This post was originally published in Retail Confectioners International Magazine.Understand what opportunity lies in the future of the Amazon marketplace and get a glimpse into the playbook of an expert on Amazon policy and sales, Peter Kearns has worked with hundreds of sellers ranging from IR-500 businesses to small, home-based operations.
The online grocery business is about to explode and there has never been a better time to be a small to medium-sized brand, especially if your brand is in the consumer packaged goods (CPG) grocery category, like candies and chocolates.
The grocery category has been slow to embrace ecommerce. But that is all changing. Analysts believe online grocery sales will continue transitioning from brick and mortar to digital, reaching 20% of all category sales by 2025. A large portion of this grocery ecommerce growth will be driven by CPG brands moving from brick and mortar to online. Additionally, last- mile technology improvements will facilitate solving unique difficulties for the delivery of perishable products especially chocolate.
Recently direct-to-consumer (DTC) brands have been exploding in popularity. Small emerging brands are outpacing large legacy CPG brands in terms of growth. According to a Nielsen article published in June 2017, small and medium-sized CPG brands account for 80.4% of growth while larger brands only account for 2.1% of growth. A lot of this growth has been fueled by Amazon’s Marketplace, which allows brands to reach Amazon’s 300+ million customers, including Amazon’s 100+ million Prime members.
Small and medium-sized confectionery brands are in a good position to grow using Amazon’s Marketplace. However, brands must be able to adopt and implement proven strategies and established best practices to avoid stumbling into common pitfalls.
Be Obsessed with Customer Service
The absolute, most important element for a brand to be successful on Amazon is to create a great product and an even better customer experience. This might sound like a simple answer but the majority of brands launching on Amazon score poorly when it comes to launching products that positively resonate with customers and don’t fully understand what
it means to be customer obsessed, one of Amazon’s core leadership principles.
The successful brands identify a gap in the market and create products that customers desire. Successful brands are purpose driven and focus on high standards and quality. When they
do this, brands are able to achieve faster customer adoption than those that don’t. Customers also want to connect with the brand and not just the product, so creating an off-Amazon following is also very important.
Brands with a strong off-Amazon presence, on social media sites like Facebook and Instagram, can use it to drive traffic to product listings. These two marketing components drive
awareness, customer trust and ultimately customer adoption. Brands that are able to adopt these strategies are most likely to see long-term sales growth and increased market share.
Think and Act Like Amazon
The second most important element for brand success on Amazon is to recognize that running an Amazon business is nothing like running your regular business. Successful brands quickly change their mindset to adopt Amazon’s philosophies on customer obsession, bias for action and ownership. The brand starts to think and act like Amazon.
Know the Fundamentals
The third most important element is making sure that the fundamentals of selling on Amazon are covered. The product listings have to be perfect. The fulfillment has to be two days or less and you can never run out of stock. The sponsored product campaigns and other marketing initiatives have to be targeted and strategic. The goals for the brand have to be established and then each brand’s team must be held accountable to goals. The brand needs to have a team exclusively dedicated to its Amazon business. That team subsequently drives adoption of Amazon’s fulfillment solutions including FBA (Fulfilled by Amazon), SFP (Seller Fulfilled Prime) and eventually Prime Now.
FBA VERSUS SFP
FBA for confectionery brands can be a viable solution for the cooler months of the year, but what are brands supposed to do when the temperature heats up? SFP is when a brand keeps the items in its own warehouse and fulfills to the customer within two shipping days, just like FBA. While this sounds like a good option, SFP can be expensive.
Prime Now is when brands sell directly to Amazon retail and Amazon delivers the product within a few hours. Prime Now facilities are temperature controlled which can be perfect for chocolates, however, the brand must have a strong demand on Amazon before it can be accepted into Prime Now.
While all three fulfillment methods are not perfect, brands need to recognize that the technology to support grocery ecommerce will be advancing quickly and there will be more change in both technological advancements and consumer behavior in grocery in the next five years than the previous 20. Brands, especially confectionery, will want to be in position to pivot and adopt these opportunities when they become available instead or risk being left behind.