EP062 Amazon Mastery: Building a Sustainable and Profitable Brand on Amazon

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[00:00:00] Darin Newbold: All right. Well, hello and welcome to Commerce Today. This is Darin. And as always, Josh is here with me and we're excited to bring you a continuation. So welcome back to our Amazon Mastery Series. This is part two. And if you happen to not get to part one yet, just a quick recap on some highlights. In that first episode, we talked about optimizing product listings, A plus content, advertising on Amazon.

And as always, the. Cauldron, that is Amazon's search algorithm. So now Josh, we've got part two, Josh, what do we got coming up here?

[00:00:40] Joshua Warren: Little fun grab bag. So sustainability, fee structure and profitability and maintaining a strong brand presence.

[00:00:48] Darin Newbold: All right. If you haven't figured it out, we're going a little quick today. Cause we got a lot to cover. So with that first and foremost, embracing sustainability, there's customer demand for sustainable products. But. What exactly does that mean? And what are you seeing?

[00:01:04] Joshua Warren: And you even asked a great question for the show of what is sustainable and who defines that? And Amazon has an answer. Um, but yeah, so consumers are shifting towards buying eco-conscious products.

They're, they're considering, at least considering sustainability in their purchasing decisions. especially in 2024, sustainable products are much hotter than they have been. Um, so we'll link in the show notes, um, to some sources around all this, so you don't have to track all the numbers, but sustainable products are actually found to command a 27 price premium over non-sustainable products.

And, um, McKinsey actually found in some research they did that brands that are making sustainability claims, and I thought it was interesting, they called it sustainability claims, grow At twice

Twice

the rate as their competitors.

[00:01:51] Darin Newbold: Wow. So definitely hot. It's definitely got a lot of spin on it. So how do you integrate these sustainable practices?

What are, what are some best practices out there?

[00:02:02] Joshua Warren: Yeah. So, um, the, really the, on a technical level, a product level, depends on Your business, kind of what kind of business you're in, but like some fashion brands are using seaweed based yarn. Um, there's furniture brands that are using reclaimed wood, other recycled materials.

So really look at how can you actually make your products and their packaging out of more sustainable materials. Um, then also something that I think a lot of people are thinking about after all the supply chain challenges of the past few years source locally, that can actually help your supply chain efforts in general, but it also reduces the amount of shipping.

Needed therefore the amount of carbon produced by your supply chain and then also just build durable products that last a long time. I think we've got a little overboard in America on disposable products, you know, swing back to a little bit more durability and make sure that it can be recycled once the product's life has ended.

But then.

[00:02:59] Darin Newbold: there's, but there's some, there's something that you brought up.

That's important to recognize as well. And that is with, with all things. And we've talked about this in other areas, the transparency around it, because my question about where does this sustain who's the governing body? Who's who's the sustainable police, I guess. what, what do we do about transparency?

[00:03:18] Joshua Warren: Yeah. So first and foremost, um, you've probably heard the phrase greenwashing, basically making claims of, and it's funny, there's some brands out there and some companies out there that deal with products that by their nature aren't green. Like, and I don't want to start a debate, especially being in

[00:03:34] Darin Newbold: Texas,

[00:03:35] Joshua Warren: but I will say like, fossil fuels.

They try to bring a lot of green claims to it, but honestly, consumers just want honesty and transparency. So if your product by its nature, isn't going to be green, don't claim it is. Find other ways to build sustainability into your business. Um, consumers seem to appreciate brands the most that are just being truthful and authentic and saying, here's where we are.

Here's what we can do. And so if your brand can make your products out of completely recycled materials, awesome. Do that and tell people about it. But if you can't find other things you can do, don't lie. Don't try to just slap a green label on things. And the best way to make it clear that your product is sustainable is seeking certifications.

And Amazon will talk about a program they have here in a little bit, but, um, even their program keys into some big programs are already out there. So. There's something called the B. I. F. M. A. level for furniture products showing how green it is. Basically, um, blue sign is a program that can show that your product uses safer chemicals.

So if you're making cosmetics, things like that, I mentioned the supply chain and carbon and all that earlier, there's carbon neutral certifications. Amazon actually has their own certification called Amazon's compact by design certification. For products, removing excess air and water to streamline shipping.

I thought that one was interesting. And then there's things like the global organic textile standard, leather working group, other groups in fashion, handbags, et cetera, that can certify your product as more sustainable,

[00:05:06] Darin Newbold: And then, who makes sure the certifiers are certified? Oh, I'm sorry, I'm not supposed to ask those questions. Okay, well, you talked about Amazon and, and their design certification, but they also have something around Climate Pledge Friendly Program.

So that's something specific just for them and something that merchants can definitely jump on board. So tell us a little bit more about that.

