What is the Amazon Flywheel?
The Amazon Flywheel is a concept created by Amazon to illustrate the interconnectedness of its businesses. It states that as growth and sales increase, the ever-improving customer experience offered by the company will lead to more word-of-mouth marketing and recommendations from satisfied customers. This in turn drives more traffic over time, leading to further increases in operational efficiency which helps lower costs and transition into newer products or services. Ultimately, this cycle leads to an increased base of loyal customers and income for Amazon.
Although this concept was introduced to describe the business model of Amazon itself, it has since been used to describe the snowball effect seen by Amazon sellers as well.
What is the Amazon Seller Flywheel?
The Amazon Seller Flywheel is an approach that 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. The Amazon Seller Flywheel emphasizes the importance of having diversified sources of Amazon traffic to support long-term growth, including organic traffic, paid traffic, and external traffic.
Envision Horizons’ Stance on the Amazon 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 Flywheel in basic terms is that as you sell more products on Amazon, you are more likely to get even more sales.
Colin Bashor, Director of Paid Media at Envision Horizons, shared his thoughts on using advertising to get the flywheel started…
“Bidding for things like a general search term and making a sale on that general search term will move you up in organic sales rank on that search term- whether or not it was a paid placement or an organic placement.
For example, let’s say that you want to be the top in your category. If you bid aggressively on a primary search term for your category and get a lot of conversions, you might start out being 16th in your organic rank. But after having a really successful ad campaign for two weeks for the top term in your category, if you converted more sales than competitors, you would move up towards the top of search.”
Organic Rank and the Amazon Flywheel
Colin goes on to explain why organic rank plays such an important part in the flywheel concept…
“Amazon search is kind of like Google, most of us aren’t scrolling beyond those first two or three pages of results. This means that if you’re organically appearing in the top 2 or 3 results in Amazon search, you’re going to be collecting the majority of sales for that search term. The top section of the first page in the SERP typically has 4 sponsored placements and 4 organic placements. If you can get into the top 4 organic placements, you’re going to get a lot more sales, which will then also open you up to earn Amazon badges such as the bestseller badge. These badges give your listing Amazon’s stamp of approval and help you stand out in the SERP, which will make people more likely to click on your product and complete a purchase.”
How Product Pricing Affects the Amazon Flywheel
One important thing to note is that Amazon ranks sellers based on unit sales, not dollar sales. This means it’s a lot easier to get the Amazon flywheel moving as the cheaper product in the category. Let’s say that you have a $15 product, your competitor sells a $20 product, and you each sell $2,000 worth of product. So in this scenario you’re going to have sold more units than your competitor, and by that factor you will be ranked higher.
Starting the Amazon Seller Flywheel
Starting the Amazon seller flywheel can be a daunting task. To be successful, sellers need to drive various signals to Amazon by implementing keyword optimized listings, maintaining healthy account standing and performance metrics, offering competitive pricing, and more.
Core Components of the Amazon 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 6 blogs in the series on the following topics…
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. Including lifestyle imagery, product video, UGC content, etc.
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 (Using an agency such as ProductWind)
- 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 on the platform
Amazon Industry News
Envision Horizons is on a mission to make selling on Amazon less stressful and more profitable for sellers. This starts with keeping our community informed about everything from best practices and expert strategies to the latest platform updates.
If you’re an eCommerce professional with unique insights to share, we want to hear from you…. Reach out to resources@envisionhorizons.com to discuss newsletter and blog features.
