Amazon Agency vs Amazon Retail

Expansion into Ecommerce has Accelerated 

Before 2020, ecommerce had been steadily growing its share of all retail. But when the coronavirus hit and countries around the world issues stay-at-home orders, it forced consumers and businesses to turn to online sales channels in numbers never seen before. As a result, we’ve seen an acceleration in brand and consumer adoption of ecommerce.

Road Bumps Along the Way 

But, 2020 also saw brands face many hurdles on online marketplaces. Amazon struggled to keep pace with the surge in purchases, and they had to restrict which types of products they would accept into their fulfillment centers for a time. Amazon’s first-party (1P) division, Amazon Retail, and third-party sellers (3Ps) alike struggled to remain in stock as supply lines locked down, manufacturing was interrupted, and consumer demand skyrocketed for products well outside of their typical peak season.  

Charting a New Course 

After the turbulence of 2020, many brands are reconsidering their approach to ecommerce. To help brands make an informed decision, we’ve put together a list of the key factors that brands should consider when deciding if they should work with an Amazon retailer (1P or a 3P) or transition to working with an Amazon agency.

Should You Work with an Amazon Retailer? 

Now that we’ve covered the primary options, let’s dig into key factors for making a decision about working with an Amazon retailer, an Amazon agency, or transitioning from one to another. 

What is an Amazon Retailer? 

Starting from the top, when a brand partners with a retailer, the retailer buys product from the brand at wholesale prices, then sells it for retail prices on Amazon.  

The brand’s profits are payment for their product, minus the cost of manufacturing. The retailer’s profit is the consumer’s payment for the product, minus the wholesale expenses and channel management costs, which includes things like shipping, storage, fulfillment, commission, and marketing fees. 

When it comes to Amazon, brands that sell through a retailer can partner with Amazon directly (first-party or 1P) or with a third-party seller (3P). Learn about their key differences in our blog post, Amazon 1P vs 3P. 

Many brands choose to sell through a retailer because it provides cash up front, and the brand doesn’t have to get involved in the hassle of actively managing an Amazon channel. 

Pros of an Amazon Retailer 

Let’s start with the pros for partnering with an Amazon retailer (1P or 3P): 

  • Paid upfront via a retailer’s purchase order, which can be useful for funding manufacturing costs 
  • Not responsible for managing consumer-facing sales channel (fewer infrastructure costs) 
  • They handle online sales tax 
  • They are already registered for international value-added taxes (VAT), making international expansion much faster 
  • They provide the expertise and resources  
  • Perhaps the simplest way to start selling on Amazon 

Cons of an Amazon Retailer 

Now for the potential cons of working with an Amazon retailer (1P or 3P): 

  • Limited control over your brand’s representation online 
  • Limited control over product pricing 
  • Limited visibility into channel performance 

It’s worth noting that some of the cons of working with a retailer can be mitigated by partnering with a trustworthy partner. If you’re interested in this business model but concerned about the cons, seek out a retailer that’s committed to building a healthy relationship with your brand. 

Costs of an Amazon Retailer 

As mentioned, in a retail model, the retailer pays the brand for their product. However, retailers may ask for various discounts from the brand so they can pay the numerous Amazon fees (commission, shipping fees, tiered storage fees, and fulfillment fees) while still having some margin left over to generate revenue for themselves.   

Making a Decision 

Work with an Amazon retailer if: 

  • You want to focus on the manufacturing and brick and mortar side of your business, while they handle taking your products to market 
  • You don’t want to be responsible for paying shipping, storage, fulfillment, and commission fees 
  • Your business’s cashflow model relies on large purchase order payments 
  • You want to expand sooner rather than later into foreign markets 

Should You Work with an Amazon Agency? 

If you’re not interested in starting with a retailer or you’re working with a retailer and want to take more ownership of your Amazon channel, you may consider working with an Amazon agency. 

What Value does an Amazon Agency Add? 

Now, let’s say a brand doesn’t want someone else representing them on Amazon; they want to sell their products themselves. That’s an increasingly popular decision, and one that we’ve seen more and more brands transition to in recent years.  

However, there’s a challenge in representing yourself. Managing an Amazon channel requires three things that can be hard to come by: 

  1. Personnel: You need bodies dedicated to managing your Amazon channel. If you’re using existing personnel, what projects are you pulling them off of? If hiring new personnel, you need the budget for salaries and benefits. 
  2. Expertise: At over 25 years old now, Amazon is a mature marketplace that requires complete attention. With millions of sellers on the platform, you must enter the platform with a strong understanding of the landscape and strategies if you want to succeed. 
  3. Time: If you manage your brick-and-mortar relationships, do you have time to also manage your ecommerce relationships (and critically, keep the two in balance so that one relationship doesn’t sour the other)? 

 

If you lack in any of the above, then you may need outside help to fill in the gaps. That’s where Amazon agencies come in.  

What is an Amazon Agency? 

Amazon agencies can typically offer services in two ways: complete Amazon management or selected services. The former means that they provide everything needed to run every aspect of your Amazon channel. The latter means they provide only a handful of services that you specifically need help with, such as managing your Amazon advertising campaigns, while you handle the rest. 

Pros of an Amazon Agency 

Pros for partnering with an Amazon agency: 

  • More control over your brand’s representation online 
  • More control over product pricing 
  • Increased visibility into channel performance 
  • Your profit margin may exceed that of a retail model 
  • They provide the expertise and resources 

Cons of an Amazon Agency 

Cons for partnering with an Amazon agency: 

  • You’re paying the agency instead of having a retailer pay you 
  • You may be responsible for inventory and supply chain management (some agencies offer this service, but not all) 
  • Since you are selling through your own Seller Account, you are responsible for collecting and remitting online sales taxes 
  • You’re also responsible for VAT in international markets, slowing your ability to expand internationally 

When determining if you’re willing to pay for an agency’s help, think of it as an investment. If you pick the right investment, it may set you back at the start, but soon, it will pay for itself and then some. 

 

Costs of an Amazon Agency 

In an agency model, the brand pays for all the Amazon fees themselves (commission, shipping, storage, fulfillment, marketing), but you have more margin to work with. Because the brand holds the inventory risk in an agency partnership, the agency fee can be significantly lower than the retailer’s margin. The agency then collects either a monthly retainer or a commission. 

Making a Decision 

Either start by working with an Amazon agency or transition to one if: 

  • You want more control of your brand’s representation online 
  • You want a greater share of product margin 
  • You need additional personnel, expertise, time, or resources to effectively manage your Amazon channel 
  • Your budget allows for you to pay a retainer or commission  
  • Your business’s cashflow model can adapt to using revenue from end-consumer sales 

Should You Sell Yourself (Direct to Consumer)? 

If you want to represent your brand yourself on Amazon and you have the personnel, expertise, time, and resources to do so, then you don’t need to partner with a retailer or an agency.  

This route is the end goal for many brands, but it has by far the most and greatest requirements. As such, we often see brands start in retail or agency partnerships, then transition toward selling themselves.  

In this post, we’re focused on comparing working with a retailer to working with an agency, but you can learn more about a Direct-to-Consumer model in this blog post. 

 

Amazon Retailer vs Amazon Agency: Which is Better? 

The annoying but honest answer is that it depends.   

Retail is generally the better choice for brands that need immediate cash flow to fund their manufacturing. Working with a retailer also simplifies domestic and international taxes, as brands do not need to deal with VAT or sales tax when selling online through a retailer; the retailer handles it for them. This also enables brands to expand into foreign markets quicker, since the legal infrastructure is already in place. 

Agency is generally the better choice for manufacturers with tight margins, want larger margins, and/or want more ownership over their brand’s presence in online marketplaces. 

Service That Grows with You 

Kaspien holds a unique position in brand services for online marketplaces, as we’re able to serve brands in both capacities: We can be a brand’s Amazon retailer, Amazon agency, or help them migrate from one to the other. Through our platform, brands can continue building upon the same foundation of data, products, services, and solutions, no matter how their ecommerce needs evolve. 

