Building a six-figure Amazon.com business
Damon Paling shares insights on the highs and lows of launching a New Zealand brand on Amazon.com. An excellent opportunity to expand internationally or a seemingly endless investment? In this case, the journey to establishing a successful six-figure business on Amazon.com began by abandoning an outdated ‘set and forget’ approach. The initial strategy involved a […]
Damon Paling shares insights on the highs and lows of launching a New Zealand brand on Amazon.com. An excellent opportunity to expand internationally or a seemingly endless investment?
In this case, the journey to establishing a successful six-figure business on Amazon.com began by abandoning an outdated ‘set and forget’ approach. The initial strategy involved a two-year-old Amazon Marketplace store that had been outsourced to a third-party based in New Zealand. Despite generating poor sales revenue, the store garnered favourable reviews, ratings, and displayed a strong brand image, including control over the crucial ‘buy box’.
Notably, Shopify data indicated that the US ranked as the third most significant traffic source for our brand’s direct-to-consumer website, trailing behind New Zealand and Australia, even without advertising on prominent platforms like Google or Facebook in the US.
Thus, it was time to liberate ourselves from limitations, roll up our sleeves, and actively engage with the enthusiastic American consumers.
Building a new business case
The next phase of our journey involved crafting a solid business case, which led us to enlist the help of a third-party Amazon consultant. Their task was to reimagine our brand’s potential on Amazon Marketplace, and they accomplished it all within a swift four-week timeframe, and for just $3,000. They delved into the nitty-gritty details of our market, diligently researching the category to uncover demand, competition, and the target audience’s preferences. They even evaluated the market potential of our brand, examining our USPs such as our diverse product range and delightful customer experience. Of course, they also considered trendy attributes like sustainability and all things ‘natural’.
To ensure we were on the right financial track, they crunched the numbers and forecasted the P&L for the first 12 months. They also devised strategies for pricing, acquiring reviews and ratings, and ensuring we stayed on the right side of regulations.
Thankfully, keeping the Fulfilled by Amazon (FBA) service was an easy decision, and we seamlessly integrated it into our financial forecast. With the business case in hand, we were brimming with newfound optimism. Moreover, our master plan was to conquer Amazon first, using our success there as a springboard to woo new third-party distributors and land prime spots in select bricks-and-mortar retailers!
Approaching Amazon advertising
Ah, the world of Amazon advertising, where self-service meets the need for expert finesse.
Our headquarters had limited resources to handle the intricacies of this advertising wonderland. To navigate this terrain efficiently, we needed outside help. So, we embarked on a quest to find the perfect advertising agency, armed with our shiny new business case and financial forecast. Thanks to NZTE, we were introduced to three US-based potential advertising agencies.
We shared our financial model, category insights, and grand vision for our brand. And after careful deliberation, we found a match! A proven agency that not only critiqued our financial model with surgical precision but also saw the untapped potential of our brand.
But we didn’t stop there. For a second opinion, we also consulted an independent Amazon advisor for their expert perspective on our brand, category, and opportunity.
With our team assembled, it was time to tackle the world of Amazon advertising. Keywords, headlines, sponsored display – oh my!
Courtesy of the agency, we meticulously managed our targeting options, budgets, and bidding strategies. It was a delicate dance of real-time adjustments, pausing and resuming campaigns, and fine-tuning our targeting. We established a daily budget using a cost-per-click model, ensuring we got the most bang for our advertising buck.
With plans in place and resources carefully allocated, a renewed sense of optimism filled the air. We were now armed with the knowledge and determination to conquer the Amazon advertising landscape.
Inadvertently scoring own goals
Ah, the joys of transferring Amazon Marketplace ownership from a faraway land like New Zealand. Who knew it would come with unexpected hurdles and quirky challenges?
Picture this: trying to tidy up Amazon Standard Identification Numbers (ASINs) for product listings. It’s like a game of Whack-a-Mole. Just when you think you’ve got them all sorted, another one pops up, begging for attention.
And let’s not forget about sorting out Seller Central access, uploading new credit cards, registering new bank accounts, and juggling deposits. Every move consumes more time and energy than you ever anticipated.
Who knew Amazon could be so demanding?
But wait, there’s more! As if the administrative burdens weren’t enough, we encountered the unpredictable world of Customs Border Protection (CBP). Some replenishment products took an extended vacation in Customs, causing out-of-stock scenarios and even leading to suspended listings. Naturally, we sprang into action, escalating and resolving these delays, but the process took weeks instead of the expected speedy resolution.
Alas, our grand plans for sales revenue momentum, especially during the highly anticipated Black Friday Cyber Monday (BFCM) campaign, were momentarily derailed – the first of many plot twists in our Amazon adventure.
But fear not, for we are resilient! Despite some own goals being scored and missing out on a few initial opportunities, we refused to let setbacks define us. Whilst these early challenges caught us off-guard, at the time we felt that they were merely steppingstones on our path to success.
Monitoring performance, reality bites
Ah, the thrilling world of tracking ad campaign effectiveness. We dove headfirst into the realm of standard reporting metrics, keeping a watchful eye on impressions, clicks, click-through rates, and conversions. It was like conducting a symphony of data, analysing every note to ensure our campaigns hit all the right chords.
To stay in sync with our advertising agency, we scheduled monthly video call check-ins, with a healthy dose of emails to keep the lines of communication open.
Now, here’s where the plot thickened. After a few months of diligent tracking, we noticed that several of our metrics were aligning well with our expectations. But not all of them. We couldn’t help but feel a genuine sense of unease.
One metric that stood out like a sore thumb was the paid traffic versus organic rate. According to our financial model, we expected to see a decrease in paid traffic and a surge in organic traffic. But alas, reality had other plans. While our top-line revenues were steadily growing, the failure to reduce paid traffic and boost organic traffic according to the original forecast became a major hurdle on the path to net profitability.
As if that wasn’t enough, the timeline to reach our break-even point stretched longer than anticipated. The 14-day Amazon pay-outs always seemed to underwhelm, putting pressure on our cashflow. And let’s not forget the joy of reconciling revenue from Amazon sales to Xero. The seemingly endless account coding issues caused frustrations to bloom and anxieties to amplify.
For the full story about this Kiwi brand’s launch on Amazon Marketplace go to www.exportertoday.co.nz/articles.
Damon Paling is a former NZTE trade commissioner to China, and now an NZTE Beachheads Advisor based in Auckland. Email [email protected]