[00:05:28] Joshua Warren: this is how all your sustainability efforts can convert into sales and dollars on Amazon.

[00:05:34] Darin Newbold: on it. Now we're talking.

[00:05:34] Joshua Warren: Yep. So Amazon has the Climate Pledge Friendly Program. It will place a badge on your products so users can actually filter their searches and say, Just like you can say, only show me things available by Prime Shipping, you can say, only show me these climate pledge friendly products. You can also search for specific certifications.

It allows consumers to basically purchase products that line up with their beliefs around sustainability. Helps you showcase your products, helps you sell more. and you actually just, this badge that you can get. You just apply for it through Amazon Seller Central, you select the option from the product listing and inventory drop down menu, get in there, enter the information, if you have a third party certification, you give some details about that certification, Amazon verifies it, boom, you have that patch. Okay,

[00:06:22] Darin Newbold: So Amazon verifies it and you've got it. All right. Sounds easy enough.

[00:06:27] Joshua Warren: and once you have it,

[00:06:29] Darin Newbold: Oh, wait, there's

[00:06:30] Joshua Warren: wait, there's more. Once you have it, um, I would recommend we talked about a plus content in the previous episode. Go back, listen to that if you haven't heard it yet, but basically once you have these certifications and this badge from Amazon, don't just rely on them displaying it.

Use that a plus content and showcase it. Really tell your brand story. Explain why, why does your brain care about sustainability? And if you have some story beyond because we want to sell you more things, then share that story in your A plus content. Guys,

[00:06:59] Darin Newbold: Gosh, you stole, uh, stole my thoughts right there. I just want to sell you more stuff.

So, hey, let's put this badge on. Alright, so, We wanted to kind of switch with a different segment here a little bit on analyzing and adapting to Amazon's fees. And this is, wow, this could be a little complicated, so hang with us. And I know our show notes will probably give you some more specifics for you, but help us out here,

[00:07:22] Joshua Warren: of numbers. So we'll have links. Um, we'll have some specifics and we're developing a resource that will help you sort out all of this. But so Amazon's fee structure. Um, I think that Amazon's fees, sorry, anyone from Amazon listening, sometimes I feel like the transparency and the complexity of their fee structure here is only matched by the complexity of trying to figure out your Amazon AWS bill.

So, hold on. So, there are referral fees. This is basically just a, um, selling fee. So, it's a percentage of the total price paid. They do include shipping and gift wrapping charges in that when they calculate that. These are dependent on the category that your product is sold in. They like to advertise. They can be as low as 8%.

There are very few products that qualify for 8%. It can be as high as 45%. Um, luckily that category is just if you're selling accessories for Amazon products, that's the 45 percent fee. I get the feeling that they don't want other people doing that, but that's something the FTC is looking into and we're not going to talk about today.

So, uh, the most common fee is about 15%. we do have some clients, um, that we've worked with that sell jewelry. That's a 20 percent fee. Um, clothing, it depends on the price and clothing over 20 bucks is a 17 percent fee. Um, and then we've worked with some furniture retailers where, furniture is 15 percent of the first 200 of the price and 10 percent on everything above that.

So super clear, easy to calculate.

Amazon also charges you a fee for the privilege of doing business on Amazon, an account fee. so I don't think any of our listeners, any of the brands that we're working with are going to be using an individual account. Um, those can only actually sell one item at a time, but they only cost 99 cents per item.

Uh, the other option is the professional account. That's what most of our audience will be using. That's a monthly fee of basically 40. And if you're at any scale selling on Amazon, that 40 really is just a drop in the bucket compared to everything else you'll be paying.

[00:09:25] Darin Newbold: Absolutely. But then the fun really starts then fulfillment by Amazon.

There's all sorts of.

[00:09:33] Joshua Warren: yeah. So if you're utilizing fulfillment by Amazon, which is where Amazon stores and fulfills your products, basically becomes your third party logistics company, there's both a storage fee and a fulfillment fee. And it varies a lot. It depends on the size of the item. It also depends on how long the item stays in the warehouse.

They want items to turn over within 26 weeks. If things sit there longer than that, they start penalizing you. Also depends on the time of the year. They triple their storage fees in October, November, and December. Entirely based on demand, of course

[00:10:03] Darin Newbold: of course.

[00:10:04] Joshua Warren: So a couple of examples. The first one makes sense.

I don't know why they have the second example as their example. they actually like to show a t-shirt Hey 9 cents a month. It is all it costs you to store a t-shirt in their warehouse during the holidays. They're going to charge you 24 cents a month, to fulfill a t-shirt It depends on how fast your customer wants it.

So standard shipping 7. Two day shipping, like if they select an Amazon Prime option, 19.