Related Content 

Amazon Electronics Category Overview

The Electronics category is one of the largest, most competitive, and most mature categories on Amazon. Amazon itself has a dominant presence, both as a first-party retailer (1P) and in a private label capacity, with Amazon Echo, Alexa, Kindle, and Fire TVs being just a few of their offerings in Electronics.  

But, Amazon isn’t the only established player in this space. Major brands like AppleSony, and many others have large catalogs on Amazon. The Electronics category also sees a surplus of copycat and knockoff products, as there are plenty of factories that will happily produce the same product for two brands and apply a different sticker to each.  

Even with these challenges, there have been tremendous success stories. Brands like Anker and 1More both established much of their initial business on Amazon and have grown into major players on and off the channel. But selling in this category is difficult; brands need to be ready to hit the ground running. It’s a marathon sprint, and the race has already started. 

Overview 

Amazon 1P Dominates Electronics Sales 

Amazon has a strong first-party (1P) presence in the Electronics category, accounting for 43% of the total sales in Consumer Electronics, according to Amazon’s responses to the US House Committee on the Judiciary’s Questions for the Record 

 Amazon’s dominance in this category is partly owed to Electronics brands themselves, many of whom choose to partner with Amazon 1P as their wholesale online retailer. We can see this played out on Prime Day in 2020. A Rolling Stones poll found that on Prime Day, the top selling products were: 

  1. Apple AirPods with Charging Case (sold by Amazon) 
  2. Bose Solo 5 TV Soundbar (sold by Amazon) 
  3. YI 1080p HD Wireless Home Security Camera 
  4. VANKYO LEISURE 3 Mini Projector 
  5. Echo Show 5 (sold by Amazon) 
  6. Amazon Smart Plug (sold by Amazon) 
  7. Back Bay Wireless Bluetooth Shower Speaker 
  8. 23andMe Health + Ancestry Service 
  9. Pure Clean Automatic Vacuum Cleaner (sold by Amazon) 
  10. YOSUDA Indoor Cycling Bike 

 

During Prime Day 2020, Amazon 1P accounted for half of the top ten selling products. Eight of the top ten selling products were from the Electronics category, including the top seven products. Digital Commerce 360 estimates that Amazon saw over $10.4 billion in sales on Prime Day 2020, and that Amazon claimed 65% of those sales. 

Amazon’s Prime Day sales demonstrate Amazon’s control in the Electronics category, as well as the enormous interest in purchasing Electronics on Amazon. Shoppers have learned they can find nearly all their Electronic wants and needs on Amazon, making it a key market for Electronics brands and sellers.  

The Electronics Category is Saturated 

Of course, when there’s so much value up for grabs, everyone wants a piece. The Electronics category is not just saturated; it’s among the most saturated categories on Amazon. It is one of the most-purchased-from categories, one of the most competitive with ads and pricing, and rife with knockoffs and counterfeit products. There are literally tens of thousands of purchasing options for headphones alone, making it into its own sub-category. 

Brands entering the Electronics category have a difficult road ahead. For new brands, rising about the clamoring crowd of lookalike products is incredibly challenging in most established sub-categories, such as headphones, speakers, and mics. However, there are strong opportunities in emerging technologies, such as “smart home” products. 

The saturation of the Electronics category is, of course, a long time in the making. Electronics sellers have been on Amazon for many years, maturing into one of the most experienced categories on Amazon. Which brings us to our next point… 

One of the Most Mature Categories 

The Electronics category is one of the most mature categories on Amazon. What exactly does that mean?  

By maturity, we mean that the sellers operating in this category tend to have an above-average understanding of what goes into selling on Amazon. They understand the competitive landscape, Amazon’s dialectic role friend and rival, the necessity and value of marketing, how to marry their brick and mortar and ecommerce strategies, etc. When the category is so saturated, sellers have had to learn to adapt or fail. 

This maturation is leading the category into the next phase of its lifecycle, where major players are reclaiming the landscape. As mentioned, Amazon dominates much of the category by retailing products from leading brands and creating its own low-cost private label products. In 2020, Amazon’s retail sales account for 97% of their sales in the Electronics category, while private label accounts for just 3%.  

Despite its small share, you shouldn’t write off Amazon’s private label. AmazonBasics is a growing threat in the landscape, as AmazonBasics often develops their own versions of successful items on the market at a much cheaper price.  

This practice landed Amazon in hot water in 2020, when the Subcommittee on Antitrust, Commercial, and Administrative Law of the Committee of the Judiciary published a report that claims Amazon uses private third-party information to inform its private label decisions. 

However, Amazon isn’t the only one taking a larger market share. Major brands like Bose, TLC, and Sony are taking more ownership of their Amazon channels as they realize the opportunities of this marketplace. If the trend continues, the Electronics category may shift to consist of several dominant brands in established sub-categories, while they and new brands continue to fight for market share in emerging sub-categories. 

Learn More 

There are many challenges in the Electronics category: seller saturation, competitive ads and pricing, direct competition with Amazon 1P, knockoffs, counterfeits, quality control, safety testing and certifications, and more. It’s a lot for any brand to handle on their own. 

Fortunately, we’ve got the resources to help. Download our free Amazon Seller’s Guide to the Electronics Category to learn even more about the category landscape, shopper psychographics, and category-specific marketing strategies. 

Download the Amazon Electronics Category Guide


Walmart vs Amazon: How the two companies compare

Amazon has long dominated online marketplaces in the US. However, in 2020, Walmart launched a series of initiatives that would borrow from Amazon’s learnings to bring Walmart into a competitive position, such as Walmart Fulfillment Services and a subscription service, Walmart+ (Walmart Plus) 

The success of these initiatives immediately underwent a trial by fire as the coronavirus pandemic swept the US. Amidst quarantines and dramatic swings in consumer buying behaviors, Walmart’s online segment has conducted itself admirably.  

So, in this post, we’re taking a closer look at how Walmart Marketplace compares to the great leviathan of US ecommerce. 

Walmart vs Amazon – History 

Amazon’s History 

Amazon was founded as an online book seller on July 5, 1994. The company went public just under three years later in 1997then expanded into music and DVDs in 1998.  

Amazon as we know it today, with millions of third-party sellers selling alongside Amazon on its platform, began in 1999, when Amazon launched its third-party seller marketplace. Amazon Web Services, or AWS, joined the fray in 2003.  

2005 brought the introduction of Amazon Prime. From there on out, Amazon continued to grow into the behemoth we know today. The last 15 years have been filled with acquisitions and ventures into all types of industries, including mobile phones, robotics systems, the Washington Post, Twitch video game streaming service, Whole Foods, the creation of Echo and Alexa, prescription medication, and more.  

This article contains a thorough summary of Amazon’s major milestones over the years. 

Walmart’s History 

Walmart is far older than Amazon, founded in 1962. The company went public in 1970.  

The next 30 years saw rapid growth in physical store locations, but it wasn’t until 2000, just five years after Amazon launched, that Walmart launched online stores. Likewise, it wasn’t until 2009 that Walmart launched a third-party seller marketplace, 10 years after Amazon.  

However, Walmart beat Amazon to the online grocery game, starting online grocery pickup in 2015.  

Walmart acquired Jet.com in 2016, a move that would ultimately teach Walmart many lessons about ecommerce, but not drive any immediate, significant growth. 

Walmart launched TwoDay Delivery in 2017 to compete with Amazon’s 2-day shipping, then NextDay Delivery in 2019. 

Though Walmart had been making progress in developing its online marketplace, it wasn’t until 2020 that their online marketplace really began to capture brands’ attention as a high-opportunity ecommerce marketplace 

In February 2020, Walmart launched Walmart Fulfillment Services. In September 2020, they launched Walmart+, a subscriptions service with exclusive benefits, similar in theory to Amazon Prime, but each offering a different set of perks enabled by their unique positions. 

