From Amazon’s recent platform policy changes/operations speculation, what does it want to do and what should sellers do?

Amazon's policy changes and operations have led to speculation about their intentions What is Amazon trying to achieve and what actions should sellers take?

What does Amazon want to do with its recent platform policy changes and operations, and how should sellers respond?

From 2020 to the present, the Amazon landscape has undergone significant changes. I saw him once banging on a car door in a BMW store, looking particularly energetic in a sales office in Qianhai Bay, then flipping a can in Bao’an and picking up a cigarette butt in Buji, Longgang…

Based on the changes in platform policies and operations in recent years, here are some personal opinions on what Amazon wants to do:

1. The constantly rising cost of logistics and warehousing

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I can’t remember how many times FBA shipping fees have been raised. I only remember that the starting price has increased from 2.14 when I first started to 3.22 now. However, most sellers’ products have packaging sizes that fall under “large standard size” (how many products have packaging thicknesses that are under 2 centimeters?), which means that the starting price for us is actually 3.86.

Starting from 2020, Amazon has adjusted its cargo capacity policy multiple times and now allows sellers to pay for storage capacity. It has even added a storage utilization surcharge (which can be understood as nearly double the storage fee for items stored for more than six months during the off-season).

Amazon’s above operations on logistics and warehousing policies can be said to be inevitable, but the phenomenon of stockouts after the pandemic has accelerated these processes. After all, more and more sellers have entered the market, and the constantly accumulating goods (unsold by sellers, or even abandoned) have resulted in Amazon’s increasing labor costs and venue fees, and it must consider reducing or transferring these costs.

Above all, it’s all useless talk. But what does it mean for us sellers?

FBA has little hope for fine layout, and FBM has almost no way out.

This seems to be understood by everyone, but some sellers still have the idea of “fine layout”.

Based on Amazon’s algorithm, links with good performance can be given higher traffic. If the fine layout does not strive for traffic for links, it will often fall into an awkward dead loop: not attracting or attracting less traffic – less orders from links – not being given natural traffic – unable to generate profitable orders (all are advertising orders) – more reluctant to attract traffic – less orders from links – becoming unsalable inventory. The end result is that the goods sold are all advertised at a loss, and the total account is calculated to be negative after deducting storage costs.

Of course, there are still some FBA fine layouts that can be done in a few categories, but they are not universal and will not be discussed further.

Try not to make products with low unit prices.

In the forum, many operational partners who want to start their own business often first think of making low-priced products for low investment. But they fall into a trap as a result.

For products with a starting delivery fee of 3.86 yuan and a selling price of 9.99 yuan, the proportion of delivery fees alone can reach 40-50%. Unless you can control the proportion of product procurement headway to within 10%, it will be difficult to make a profit.

Of course, this common choice will lead to a phenomenon: in categories of low-priced products, such as mobile phone cases, film, and data cables, ordinary sellers will not enter in the future (and may not survive even if they do), and finally it will evolve into a few large sellers’ arena, where the competition among them is not based on product advantages and operational techniques, but purely on capital.

Two, Continuous adjustment of advertising

In recent years, the average cost per click for advertising has continued to rise, and the Amazon advertising platform has also continued to improve – adding new advertising display positions such as “4Stars Above” and “High Rate”; changing the rules for broad matching (making traffic more mixed).

The reason for this is to meet the growing demand for traffic from sellers, who can only explore more advertising positions and maximize the use of traffic on the platform. From this, it can be inferred that the current platform has a large number of sellers, but the supply of traffic has reached a bottleneck. So, at this stage, does the platform care about the retention of sellers? No, it may even occasionally kill off some sellers.

However, simply adding a few new advertising positions and changing matching rules is difficult to effectively solve the problem of traffic demand. If you don’t transform the entire structure of the platform and open up more marketing scenarios (such as personalized recommendations on the homepage and live streaming, as seen on Taobao), it will be difficult to solve the fundamental problem (so it is speculated that Amazon’s future “Taobao-ization” is also possible).

If you follow Amazon’s official account, you will see that it always recommends its SD advertising. Why?

Because this type of advertising can be displayed on the site and on a vast number of Amazon affiliate sites, which have countless advertising positions.

Personally, I think the cost of traffic on the platform will continue to increase in the future, especially in the next few years. First, the number of sellers is still large, and the competition for traffic is still fierce; second, the purchasing power of the buyer group is decreasing, resulting in a overall decrease in platform conversion rate, but sellers can only buy more traffic to maintain or increase their order volume.

Therefore, it’s impossible to produce products with low unit prices, and making the flow of purchases more cost-effective can only be achieved through the product itself.

Thirdly, the gradual popularization of video review.

Last year, the platform started spot-checking accounts for video review, and recently announced a policy that it may conduct universal audits in the future. The basic bottom line for audited stores is “annual sales of more than 200 units.”

Amazon is also aware of the phenomenon of sellers operating multiple accounts, and can even calculate which stores belong to the same entity through the system (as seen from the accurate deduction of sales accounts in the same period that year).

In my personal experience, 90% of accounts undergoing video review, especially those whose legal representatives are unaware, will not be able to recover. During the review process, any hesitation in answering a question could lead to failure to pass the review, and the platform will not tell you the specific reason for the failure.

On the surface, the platform doesn’t lack sellers, but essentially, the platform doesn’t lack products. It is speculated that the platform intends to force sellers to further standardize/boutique/boutique store operations by continuously reducing the number of accounts at their disposal, which has a bit of the meaning of “small and beautiful” that Alibaba advocated in the past.

Therefore, from this action, it is not impossible for the platform to incorporate store-based algorithms into the link weight in the future. For us sellers, it is necessary to have at least one legal representative who is aware of the store to ensure our inner sense of security.

In summary, the large number of sellers and surplus of products (a large number of seller SKUs lead to a cumbersome logistics and warehousing system); the decline in online shopping demand and the decrease in consumer purchasing power, but the platform’s traffic is facing bottlenecks, and the demand for seller traffic is increasing day by day. The platform hopes that sellers will develop towards boutiques/boutique stores, produce better products, have higher turnover rates, and at the same time transfer the growth in labor costs to sellers.

Above.

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