, to-scale sizing, and shots from multiple angles. P&G brands Gain, Swiffer and Charmin consistently supply enhanced content across their top five SKUs. For brands distributing on the platform, Amazon can handle merchandising duties, shooting products in their studios.
Find more information in L2’s Intelligence report on Amazon. For member brands, L2 can perform “Amazon Quotient” reviews that explore tactics on a granular level across metrics to help organizations focus their investments on the platform.