Walmart vs Amazon – Size 

Ecommerce Share 

Amazon currently controls roughly 38% of the United States ecommerce retail market, according to eMarketer. On the other hand, Walmart only controls approximately 8% of the ecommerce retail market.  

Amazon has over 95 million monthly unique website visitors in the US, while Walmart.com has over 100 million monthly unique visitors. 

Physical Locations 

It should come as little surprise that Walmart’s physical locations vastly outnumber Amazon’s, given each company’s history. Walmart has 5,353 US stores as of July 2020, while Amazon ha589 physical stores as of August 2020. 

International Presence 

Amazon has marketplaces in 16 countries, while Walmart has its online marketplace available in 10 countries and physical stores in 27 countries 

Walmart vs Amazon – Customers 

How do Walmart shoppers differ from Amazon shoppers?  

The answer? Not a whole lot. According to Walmart, Walmart’s and Amazon’s customer demographics are nearly identical when viewed by generations or by income levels. 

Walmart’s VP of Walmart Fulfillment Services delved into more Walmart vs Amazon myth busting in our co-hosted webinar. You can watch it for free on-demand. 

Walmart Fulfillment Services (WFS) vs Fulfillment by Amazon (FBA) 

Speaking of Walmart Fulfillment Services (WFS), let’s take a look at how it compares to Fulfillment by Amazon (FBA). 

For the moment, WFS and FBA share many similarities. Both services allow third-party vendors to ship their product at a fulfillment center, where the product is stored until purchased, then fulfilled. Both will: 

  • Pick, sort, pack, ship, and track products 
  • Handle shipping, returns, and refunds  
  • Provide 2-day shipping 
  • Provide same-day shipping in select areas 

One big difference is that Walmart.com allows for item pickup at any of its stores, while Amazon only has a few stores that do online pickup. 

WFS vs FBA eBook & Webinar

We offer a comprehensive breakdown of WFS vs FBA in our free eBook. If you’re interested in learning more about WFS, watch our on-demand WFS webinar that we co-hosted with Walmart’s VP of WFS. 

Walmart Fulfillment Services vs Amazon FBA

Walmart vs Amazon – Marketing Services

In terms of marketing, Amazon and Walmart.com are very similar, but Amazon has many more options to choose from.  

Amazon Marketing Services 

Amazon marketing products available to sellers include:  

Walmart Marketing Services 

Extensive right? In contrast, Walmart offers a limited selection of marketing products for sellers, including:  

This difference in selection is not surprising though. Amazon has been focused on ecommerce for 25 years, while Walmart has only really made ecommerce a heavy focus in the last five years. Over time, Walmart Marketplace will develop new marketing services to match Amazon’s list. 

For the time being, online sellers will see far greater returns from marketing dollars invested into Amazon marketing than in Walmart marketing. Amazon’s services offer greater control over audience targeting and more data insights, which, in turn, yield higher profitability. 

Walmart Plus vs Amazon Prime 

Until recently, Walmart did not have a competitor to Amazon Prime, Amazon’s premium paid subscription service. In July 2020, Walmart announced Walmart+, its own premium paid subscription service. These subscriptions are very similar as both give you access to perks and benefits like two-day shipping and one-day shipping on a host of products.   

Walmart Plus vs Amazon Prime

Walmart Plus Member Benefits 

  • Free 2-day shipping 
  • Early access to deals 
  • Express delivery for groceries and select goods 
  • Fuel discounts at Walmart gas stations 
  • Scan & Go service in Walmart stores 
  • Walmart dropped its minimum $35 purchase requirement for 2-day shipping in December 2020 
  • Planned Walmart Plus credit card 
  • Planned Walmart Plus entertainment package 

Amazon Prime Member Benefits 

  • Free 2-day shipping 
  • Early access to deals 
  • Express delivery for groceries and select goods 
  • Prime video 
  • Free video games 
  • Free access to Amazon library 
  • Ad-free Amazon Music 

Amazon Prime costs $119/year, while Walmart Plus costs $98/year. Amazon Prime has 126 million members in the US as of October 2020, so Walmart has a lot of catching up to do. 

Walmart vs Amazon – Challenges 

Counterfeit Products Plague Amazon 

Amazon has the ignominious reputation of being rife with counterfeits and unauthorized sellers. In January 2020, the United States Department of Homeland Security released a report detailing counterfeiting on the Amazon marketplace platform. The company has been slow to face the issues but has been making some strides.  

Unlike Amazon, Walmart.com is a gated marketplace, which has helped mitigate the risk of counterfeits and unauthorized sellers. 

Amazon Accused of Stealing Third-Party Data 

Another problem facing Amazon is the accusations of stealing data from businesses that use its marketplace or Amazon Web Services (AWS). Jeff Bezos, founder and CEO of Amazon, testified before United States Congress about these allegations on July 29, 2020, and Amazon provided written answers on September 4, 2020 to the committee’s follow-up questions. 

Walmart is Playing Catch Up 

Walmart Marketplace’s greatest hurdle is that it is starting so far behind Amazon in the ecommerce game. However, Walmart has an extensive infrastructure, capital, and the benefits of learning from Amazon’s successes and failures. As we touched on regarding marketing, Walmart is still well behind Amazon, but they have made admirable progress this year with the launch of Walmart Fulfillment Services and Walmart Plus.  

Walmart vs Amazon – Ecommerce Growth 

As anyone can see, there are pros and cons for both Amazon and Walmart. Amazon may be the giant in the ecommerce space, but that means they have a large target on their back. Both Amazon and Walmart have seen tremendous growth in 2020: 

Walmart Ecommerce Quarterly Net Sales Growth 

  • Q1 2020: 74% year-over-year 
  • Q2 2020: 97% year-over-year 
  • Q3 2020: 79% year-over-year 

Amazon Quarterly Net Sales Growth 

  • Q1 2020: 26% year-over-year 
  • Q2 2020: 40% year-over-year 
  • Q3 2020: 37% year-over-year 

Clearly, both companies’ offer huge growth potential. In general, we recommend prioritizing Amazon over Walmart because the sales potential is, currently, so much greater on Amazon. However, Walmart is growing rapidly, and you would be wise to try to get on Walmart sooner rather than later so you can grow with it. 

Want to learn about selling on Walmart.com? Check out our free eBook!

Download the eBook: “WFS: Walmart’s Gamble to Challenge Amazon FBA”


FBA Seller Reimbursement Services

Selling on Amazon offers many opportunities and is an excellent way to grow your brand. One of the most helpful tools that Amazon offers sellers is Fulfillment by Amazon (FBA)which boasts a sprawling network of Amazon-owned warehouses across the country. Sellers ship inventory to these Amazon fulfillment centers for storage and eventual fulfillment to the end consumer. Amazon’s fulfillment services are a foundational component of Amazon’s success. 

However, these fulfillment centers aren’t perfect. They regularly make mistakes that cost sellers money, and sellers must petition Amazon for reimbursement if they don’t want to eat the costs. With many sellers unaware that they need to take action, we often see significant amounts of money left on the table. 

Why Does Amazon Owe FBA Sellers Money? 

Amazon’s fulfillment centers regularly lose or damage inventory, overcharge fulfillment and storage fees, or under-reimburse sellers. To get fully reimbursed, FBA sellers have to cross reference up to 17 reports to identify and submit cases. 

Most Common Types of Mistakes in Fulfillment Centers 

There are quite a few mistakes for which Amazon may owe an FBA seller reimbursement, but two case types in particular account for the vast majority of inventory reconciliation cases: 

Inbound Discrepancy 

Inbound shipments with items that have a discrepancy between shipped and received after 15 days.   

Lost Inventory

Inventory lost minus inventory found and reimbursed. 

At Kaspien, we see these two case types account for 95% of all FBA seller reimbursement cases. Below are other types of cases that account for the minority of reimbursement cases. 

