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Amazon Seller Flywheel: Catalog Strategy and Profitability

A successful Amazon catalog strategy must be well-thought-out and optimized to keep the Amazon seller flywheel running smoothly. One of the most important decisions you need to make is your catalog strategy: what products will you offer, how should they be priced, and how will you manage your inventory?  These decisions are all critical components […]
Written By Tristan Williams
Published on February 7, 2023   |9 minute read

A successful Amazon catalog strategy must be well-thought-out and optimized to keep the Amazon seller flywheel running smoothly. One of the most important decisions you need to make is your catalog strategy: what products will you offer, how should they be priced, and how will you manage your inventory? 

These decisions are all critical components of the Amazon Seller Flywheel, so it’s important to understand how they work together. Focus on creating a high-quality catalog of products with high profit margins as well as sound pricing, inventory management, and retail readiness strategies.

  • Focus on high quality products with high profit margins
  • Remember larger isn’t always better when it comes to catalog size
  • Make sure items are retail ready when expanding into new categories
  • Create a pricing strategy tailored towards customers needs while also factoring in market trends and competitors prices
  • Maintain healthy account standing through sound inventory management practices such as tracking current stock levels and understanding payment cycles 

How Does Catalog Strategy Affect the Amazon Seller Flywheel?

At Envision Horizons, we describe the Amazon Flywheel as more like a snowball rolling down a hill, where you continue to pick up momentum as you go. The Amazon Seller Flywheel as a concept suggests that boosting Amazon sales will create a cycle of increased sales performance. As the circle of activities builds up momentum – with each step amplifying the next – sellers can reach higher levels of success in the amazon marketplace. 

Your catalog is a representation of your brand and it’s essential for effective marketing on Amazon. When creating or editing your catalog, it’s important to consider how each product affects your top and bottom line, impacts your inventory management strategy, and how it plays a part in your pricing strategy. 

A crucial part of managing the Amazon seller flywheel is monitoring your product catalog performance and making adjustments. This involves analyzing your product performance every day to identify potential issues, top sellers, and determining how best to advertise and adjust prices for each ASIN. Taking a proactive approach to understand the life cycle of all products in the catalog will ensure sellers are aware of any underperforming items or those that have lost their shelf-life. This can also provide excellent insights into new opportunities to expand product offerings and discontinue products where necessary. Sellers should not be afraid to remove products from the catalog that are not hitting targets, have low profit margins, or require too many resources to maintain. 

Doing this due diligence with catalog management proactively ensures that your flywheel continues running smoothly.

Focus on High Quality Products with High Profit Margins 

When selecting products for your Amazon catalog, it is important to focus on high quality products that will bring in the highest profit margins possible in order to maximize your return on investment. To ensure this happens, do research into the product before listing it on Amazon. This can help you make sure you are not wasting time or resources on products that will not sell well. 

Additionally, consider customer reviews and ratings when selecting and reassessing your product lineup; if customers aren’t satisfied with their purchase, they won’t be likely to buy from you again in the future. 

Larger Catalog Is Not Always Better 

It can be tempting to try and expand your catalog as quickly as possible by adding more and more products. However, this isn’t always the best approach; instead, focus on creating a smaller number of high quality products that have been carefully researched and selected for their potential profitability. When expanding your catalog slowly but steadily, ensure that all new products meet retail readiness standards (this includes ensuring they are packaged properly according to Amazon regulations) before listing them for sale in your store. 

Amazon Pricing Strategy Matters

Your pricing strategy should be tailored to meet the needs of both your business and your target customer base. Pay attention to market trends and competitor prices when setting your own prices in order to remain competitive while still generating a healthy profit margin. Additionally, if possible, offer incentives such as discounts or free shipping for orders over a certain amount; these can help boost sales and encourage customer loyalty. 

Amazon Profitability

For multi-channel brands, Amazon pricing strategy can become more complicated. Some brands must consider pricing of their products within other online or brick and mortar retailers. Additionally, Amazon’s algorithm suppresses products that are listed for lower prices outside of their platform, so brands must ensure that their other retailers and DTC sites are not offering steeper discounts.

In order to maximize profitability and have a competitive edge, businesses must be savvy in setting pricing that differentiates themselves from others selling similar products. By utilizing Amazon’s existing platform and data to inform decisions regarding product pricing, multi-channel brands can ensure they are offering the most beneficial prices both internally and externally.