[00:10:32] Darin Newbold: And that's per shirt, right?

[00:10:33] Joshua Warren: Per shirt 

[00:10:34] Darin Newbold: Okay.

[00:10:34] Joshua Warren: Clothes iron is the other example they give. I guess it's a shape you can easily visualize ish. Um, might be able to tell I don't often use an iron. Uh, so storage fees of 1. 31 or 3. 60 in the high season.

And then that fulfillment fee for shipping it, ranges from 11 to 23.

[00:10:50] Darin Newbold: 23.

[00:10:51] Joshua Warren: So you can see how, you know, pretty quickly you add up all these fees and it's hard to make money.

[00:10:56] Darin Newbold: It is.

[00:10:58] Joshua Warren: now they do offer discounts on fulfillment by Amazon if you use multi channel fulfillment, which basically means you're using your Amazon fulfilled inventory to fulfill your website or any other channels.

So basically if you start giving them all your fulfillment business, they will lower the price some. Now, modeling and forecasting out your, these expenses, especially when you start talking about figuring it out for 20 products, much less hundreds of products, it gets complicated. it's a combination of the size of your items, how often they sell, what category they're in, their price.

That's why we actually, in our e commerce knowledge library, we are working on building out a calculator, That tries to simplify this as much as possible, where you can actually do some modeling and forecasting, so that you can understand what your bill might look like.

[00:11:44] Darin Newbold: Well, and Josh, this may admit, show that I didn't completely read in detail all of our notes today, but how often do they change their pricing?

Okay.

[00:11:51] Joshua Warren: Oh, that's the fun part that we haven't even mentioned is just as we were preparing to go live for this, they announced some more changes in their fees. Um, they would say very rarely do they change their prices. Um, and this is, this is an item that's up for debate in front of the FTC right now, because there's a lot of sellers that say, well, some of these other things they do, like their advertising programs, those are fees as well.

And the prices change a lot.

[00:12:17] Darin Newbold: I'll bet. Well, all right. So we talked about the fees. What's some strategies to manage this craziness that you want to sell on here? It's a great place. How do we manage this?

[00:12:28] Joshua Warren: So the very first thing is, is fulfillment by Amazon worth it? Because as you heard, that can be a very large fee.

That could be, you know, that 19 shipping fee, 23 shipping fee per item. If you don't have your own warehouse, or if you're a brand that, um, Is well enough known to kind of overcome the bias towards always wanting Prime shipping on Amazon, then Fulfillment by Amazon may be worth it. So basically that allows you to opt into Amazon Prime, if you're using Fulfillment by Amazon.

we used to recommend it to all sellers because used to, that was the only way you could show up, um, for Amazon prime shipping. Um, that's that guarantee that items will arrive in two days or less. They actually have added a feature called seller fulfilled prime, where you don't have to use fulfillment by Amazon and you can still offer prime.

now you have to qualify for that to even qualify for a trial to be considered for it. Then you have to in 90 days ship 100 orders, have a cancellation rate of less than 2.5 give Amazon valid tracking information for at least 95 of your orders, and have a late shipment rate of less than 4%.

If you work in shipping or logistics, or if you just buy too much stuff online, you know that that late shipment rate of less than 4 is challenging.

Even if you do everything right as the retailer, UPS, UPS USPS, FedEx, sometimes they don't don't quite meet their delivery guarantees.

[00:13:57] Darin Newbold: All right. And so what are some other ways to,

[00:14:00] Joshua Warren: Yeah, so once you get in, you have to meet that one day and two day delivery promise of Amazon Prime. You have to hit those exact same metrics.

You also have to ship and deliver Prime orders on weekends and Amazon's so nice, their definition of that is at least one of Saturday or Sunday, your warehouse must be shipping.

[00:14:21] Darin Newbold: and your shipping options must be delivered.

[00:14:23] Joshua Warren: And you also have to offer free returns and you have to initiate a cancellation rate of less than 0. 5%. So your, your inventory data has to be basically perfect.

[00:14:34] Darin Newbold: wow. Wow. So you really do need to ask yourself, can you meet these metrics and is it low enough cost of what Amazon charges for their fulfillment? Versus doing the seller.

[00:14:46] Joshua Warren: with merchants that

[00:14:47] Darin Newbold: I've definitely worked with merchants that have figured

[00:14:49] Joshua Warren: have figured out that it's actually more expensive for their warehouse to try to meet these requirements.

Then it just pay Amazon's fee crazy.

[00:14:57] Darin Newbold: So calculating that average fee and, and, and doing all of that, does that cause then the sellers, they got to raise their prices in some ways.

[00:15:05] Joshua Warren: it used to, that's what everybody did. They just charged more on Amazon than they did on their website to offset Amazon's referral fee.