Amazon Inventory Reconciliation Case Types 

Carrier Damaged Return

Customer returns that were damaged by Amazon-partnered carrier minus reimbursed. 

Commission Discrepancy

Orders with SKUs where the charged referral fee (commission) exceeds Amazon’s estimated referral fee for the order date. 

Damaged Inventory

Inventory damaged in the warehouse. 

Destroyed Without Permission

Inventory destroyed. 

Dimension Discrepancy

ASINs with either dimensions or weight that have significantly increased compared to previous values, affecting fulfillment fee and/or monthly storage fee. 

Failed Return

A refund was issued to customer for a return, but the items returned were fewer than the number that was refunded. 

Fulfillment Center Damaged Return

Customer returns that were damaged in an Amazon fulfillment center. 

Fulfillment Fee Discrepancy

Orders with SKUs where the charged fulfillment fee exceeds Amazon’s estimated fulfillment fee for the order date. 

Missing Reimbursement

Customer return flagged as ‘reimbursed’ but the seller doesn’t see the reimbursement come through. 

Missing Return Unit

Customer return was flagged as ‘Unit returned to inventory’ but the unit was not actually returned to inventory.  

Over Refunded

Refund issued to customer exceeded the actual order total.  

Returned Inventory Discrepancy

Customer returns with units returned to inventory under a different SKU than that which was purchased. 

Under Reimbursed Failed Return

A refund was issued to customer for a return, then the customer failed to return the item, and the reimbursement was issued but the reimbursement amount is less than the refunded amount. 

Under Reimbursed Return

A refund was issued to a customer for return, the customer returned the item, and the reimbursement was issued but the reimbursement amount is less than the refunded amount. 

Unfulfillable Damaged Inventory

Damaged inventory that has been damaged for more than 20 days and is therefore unfulfillable. 

How to Get an FBA Reimbursement 

Manual Amazon FBA Reimbursement 

Due to the ambiguity of Amazon case management, managing inventory reconciliation manually is laborious and inefficient. Here’s the general process for manual case management:  

  1. Download separate business reports (in some cases, this may add up to 12 separate reports). 
  2. Cross-reference reports to identify reconciliations.  
  3. File and manage separate Amazon cases for each instance where Amazon owes you money while complying with each case’s unique allowance window.  
  4. Manual case management can take up to a month to actualize, which requires careful tracking and frequent follow-up on all submitted cases.  
  5. Review your Amazon statements to ensure you were reimbursed for the correct amount, even after the case is closed. 

As you can see, the FBA reimbursement process is arduous. In the long-term, few brands can afford to spend the time managing the manual process, but neither can they allow cash to bleed from FBA errors. 

Automated Amazon FBA Reimbursement 

Luckily, there are plenty of software solutions for this problem, including our own proprietary seller reimbursement software, Channel Auditor 

What is Channel Auditor? 

Channel Auditor is a software that helps FBA sellers mitigate fees and recover lost funds. It does so by automatically identifying cases that are eligible for reimbursement and expediting case creation. It’s your Amazon auditor that never sleeps.  

Does Channel Auditor Automate Case Creation? 

Amazon’s policies expressly forbid automating case creation in Seller Central. Those violating this policy can be fined, suspended, or banned.  

Channel Auditor does not automate case creation, but it does the next best thing. It automatically identifies cases that are eligible for reimbursement, then provides the exact text and evidence needed to petition for reimbursements. All you have to do is copy and paste, click submit, and Channel Auditor does the rest. 

How Channel Auditor Automates Amazon FBA Reimbursements

Automatic Case Identification

First, sellers connect Channel Auditor to their Seller Central account, allowing it to pull inventory reports for their channel. Channel Auditor immediately and automatically starts cross-referencing multiple reports to identify Amazon reimbursement cases. Using this information, Channel Auditor can forecast how much money a seller can be reimbursed.

Expedited Case Creation

After inventory reconciliation cases are identified, sellers select the cases they want to create from within Channel Auditor. Channel Auditor provides the exact text needed, including links to evidence that supports the claim.

Easy Case Management

From there, Channel Auditor automatically tracks case progress and notifies the seller of their results.

Channel Auditor Case Study

A brand in the Health & Personal Care category started using Channel Auditor in June 2020. In a single month, they were reimbursed over $7,000! In less than five months, they recovered over $13,000 in Amazon seller reimbursements! 

See How Much You’re Owed 

If you’re curious how much Amazon owes you but aren’t ready to start a subscription, that’s alright. Request a quote from Channel Auditor – for free – and we can tell you exactly how much money Channel Auditor could recover for you if you used it.  

Request a free quote today. 

Amazon Q3 2020 Earnings Report

Today, Amazon released their Q3 earnings report. Amazon’s net sales this quarter grew 37% year-over-year, down from 40% YoY growth in Q2 but still staggering, nonetheless. Other highlights from the earnings report include: 

Overview

  • Operating cash flow for the trailing 12 months increased by ~$20 billion compared to the same period last year, up 56% to $55.3 billion 
  • Operating income nearly doubled YoY, up from $3.2 billion to $6.2 billion 
  • Amazon’s net income tripled YoY, up from $2.1 billion to $6.3 billion 
  • Amazon reports that it has created over 400,000 jobs globally in 2020 
  • Amazon Sweden launched yesterday, October 28

Segments

  • Third-party seller services grew 55% YoY 
  • First-party sales grew 38% YoY 
  • The “Other” segment, which consists largely of advertising revenue, grew 51% YoY, demonstrating that advertising revenue continues to be one of the fast growing segments
  • AWS grew 29% YoY, on par with growth in Q2 (the last two quarters are the slowest growth rate in the last 3 years) 

Other 

  • Subscription services are up 33% YoY 
  • Shipping costs are up 57% YoY 
  • Amazon’s logistics and fulfillment square footage is expected to grow 50% YoY in 2020
  • Amazon expects net sales to grow between 28% and 38% YoY in Q4 

A Record Breaking Quarter

At $6.3 billion, Amazon’s Q3 earnings shattered records, the previous record being $5.2 billion in Q2 this year. To not appear to benefit too greatly from the pandemic, Amazon has pledged another $4 billion to COVID-19 costs for the fourth quarter. It’s also worth noting that on Prime Day, which occurred in October this year, that Amazon did not appear to struggle with fulfillment. Their logistics success on Prime Day is reassuring as sellers head into the holiday season.

Amazon’s earning report covers much more, delving into Amazon’s contributions to communities, job growth, climate change, Amazon products, Prime Video, AWS, and more. As an Amazon seller/agency/software provider (we do a lot), we’re going to focus this coverage on what the report suggests for brands selling on Amazon. 

Our biggest hot take: Amazon’s feeling the heat from the antitrust investigation, and is taking time in this earnings report to try to deflect or minimize some of the allegations laid against it. 

Amazon Tries to Deflect Antitrust Concerns 

On July 29, 2020, Amazon founder and CEO Jeff Bezos testified before a congressional antitrust committee. Amazon also supplied written answers to the committee’s questions on September 4. The committee published a 450-page report on October 6 with their findings from a 16-month antitrust investigation into Amazon, Google, Facebook, and Apple.  

For those who listened to Bezos’s testimony or read the aforementioned documents, it’s easy to see that Amazon is making a defense for itself within its Q3 earnings report. We’ve broken down some of the most notable references to the antitrust concerns.  

Does Amazon Hinder S&MB Growth? 

Amazon has been accused of stymieing the growth of small and medium-sized businesses. In this earnings report, as with previous reports, Amazon points to its efforts to support small and medium-sized businesses, including: 

  • Amazon Accelerate, a program that teaches business owners best practices for selling on Amazon 
  • Ignite Digital Festival, an event for delivery service partners offering best practices and updates for logistics 
  • Stand for Handmade, a program in India that waives selling fees for local, handmade products 
  • Amazon Launchpad Innovation Grants, a program in Australia to provide grants to start-ups and S&MBs 

Amazon Takes Majority of Prime Day Sales 

During the antitrust hearing, Amazon faced questions about unfair usage of third-party data and unfair competition against third-party sellers by Amazon’s first-party retail segment. 