Finally, another factor to consider is Amazon’s MAP policy, which is central to product pricing strategy for multi channel brands. MAP stands for Minimum Advertised Pricing, which is a pricing model that requires retailers to honor manufacturer set prices on advertisement of products. This helps maintain a level playing field between competitors and ensures pricing remains fair and legitimate. Amazon negotiates MAP agreements with the brand owners, which creates stability across the channels that sell their products. MAP strategies prevent sales tactics like deep discounting in an effort to drive more sales volume, while protecting the value of the brand and creating trust between the partner brands and end customers who shop on Amazon.

Understanding ASIN Profitability

When coming up with your pricing strategy, factor in all costs associated with selling each item (including shipping costs), as well as any fees or taxes associated with selling online in general or on Amazon specifically. 

It’s extremely difficult to improve overall brand profitability if you don’t know your profit by ASIN. Understanding profitability by ASIN allows for a more informed advertising budget by product. This also allows for better merchandising and knowledge of what products have longevity. There are some products that will never be profitable on Amazon. 

Inventory Management

Staying In Stock & Keeping Performance Metrics Healthy

It is also important to create an inventory management plan that ensures your account standing remains healthy. Keep track of current stock levels and understand when new orders need to be placed so that stock does not run out frequently–which would hurt performance metrics.

Regularly review accounts receivable/payable cycles so that cash flow can be managed efficiently; if money is tied up in uncollected payments this could lead to cash flow problems down the line which could prevent you from growing or expanding into other areas or markets. 

Additionally, monitor customer feedback regularly so that issues can be addressed quickly and efficiently if necessary; this will help maintain customer satisfaction levels and ensure repeat purchases from loyal customers in the future. 

Product Positioning

Optimizing Amazon Product Categories 

When it comes to organizing products on Amazon, there is no one-size-fits-all solution. You need to consider which product categories best suit the items you are selling, as well as which categories will make it easier for customers to find what they need. If you don’t categorize your products correctly, it could lead to search engine optimization (SEO) issues or even customer confusion. It’s important to ensure that each product fits into at least one relevant category on Amazon so that customers can easily locate and purchase them. 

Additionally, select products for your catalog that have low competitive environments. Use data to determine what customers are looking for in a product and what they are willing to pay for it, so that you can stand out from the competition in your category.

Conclusion

Focus on high quality products with high profit margins, remember larger isn’t always better when it comes to catalog size, make sure items are retail ready when expanding into new categories, create a pricing strategy tailored towards customers needs while also factoring in market trends and competitors prices, and maintain healthy account standing through sound inventory management practices such as tracking current stock levels and understanding payment cycles. These are essential components of an effective Amazon catalog strategy, which can help sellers unlock growth opportunities while optimizing their profits over time.

By taking the time now to develop an effective catalog strategy tailored specifically towards your business goals & objectives, you will maximize both short-term & long-term success within the seller flywheel model & beyond!

Core Components of the Amazon Seller Flywheel

We’re breaking down core components of the Amazon Flywheel that lead to long term growth on the platform. Stay tuned for the next 5 blogs in the series on the following topics…

Amazon Flywheel

  • Core concept explained
  • How to start the Amazon seller flywheel

Amazon SEO

  • Understanding Amazon’s algorithm
  • Improving organic rank: listing optimization, keyword strategy, amazon badges, etc.

Catalog Strategy and Inventory Management 

  • Catalog size and retail readiness: quality over quantity
  • Pricing strategy focused on both competitive edge and profitability
  • Importance of demand planning and staying in stock
  • Healthy maintenance of account standing and performance metrics

Customer Experience and Brand Reputation on Amazon

  • Creating a positive branded shopping experience: higher conversion rate and brand affinity
  • Customer service and positive review generation
  • Utilizing creative assets to Improve both the customer experience and your brand presence on Amazon: Lifestyle imagery and video, including UGC content

Advertising

  • PPC
  • Sponsored Brand, Sponsored Product, Sponsored Display
  • Amazon DSP

Driving External Traffic

  • Influencer marketing, social media marketing, affiliate marketing, earned and paid media placements
  • Paid advertising, Email marketing 

Long Term Strategy

  • Focusing on long term growth means avoiding black hat strategies that could offer short-term benefits
  • Investing in scaling

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