Amazon now has the general pricing rule, not a price fixing rule, a general pricing rule that says you must offer the same or better price on Amazon as you offer on all other online channels. So. That's where, um, I would recommend and kind of jumping into our tips here. consider having SKUs that are Amazon-specific consider having products that maybe this is a color that we only sell on Amazon.

Well, then you don't, you don't have to worry as much about that pricing rule. Because that's a product that's only sold on Amazon. Also, look at maybe you only want to put your most profitable products on Amazon. Also, if you're utilizing, if you decide to utilize Fulfillment by Amazon, clear out your inventory, run specials and churn that Fulfillment by Amazon inventory to make sure that it's turning at least every 26 weeks.

And you really have to right size your inventory for October through December, um, especially if you're someone that sells a lot of products at the holidays, you want to have enough inventory that you sell, but you don't want to have a whole bunch left over that you paid fees on that whole season and then didn't sell a

[00:16:17] Darin Newbold: Wow. A lot of things to keep on top of. Well, that's, uh, as we're, as we're kicking along here, let's, uh, kick onto our, our next question.

[00:16:26] Joshua Warren: So, we do try to keep all of our episodes quick and under 20 minutes. So I'm actually going to start by saying,

[00:16:39] Darin Newbold: do

[00:16:39] Joshua Warren: basics of branding, talk to, hopefully you have someone in your company that's responsible for your brand, make sure it's consistent on Amazon as it is off Amazon. Make sure you have good products that you're not getting a high return rate on things like that.

A lot of this is basics. I think the thing I really want to spend what our remaining time on is Amazon Live. Um, so we've talked some about live streaming e commerce. Amazon Live is the streaming service on Amazon where you can showcase your products, you can have demonstrations, you can interact with customers in real time.

It gives you a chance to really go in depth on Amazon. especially if you tie it into a limited time offer, it can really, um, boost your sales. There's not a lot of brands doing this yet compared to how many brands are on Amazon. So it's a way to stand out in the crowd. I would recommend that you, um, kind of plan out what you want to cover in your live stream.

Kind of have some ideas of, what you're going to cover, what your goals are. then promote that live stream and think about promoting it off Amazon as well. it can be something to include in your social media marketing, your email marketing. depending on how you want to word it, the spin you want to put on it.

You can even, you know, Amazon's featuring our products on Amazon live today.

[00:17:49] Darin Newbold: you go.

[00:17:50] Joshua Warren: and then make sure you have someone that's able to interact with the audience during the live stream. If you go back to our live streaming commerce episode. Seeing a connection, even if it's not connecting with that specific customer, but seeing a connection between the person on screen and someone in the audience greatly increases the trust in a live stream, increases how much you sell.

you can start small with it. You don't have to go straight to huge influencer marketing, five hour long streams. You could start with just small product demonstrations. Um, do consider collaborating with influencers. Um, I think in the future we're going to have a whole episode probably on, um,

[00:18:25] Darin Newbold: How to

[00:18:26] Joshua Warren: where, yeah.

And where influencer marketing is right now in 2024. and really be careful what products you select, make sure it's a product that you can do an interesting live stream about that has something that maybe it's harder to get across in the product description. It's easier to show than tell. so yeah, uh, that would be how I would grow a brand on Amazon right now.

[00:18:45] Darin Newbold: Well, a lot of great tips there, Josh, and, and this has been a action packed, fully packed episode. It's many key points.

Sustainability and being on that navigating Amazon's, uh, cauldron of fees, and then definitely having that strong brand presence that is there, many, uh, many different ideas that you can implement. Check out our show notes as always. And we definitely want to invite you to share your experiences with any of these ideas, sustainability, their fees, all of these things, and how your, uh, experience is going with Amazon.

And then want to give you a heads up for our next episode. And this will be part three of three. So this will be the closing out. We're going to be talking again, Amazon mastery, engaging customers in a competitive way.

[00:19:34] Joshua Warren: marketplace.

[00:19:35] Darin Newbold: So last but not least, we want to thank you as always for tuning in. Um, definitely remind you to subscribe to our podcast on any of your favorite podcast players for commerce today.

Yes, Josh.

[00:19:48] Joshua Warren: going to clarify, and you got it though, if you're looking for the podcast, it's called Commerce Today. If you're looking for it on YouTube, search for our Creatuity YouTube channel. So, speaking of clear branding, ours is

off. 

[00:19:59] Darin Newbold: Important safety tip. And last but not least, our very own Josh, uh, definitely connect with him on LinkedIn and Twitter.

Definitely add any comments there and we have a fantastic e commerce knowledge library that we're continuing to build. So with that, we thank you for tuning in. We appreciate it. We look forward to you next time and that's all for Commerce Today.

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