In their earnings report, Amazon makes a point to state that on Prime Day, third-party sales grew 60% YoY, up to $3.5 billion, “growing even more than Amazon’s retail business.”  

This note seems to be a defensive move by Amazon, as others have noted that Amazon’s firstparty sales hit an estimated $7 billion and accounted for 60% of all Prime Day sales. In year’s past, first-party sales accounted for closer to 40% of all Prime Day sales. Third-party sellers may have grown at a greater rate than Amazon’s retail segment, but Amazon took a far larger slice of the Prime Day pie this year. 

Amazon’s Efforts to Protect Brands & Consumers 

Amazon also drew attention to Project Zero, announcing that the tool is available in 17 countries around the world. Project Zero allows brands to remove alleged counterfeit sellers from their listings themselves, without going through Amazon’s approval process. The program has been historically difficult to gain access to.  

Bezos referenced Project Zero during his testimony when asked about what Amazon is doing to protect brands and consumers from counterfeit products.  Mentioning it again in the earnings report helps send the message that Amazon is continuing to expand its anti-counterfeit efforts.

Marketplace Earnings Reviews

Read our breakdowns of Amazon’s Q2 Earnings Report, Walmart’s Q2 Earnings Report, and Target’s Q2 Earnings Report.

A Chow Chow Wearing Sunglasses and a Kitten

The Pet Supplies category is an emotions category – shoppers buy with their emotions and justify with logic. The joy that comes from delighting a beloved pet or the fierce protectiveness that comes when thinking of their safety – these are grounding factors that must guide your marketing strategy for the Pet Supplies category.    

Pet Owners Seek Trustworthy Brands 

Shoppers in the Pet Supplies category tend to demonstrate high brand loyalty. Shoppers want to trust that the toys, treats, and items they buy for their pets are safe and reliable. Once they’ve found a brand that they trust, they tend to stay with it.  

We see this played out in data, which shows that first-time buyers enter the category using broad keywords, like “dog toy,” while repeat buyers often use branded keywords.   

In the same vein, we also see that shoppers in the Pet Supplies category are willing to pay for quality. Because pet owners want the best for their pets, they’re willing to pay more for higher quality items. This is especially important to consider given that this category struggles disproportionately with counterfeit product. The low production and freight costs often associated with this category make it a prime hunting ground for counterfeiters. 

3 Ways to Tailor Your Amazon Marketing Strategy for Pet Products 

1 – Lifestyle Images are a Must  

Exciting visuals are critical in emotions categories because they are the first step towards inspiring an emotional rapport with shoppersLifestyle images are images that show your product in use in a natural setting. An adorable photo of a dog using your chew toy will delight shoppers and make them want to see that joy in their own furry friend. In many cases, they also help display the size of the product, helping ensure customers know what size they’re buying. 

Dog with Frisbee in park

Recommendations: 

  • Re-use images generated by influencers for your Amazon listings 
  • Include 2-4 lifestyle images and 1 video, if possible, in your Amazon listings 

Read more about the role of images and video for Amazon marketing. 

2 – Tell a Story with A+ Content 

A+ Content is a potent marketing tool in any category, but especially so in the Pet Supplies category. Pet owners value safety and reliability from the brands they patronize. A+ Content is an excellent place to acknowledge and empathize with their desire. Share your brand’s story and values to show shoppers that your brand is worthy of their trust. 

A Plus Content on Amazon

Recommendations: 

  • Create A+ Content for top performing ASINs (requires Brand Registry) 
  • Share your brand story and values 
  • Use additional imagery that shows your products in use 
  • Highlight product features 
  • Include a sizing chart, if applicable to the product 
  • Link to your other product lines through a comparison chart 

Learn more about earning customer trust in a skeptical world. 

3 – Reach Brand-Loyal Shoppers with Sponsored Brand Ads 

Earlier, we identified shoppers in the Pet Supplies category as being brand loyal. We see this played out in Sponsored Brand Ads – banner ads that show the brand name, logo, and several products. Sponsored Brand Ads typically have lower conversion rates than Sponsored Product Ads, but in the Pet Supplies category, we see strong performance because repeat buyers are seeking specific brands. 

Sponsored Brand Ad on Amazon SERP

Recommendations: 

  • Direct Sponsored Brand Ads to your Amazon Store 
  • Bid on branded keywords so the ads appear for repeat buyers 

Learn more about sponsored ad strategy on Amazon. 

The Best Doggone Guide to Pet Supplies on Amazon 

Like what you’re learning? This is only scratching the surface. Our Amazon marketing experts put together a comprehensive Amazon seller’s guide to selling pet products on Amazon. It contains a category overview, top challenges for pet brands on Amazon (and solutions for them)legal and marketplace requirements, and 10 ways to customize your Amazon marketing strategy specifically for the Pet Supplies category.  

 

Download the Free eBook


Bezos answers congressional antitrust questions for house subcommittee on the judiciary

On July 29, 2020, Jeff Bezos testified before the US House Committee on the Judiciary. After the testimony, the committee submitted a list of additional questions for Amazon to answer in writing. The questions and answers were published on September 4th. We’ve reviewed Amazon’s responses in the Questions for the Record and identified some key takeaways for brands and third-party sellers that operate on the Amazon marketplace.  

Does Amazon Steal Third-Party Data? 

One of the most persistent lines of questioning was around Amazon’s use, or rather, alleged misuse of third-party data, including third-party seller data from the Amazon marketplace and third-party data from AWS users. Amazon has been accused of using third-party data to create copycat products and undercut its users’ prices. 

In short, Amazon openly admits to drawing on its enormous wealth of third-party data to improve its first-party offerings. However, it denies targeting any single seller because it anonymizes and aggregates data. 

Amazon responded in multiple instances that Amazon uses anonymized, aggregated data to inform its decisions, including which private label brands and products it pursues. Amazon argued that this is an ability that any retailer has, ecommerce or brick and mortar. Amazon also stated that, like any other seller, its private label developers research public-facing content on listings, such as price, reviews, rank, and features. 

Rep. Pramila Jayapal’s questions pressed Amazon to define “aggregated data” through a hypothetical: If a category consisted of one seller who accounted for 99% of sales and another seller who accounted for 1% of sales, would Amazon deem the combined data “aggregate data”? Amazon’s response that aggregate data is “data that is aggregated across multiple third-party sellers and, where available, Amazon’s first party sales,” suggested that it would. 

First-Party Share of Listings by Category

First-Party Share of Sales by Category

Amazon First Party Share of Sales by Category

 This question and Amazon’s answer are important to note for brands that release innovative products. Even if Amazon reviews data at a category level (and Amazon did not specify how deep category levels go for their product development purposes)successful products in niche categories are particularly vulnerable to copycat products based on Amazon’s aggregated data and frontend research. 

Does Amazon Unfairly Favor First-Party Products & Services? 

The Buy Box 

Chairman David Cicilline asked if Amazon considers profitability to Amazon when determining which seller wins the Buy Box. Amazon responded that profitability to Amazon is not a factor. Instead, factors such as price, delivery speed and cost, Prime eligibility, and seller performance determine Buy Box ownership. These factors are all things prioritized by Amazon first-party products. 

FBA vs Non-FBA Offers 

Cicilline also asked if Amazon favors products fulfilled through Fulfillment by Amazon (FBA) are favored over non-FBA options. As with nearly every answer, Amazon responded in a roundabout way, stating that Amazon’s data shows that customers prefer orders with FBA over non-FBA orders by 9.46%. This answer suggests that, yes, Amazon does favor FBA orders over non-FBA orders, but justifies it by claiming it provides the superior customer experience. 

