Whew! It’s been a yoyo ride for Amazon sellers these past couple of years. On one hand, Amazon sales rose by 51% in the UK and net sales worldwide hit nearly $386 billion. (Not too shabby! 💰)
But on the other hand?
Constant changes to Amazon’s rules have made it challenging to stay in stock and profitable. And let’s not forget the sluggish Q3 Amazon experienced last year, growing its revenue by just 15%, the lowest in 6 years.
With all the shifts and uncertainty surrounding Amazon’s path ahead, you’re likely wondering what’s going on at the Amazon HQ and what the future may hold for your ecommerce business.
Did Amazon’s changes throw you through a loop? Elevate your store with SellersFunding.
3 Amazon predictions and the consequences for your growing store
COVID-19, supply chain issues, and rising shipping costs are just a few of the challenges Amazon has gone toe-to-toe with in the last two years.
While Amazon is an undisputed ecommerce titan, it’s not immune to global events. And in recent years, sellers have borne the brunt of Amazon’s many changes with little visibility into what the future holds.
So before you embark on another year of selling on Amazon, it’s important to look back on past events and predictions so that you can plan for a more stable road ahead.
Let’s explore some of the top Amazon predictions, trends, and outcomes we’ve seen so far.
#1. Restocking limits will cause significant challenges for fast-growing brands 📦
When the pandemic hit, Amazon was inundated with stock from sellers eager to maintain optimal inventory levels during the pandemic. To release storage space, Amazon restricted restocks to essential items.
Although this restriction was removed, it was swiftly replaced by the much-loathed inventory limits. At one point, restock limits were set to just 200, making it a major challenge for sellers with high order volumes to launch products and stay in stock.
Fortunately, Amazon has since lifted the 200 item limit, but restricts restocks according to your selling history using the Amazon Inventory Performance Index (IPI).
The prediction was that IPI restrictions would stick — and they did. Now brands must work to keep Amazon happy or risk having their stock space slashed.
What inventory limits mean for your Amazon store
- You’ll need to monitor your Amazon IPI and keep it above the threshold which is currently 400 (as of January 1, 2022), but can change.
- Sellers may also want to build more strategic relationships with storage and shipping providers near your allocated Amazon warehouse(s) to make sure they’re able to get inventory to Amazon fast.
- Working with a 3PL to maintain a “fulfilled by merchant” shipping option may be another key component sellers can use in the ongoing battle against Amazon stockouts.
#2. Rising Amazon ad costs are here to stay
These days, everywhere you turn prices are rocketing. And the same is true for Amazon advertising.
With Amazon pay-per-click costs doubling year-on-year, your bill is going to be a hefty one no matter what ad type you choose. The prediction?
The cost of Amazon ads is only going to rise — and unfortunately, this one also proved true.
What rising ad costs means for Amazon sellers
- Sellers will need to explore other ways to drive traffic and conversions, for example influencer marketing and social shopping. Diversification using organic channels is especially helpful since Amazon’s latest algorithm update, A10, places more emphasis on customer searches for ranking items.
- To maximise your ad budget, you’ll need to create an ad optimization schedule for tasks like adding and removing keywords from your campaigns. You’ll also want to test new ad types and monitor your campaign spend to pinpoint your best performers.
- To capture more sales, you may also want to look into flexible ecommerce funding to keep your ads running without worrying about delayed payouts or having to come up with extra cash flow to run ads.
Psst! Need help optimizing your cash flow to help fuel your Amazon ad budget? Check out our free ebook filled with tips to help you nail your Amazon ad ROI!
#3. Selling on Amazon will become more competitive
Boasting over 1.5 million active sellers, 12 million products, and infinite shelf space, Amazon is becoming increasingly crowded.
By now, we’re all aware that Amazon’s stunning growth in 2020 was compounded by the pandemic when brands were forced to go online. And while that growth didn’t sustain like many predicted it would, the level of competition on Amazon was tipped to continue rising.
This was yet another prediction that proved true, with Amazon even posing a threat to sellers with its own branded goods.
What extra competition means for your business
- Sales channel diversification is a must: Putting all your eggs in one basket will become riskier as competition and customer buying habits evolve. Offer an omnichannel ecommerce experience to enable buying and selling on multiple platforms while synchronising your customer data.
- You’ll need to think like a brand: Since the people that buy from your Amazon store are Amazon’s customers it’s vital you build your own loyal audience with a dedicated website, email list, and social media.
- You may need to branch out: If you sell in ultra-competitive niches, you may be able to gain some ground by seeking out adjacent products to help increase your Average Order Value (AOV). For example, if you sell artificial grass, you could sell goalposts for sports and golfing equipment.
The secret to getting ahead on Amazon in 2022
Amazon has taken its sellers on a rollercoaster ride in recent years. With so many sellers still reeling from the many shifts and changes, the temptation to sit tight and brace for impact is very real. But we’ve got a better idea:
If your store has made it this far, you’re definitely doing something right. And while no one can guarantee a straight and narrow road for selling on Amazon, the sellers who come out on top will be those who are ready for anything.
So straighten up your financials, sharpen your marketing skills, test new products, and start thinking about the strategic ways you’ll grow your business this year.
With a little intention (and a lot of smart work), you’ll be ready to adapt and grow no matter what Amazon throws at you.
If you need fair and flexible capital to help get your store ready for the new year, our team can help. Reach out today to learn more!