However, this may change in the coming fourth quarter, as Amazon has been forced to impose inventory constraints across its fulfillment centers due to being unable to meet the surge in ecommerce purchases caused by COVID-19Since inventory space is limited and in high demand, Amazon is focusing on higher-volume, faster turning ASINs, as well as higher-profit items, to ensure that products stored in Amazon fulfillment centers (FC) are worthwhile for Amazon. 

The Amazon FC capacity constraints has driven many third-party sellers to establish hybrid fulfillment strategies for Q4, combining FBA with Fulfillment by Merchant (FBM). 

Purchases Through Alexa 

Cicilline also submitted questions about what ratio of first-party products are sold through Alexa compared to third-party productsAmazon stated that third-party sales account for 45% of sales made through Alexa in 2020, despite accounting for 58% of sales of physical products on Amazon. Amazon stated this discrepancy is due to the fact that many sales on Alexa are for consumable household items, like paper towels and diapers, and Amazon has a larger first-party presence in this category. 

Amazon also stated that only a low, single-digit percentage of customers complete the purchase of a product suggested by Alexa on Alexa. The clause “on Alexa” is worth noting, as it implies that the conversion rate for Alexa-recommended products could be higher if one tracked sales made on other devicesWhen Alexa recommends a product, shoppers may look it up on their phone to view pictures and read reviews, then purchase from their phone. Such conversions would not be counted in the low, single-digit conversion rate provided by Amazon. 

Does Amazon Do Enough to Protect Brands & Consumers? 

Project Zero Allows Brands to Remove Counterfeits 

Representative Henry Johnson, Jr.’s line of inquiry focused on brand protection services available to sellers on Amazon, and by extension, consumers who shop on Amazon. His first line of questioning focused on Project Zero, an Amazon program that gives brands the power to take down counterfeit listings themselves. 

According to Amazon, to be eligible for Project Zero, a brand must have a registered trademark, an Amazon account with access to Brand Registry, and have maintained an accuracy rate of higher than 90% for all notices of infringement submitted to Amazon in the prior six months. Requiring a high rate of accuracy for notices of infringement is critical to protecting honest sellers from abusive removals. 

Amazon stated that currently, 10,000 brands are enrolled in Project Zero. When challenged why brands should have to police Amazon’s marketplace for it through Project Zero, Amazon stated that their automated brand protections proactively remove more than 100 items suspected of infringement for every 1 item that a brand owner manually removes.  

IP Accelerator Expedites Trademark Registration 

Responding to questions about protecting intellectual property rights (IPR), Amazon brought attention to its IP Accelerator program, which connects brands with a curated network of trusted IP-focused law firms to help with trademark registration. According to Amazon, this program has connected over 1,500 brands to the network, and over 500 brands have received “accelerated protection” on Amazon. 

Accuracy of Seller Contact Information 

As of September 1, 2020, Amazon requires all sellers to list their contact information on their public-facing Amazon seller profile page. Representative Johnson, Jr. asked Amazon how they plan to ensure that the seller information is accurate.  

Amazon responded that they combine computer and human resources to validate seller contact information. However, many of their efforts seem to occur when a new account is created, so it is unclear how effective Amazon’s systems will be at retroactively identifying inaccurate information in existing seller accounts. 

Does Amazon Knowingly Permit the Sale of Counterfeits? 

Despite a plethora of anecdotes from consumers and brands about a pervasive counterfeit problem existing on Amazon and the Department of Homeland Security’s report from January 2020, Amazon continues to deny that counterfeit products are prevalent on the Amazon marketplace.  

Amazon claims that 99.9% of all products viewed by customers on Amazon do not have a valid counterfeit complaint, although Amazon did not state how it determines which complaints are valid.  

CJ Rosenbaum, founding partner of Amazon Sellers Lawyer, also cast further doubt on the sincerity of Amazon’s claim that it proactively fights the sale of counterfeit product on its marketplace. In an interview with Kaspien’s CEO and Director of Compliance, Rosenbaum shared that his firm recently represented a vendor who knowingly sold counterfeit product to Amazon Retail (first-party or 1P), and that Amazon Retail: 

  • Knew the product was counterfeit and bought it anyways, then sold it to consumers 
  • Simultaneously had an existing partnership with the competing authentic brand 
  • Stopped paying the vendor when the vendor’s account was accused of counterfeit, while continuing to sell the counterfeit product to consumers, resulting in maximum profits  
  • Instructed the vendor to create a new vendor account so that Amazon Retail could place another purchase order, then repeated the whole process several times before the vendor took Amazon to court 

The below video starts at the segment where Rosenbaum shares the story.

The frankly shocking allegations can be listened to in full, here. 

Other Notable Lines of Inquiry 

Because we are an ecommerce services provider with a large portion of our business and expertise focused on the Amazon marketplace, our review focused on key takeaways for brands and third-party sellers that operate on the Amazon marketplace. However, the committee’s questions delved into much more, including: 

  • Whether Amazon is seeking access to content rights for content available on HBO Max, Hulu, Disney+, or Netflix as part of its negotiations around Fire TV 
  • Whether Amazon’s initial and ongoing response to COVID-19 has been sufficient 
  • Allegations of wrongful terminations 
  • Amazon’s plans for the upcoming pilot commercial ecommerce program organized by the General Services Administration (GSA) (the program will essentially offer a marketplace specifically for federal employees) 

The Future of Amazon 

While Amazon is under fire from Congress for monopolizing the ecommerce space and stealing third-party data to usurp its customers, Amazon hasn’t broken its stride. Q3 is looking to be another strong quarter, with North American retail revenue forecasted to grow 30% year-over-year (YOY), compared to 21% YOY growth in Q3 2019. Likewise, Amazon’s advertising revenue is expected to grow 37% YOY in Q3, compared to 41% in the previous quarter.  

Predictions for the Amazon Marketplace, Near and Far 

  • Amazon will continue enhancing advertising services on and off its platform to further realize revenue from this rapidly growing segment. 
  • Amazon will continue expanding its brand protection services, including paid brand protection services, as pressure mounts from Congress and upcoming competitors, like Walmart and Target. 
  • Amazon will retain many of the inventory policies for its fulfillment centers that it put into place during the pandemic. Permitting only faster-turning products to be stored in Amazon fulfillment centers increases Amazon’s profits, and the baseline for consumer demand in ecommerce has been permanently raised as the result of COVID-19. As a result, Amazon can afford to impose stricter conditions. 
  • Amazon first-party sales share will continue to reduce, as Amazon enjoys better profits and less risk through seller fees and having third-party sellers carry inventory risk. Pointing to the shrinking share of first-party goods, even as total revenue grows, also helps Amazon argue against calls for trust busting. 
  • If other online marketplaces can rise to compete with Amazon, as Walmart has been making strides towards with the launch of Walmart Fulfillment Services and Walmart+, calls for trust busting may dissipate. As such, Amazon may limit competitive efforts to stymie their growth too much, so it can point to competition as antitrust pressure mounts.  
  • Though countries such as India have forbidden the marketplace owner from also being a seller, it is unlikely that the US will institute such a policy given that Amazon, Walmart, Target, and others all act as first-party sellers alongside third-party sellers on their marketplaces.  

On September 8th, Amazon announced updates to its communications policyThe update clarifies what buyer-selling communication is permitted by Amazon’s policies, something that was previously ambiguous at best. The update is intended to reduce the number and improve the quality of emails Amazon shoppers receive in the interest of improving the Amazon buying experience. 

Biggest Takeaways: 

  • Sellers can ask buyers for product reviews and/or seller feedback (although you still cannot ask for a positive review, only an honest review) 
  • Amazon clarified what message types, content, and formatting are not permitted 
  • The policy update applies to all Amazon marketplaces 
  • The updated policies go into effect on November 3, 2020 

Communications Updates 

Permitted Buyer-Seller Communications 

Sellers are permitted to communicate with buyers for the following three reasons: 

  1. If an order cannot be shipped or if it will be delayed. This must be communicated via Seller Central using the Manage Orders feature. 
  2. If additional information is needed to complete a return or if the seller is offering a partial refund. This must be communicated via Seller Central using the Manage Orders feature. 
  3. Communicate with buyers proactively (communication initiated by the seller instead of the buyer) to: 
    1. Resolve an order fulfillment issue  
    2. Request additional information required to complete the order 
    3. Ask a return-related question 
    4. Send an invoice 
    5. Request product review and/or seller feedback 
    6. Schedule the delivery of a heavy or bulky item 
    7. Schedule a Home Services appointment 
    8. Verify a custom design 
    9. Any other reason where the contact is required for the buyer to receive their purchase 

 

Proactive messages may be sent using email, Amazon’s templates in Seller Central, third-party applications, or via API. These messages must be sent within 30 days of order completion, include the 17-digit order ID, and be in the buyer’s preferred language. Amazon retains the authority to modify subject lines as it deems necessary.  

Learn more about how customer reviews impact Amazon sales or how to generate new customer reviews compliantly. 

Forbidden Message Types 

Amazon’s policy update states that sellers may not send the following message types to buyers: 

  1. Order or shipping confirmations 
  2. Messages that say only “Thank you” or that you are here to help if buyers have any problems  
  3. Marketing or promotional messaging, including coupons  
  4. Language that either incentivizes or persuades the buyer to submit positive product reviews or seller feedback, including by offering compensation, money, gift cards, free or discounted products, refunds, rebates or reimbursements, or future benefits  
  5. Language that requests removal or an update of an existing product review  
  6. Language that requests a product review only if they have had a positive experience with the product 
  7. A repeat request (per order) for a product review or seller feedback 

 

Forbidden Message Features 

Seller-buyer communications must not contain any of the following: 

  1. External links unless they are secure working links (https, not http) necessary for order completion or links to Amazon  
  2. Attachments except for product instructions, warranty information, or invoices  
  3. Logos, if they contain or display a link to your website  
  4. Link to opt-out of messaging  
  5. Sensitive content in images or text (e.g. bare skin, violence/gore, adult/offensive language)  
  6. Tracking pixels or images  
  7. Email addresses or telephone numbers  
  8. Images of purchased products as Amazon includes those on your behalf  
  9. Images that do not relate to your brand or company 

 

Forbidden Message Styling 

Likewise, the policy update also forbids seller communications from containing any of the following: 

  1. Accessibility issues as specified in the Web Content Accessibility Guidelines from the Web Accessibility Initiative  
  2. Emojis  
  3. GIFs  
  4. Message margins over 20% max width  
  5. Image or graphic sizes larger than 80% max width  
  6. Overrides of Amazon’s default line height, font family, or font color  
  7. Fonts in more than three sizes  
  8. Message bodies that are centered or that otherwise override default text alignment settings  
  9. More than two line-breaks (spacing between paragraphs) in a row  
  10. Unsecure images (http instead of https)  
  11. Spelling errors or grammar issues 

 

Compliance Required by November 3, 2020 

Sellers that fail to comply with Amazon’s updated guidelines by November 3rd may face temporary restrictions in proactive seller-buyer communication or a suspension of their seller account. 

Target Earnings Q2 2020

Target released their earnings report today for the threemonth period ended August 1, 2020. Comparing Q2 2019 to Q2 2020, this quarter was a resounding success for Target. Notable highlights include:  

  • Second quarter sales grew 24.3% year-over-year (YoY), the highest Target has ever reported, with digital sales contributing 13.4 percentage points and store sales contributing 10.9 percentage points 
  • Digital sales grew 195% YoY  
  • 17.2% of total sales from the second quarter originated online 
  • Total revenue grew 24.7% YoY, from $18.4B to $23B 
  • Operating income grew 73.8% YoY 
  • Same-day services for Q2 grew 273% YoY 
  • Target gained $5B in market share in the first six months of 2020, exceeding gains made in all of 2019 

Target’s Q2 earnings snapshot also notes that more than 90% of second quarter sales involved stores in some manner, whether it be in-store shopping, pick-up, or delivery through Shipt. 

Key Takeaways for Online Sellers 

In February, eMarketer forecasted that Target would finally break into the top 10 US ecommerce retailers, capturing 1.2% of total retail ecommerce sales in the USEMarketer also predicted that Target’s ecommerce business will grow to $8.34 billion. Target’s second quarter earnings report supports this prediction.  

In the six months preceding August 1, 2020, digital accounted for 16.3% of Target’s sales. In that same period, Target reported $42 billion in sales, which indicates that they’re nearing $7 billion sales generated through ecommerce.  

This is impressive growth, but still trails Walmart, which generated roughly $5.5 billion from ecommerce in Q2 alone, and Amazon, which grew North American net sales to $55 billion in Q2. Brands interested in growing their online business should continue to focus on Amazon and Walmart’s online marketplace, but Target is clearly one to watch. 

Read our breakdowns of Amazon’s Q2 Earnings Report and Walmart’s Q2 Earnings Report. 

Walmart earnings report Q2 2020

Today, Walmart released their earnings report for the 13-week period ended July 31, 2020Notable highlights from the release include:  

  • Net sales in the US were up 9.3% year-over-year (YoY) to $93.3B 
  • Total revenue was up $7.4B YoY to $137.7B 
  • Walmart US ecommerce sales increased 97% YoY 
  • Walmart US ecommerce sales accounted for approximately 6% of Q2 net sales, around $5.5B
  • Sam’s Club ecommerce sales grew 39% YoY 
  • International net sales were down 6.8% YoY 
  • Ecommerce sales accounted for 12% of total international sales 
  • Walmart incurred $1.5B in COVID-related costs 

Global Ecommerce Growth 

As a company that operates in the ecommerce space, we took particular note of Walmart’s online sales performance. Just this year, Walmart has announced Walmart Fulfillment Services, an integration with Shopify, and Walmart Plus – all indicators of Walmart’s growing ambition for their ecommerce presence. As COVID-19 impacted shopping in physical stores, Walmart’s online sales growth boomed around the globe. 

Walmart Marketplace Ecommerce Net Sales: 

  • US: +97% 
  • Mexico & Central America: +217% 
  • China: +104% 
  • Canada: +215% 
  • United Kingdom: +98% 

Online grocery sales were a significant contributor to online sales growth in each of the below markets. Pickup and delivery services experienced record-high sales, with approximately 3,450 stores allowing pickup and approximately 2,730 stores offering same-day delivery. 

Key Takeaways for Sellers 

Walmart’s online marketplace has been building momentum since it launched, but it’s rapidly gaining speed in 2020. We saw with Amazon that brands who entered the marketplace early were positioned to seize and grow a greater market share. As Walmart’s online marketplace matures, a similar outcome is likely.  

In addition to general ecommerce growth, the current health crisis has also led to a surge in online grocery shopping. This is a fascinating space that’s likely to continue growing even after shopping in physical stores normalized again. You can learn more about the rapid rise of online grocery in our podcast episode with Chicory, a digital shopper marketing platform that specializes in the grocery industry. 

Read our breakdowns of Amazon’s Q2 Earnings Report and Target’s Q2 Earnings Report.

Want to learn about selling on Walmart.com? Check out our free eBook!

Download the eBook

WFS: Walmart’s Gamble to Challenge Amazon FBA


Amazon PPC Management Software

Today, we’re excited to announce the release of a new suite of features for our Amazon PPC management software, AdManager. The new features include: 

  • Automated search term optimization 
  • Automated budget optimization to maximize profitability 
  • An Out of Budget table that recommends ideal budgets 
  • A new “4 Campaign Build” option for campaign creation 

All these features are being added for free for existing users and will be included as standard features for all new subscribers.

This set of features joins the existing suite of features, which includes dynamic bid optimizations, a centralized keywords table for simplified campaign management, and detailed reporting. 

Automated Search Term Optimization 

AdManager can now automatically identify and add high-converting search terms as keywords to campaigns, promoting relevancy and driving more sales. Users set custom rulesets that will mine customer search terms from automatic campaigns and broad and phrase match types. If a search term meets your selected parameters, AdManager will automatically add it as a keyword to your manual campaigns.  

With this feature also comes keyword negation. AdManager will automatically identify and negate terms that don’t meet your custom performance thresholds. For example, a keyword that continuously generates clicks but never generates a conversion is wasting your budget. AdManager can now automatically negate such terms, minimizing wasted ad spend and increasing campaign relevancy. 

Search Term Optimization

Never Run out of Budget 

AdManager now lets you set custom rules that automatically increase daily budget for high-performing campaigns if they run low. This way, you ensure that your most profitable campaigns never turn off, maximizing your revenue. 

Budget Optimization

Campaign Budget Optimization Table 

AdManager now includes an Out-of-Budget table that shows at what time a campaign ran out of budget, how often they run out of budget, and uses Kaspien’s proprietary data to recommend an ideal budget for each campaign.  

It’s important that campaigns can run 24 hours per day because optimizing campaigns requires data. If your campaigns consistently run out before 10am, any optimizations you make are using incomplete data, and as a result, risk doing more harm than good. The Out of Budget Table provides both visibility and a solution for this problem.  

Out of Budget Table

Automated Campaign Build Strategy 

Maximize data insights and improve performance using our proven “4 Campaign Build” architecture. When creating a new campaign, you can select our “4 Campaign Build” to automatically create three manual campaigns (one per match type) and one automatic campaign. 

Since we began advertising on Amazon seven years ago, we’ve been experimenting with campaign architecture to find the most effective structure for strong results and ease of management. The 4 Campaign Build is what we’ve found to be the most effective.  

Manually creating this architecture is time consuming, which has led many marketers to regretfully turn away from it, even knowing the benefits to data insights and performance. AdManager solves this problem by automating its creation.  

4 Campaign Build Ad Architecture

For New and Experienced Marketers 

AdManager is designed to cater to both novice and experienced Amazon marketers. The easy-to-use interface and data visualization make it accessible for marketers not yet versed in Amazon advertising. For users who are experienced with Amazon advertising and want to get more in the weedsAdManager offers the depth and customization that you’re looking for.  

Take a self-guided demo to see the backend, or request a live demo with a specialist to see AdManager in action and ask more detailed questions.  

If you’re not ready to start using the software yourself, AdManager is also available as a managed service. Our experts can serve as an extension of your team and manage your Amazon ad campaigns on your behalf. 

Our Lowest Prices Ever 

To celebrate the launch of these new features, we’re offering AdManager at our lowest prices ever! Self-service AdManager is now available starting at $99/month and managed service AdManager is available starting at $1,300/month. Visit Kaspien.com/AdManager to learn more. 

Amazon's second quarter earnings soar in 2020

Amazon Revenue Soars in Second Quarter

Today, Amazon published their earnings report for the second quarter of 2020. Their earnings exceeded expectations, with Amazon reporting a revenue of $88.91B and a net sales increase of 40% compared to Q2 in 2019. Other notable results include: 

  • Net income increased to $5.2B, doubling their net income from the second quarter of 2019 
  • North American net sales were up 43% YoY, while international sales were up 38% YoY 
  • Amazon’s “Other” category (which consists mostly of Amazon advertising) grew revenue 41% 
  • AWS grew 29%, the lowest growth rate since Q1 2017 
  • Operating cash flow increased 42% YoY  
  • Free cash flow increased from $25B to $31.9B YoY 
  • Operating income increased from $3.1B in Q2 2019 to $5.8B in Q2 2020 
  • Third-party sales growth outpaced first-party sales growth 
  • Grocery delivery capacity grew by over 160% and online grocery sales tripled, YoY 

Amazon’s guidance for Q3 anticipates slightly more modest growth, with net sales expected to increase between 24% and 33% YoY. 

Amazon’s COVID-19 Efforts 

In Q1, Amazon promised to spend $4B on COVID-related costs during Q2. In Amazon’s earnings report, CEO Jeff Bezos stated, “As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand.”  

Bezos added that since March, Amazon has created over 175,000 jobs, 125,000 of which are planned to transition to full-time positions. 

Amazon promised to invest an additional $2B in COVID-19 related costs during Q3. As noted by Venture BeatAmazon does not wish to appear to benefit too much from the pandemic, even as their $5.2B quarterly profit marks the highest on record in their 26year history. 

Key Takeaways from Q2 for Sellers 

By looking at where Amazon is experiencing the most consistent, strongest growth rates, we can see where Amazon is likely to continue investing in the future. This report marks yet another strong quarter for third-party seller growth and Amazon advertising.  

Third-party seller sales yet again grew faster than Amazon’s first-party sales, indicating that Amazon is continuing to embrace the third-party approach to the marketplace. This makes sense, as holding inventory carries greater risks. By expanding the third-party network, Amazon reduces its inventory risk while still generating more revenue in the form of fees.  

Those fees include advertising. Amazon’s “other” category by and large consists of their advertising business. Revenue grew 41%, making it yet again one of their fastest growing segments. It’s likely that Amazon will continue expanding their offerings and capabilities for their ad platform, making it an even more appealing tool for brands selling on its platform. 

Read our breakdowns of Walmart’s Q2 Earnings Report and Target’s Q2 Earnings Report.

Jeff Bezos Testified Before Congress 

Amazon’s Q2 earnings report comes one day after Jeff Bezos testified before the US House Committee on the Judiciary. Amazon, along with Facebook, Google, and Apple, were brought before the Subcommittee on Antitrust, Commercial, and Administrative Law to answer questions for an antitrust case.  

It did not appear to go well. Members of congress grilled Bezos about Amazon’s alleged practice of using third-party data to create copycat products, then undercut the brands selling on its platform. The same accusation was made regarding AWS, with members asking about allegations that Amazon stole third-party data to create competitor products, as well as identify and then target competitors’ customers.  

Congress members also pressed Bezos to explain why sellers bear the burden and costs of combating counterfeiters instead of Amazon, implying that Amazon has taken too passive a role because Amazon still profits from sales even if the products are counterfeits.  

Bezos’s answers seemed unsatisfactory for committee members. In many cases, he stated he could not remember the details or was unaware of the alleged events.  

Mr. Cicilline shared the following story from an apparel company that compared Amazon’s first-party division, Amazon Retail, to a drug dealer: 

“Amazon strings you along for a while because it feels so good to get that paycheck every week. And in the past, for a lack of a better term, we called it, ‘Amazon heroine’ because you just kept going, you had to get your next fix, your next check. And at the end of the day, you find out that this person, who was seemingly benefiting you, making you feel good, was just ultimately going to be your downfall.” 

Bezos responded by saying that he “completely disagrees with that characterization.” However, the anecdote rang true for third-party retailers. It is not a rare occurrence for a brand to seek out partnering with trusted third-party retailers after having a similar adverse experience selling through Amazon Retail.  

What the Antitrust Hearing Means for Brands on Amazon 

The antitrust hearing could be a huge win for brands selling online. If Amazon is indeed exploiting brands selling on its platform through copycat tactics, actions taken as a result of this hearing could put a stop to it. Likewise, if the burden of combating counterfeiters is placed on Amazon, brands may not have to bear the costs.  

Unfortunately, both of the above are big “ifs” and will take months or years to be acted upon. As Amazon’s Q2 earnings report shows, Amazon is and will remain the dominant marketplace in US ecommerce for the foreseeable future 

Start Selling on Amazon

Brands that wish to sell online will need an Amazon strategy if they wish to grow their online sales. If you’re wary of doing that, work with an experienced Amazon retailer like Kaspien who already has the infrastructure and safeguards in place to protect your brand.  

If your business is not selling on Amazon yet, read this article on why your brand should probably be selling on Amazon, even if you don’t want to be on Amazon