Amazon CRaP (Can’t Realize a Profit) refers to items that are structurally unprofitable on the Amazon marketplace. Low per unit pricing combined with storage and shipping costs can create low to negative margins leading to CRaP status. When this happens Amazon will engage with vendors to renegotiate costs. Until the issue is resolved impacted ASINs will be removed from free Amazon advertising, prevented from the use of Amazon Marketing (AMS), removed from Subscribe & Save, and sometimes Amazon will even stop ordering your product or remove the listing from their marketplace.
What causes CRaP?
There are multiple reasons you may find your ASINs have suddenly been flagged by Amazon as CRaP. By the way, Amazon doesn’t tell you that an item is CRaP, you just see the impact in your sell-through. While most retailers review profitability at the brand level, Amazon reviews it at the SKU or ASIN level. This means that while overall your brand is profitable on Amazon you may find one or more of the below issues with some of your top sellers.
- Lack of consistent pricing across eCommerce retailers: If a product has a lower price on another retailer, Amazon will match it. Often this happens due to promotional activity or a lower cost for product fulfillment with other retailers which translates to lower prices on their websites.
- Too many weeks of cover: Sudden increases in demand can trigger a larger than normal order from Amazon. If this inventory is not reduced in a timely fashion Amazon will decrease the price to encourage sales. Another cause of high inventory position can be a high minimum order quantity that doesn’t align to sales volume.
- Case pack sizes: Traditional case pack sizes, especially for CPG, are usually not optimized for an eCommerce environment. These low quantity case packs are a key driver of CRaP status due to a disproportionately low price relative to shipping costs.
- Short expiration period: When demand drops and weeks of cover becomes too high for perishable items Amazon will dispose of these excess units rather than sell them to consumers. If brands do not factor in transportation time and provide increased diligence for weeks of cover they may find themselves in challenging inventory positions due to high disposal rates and the resulting low weeks of cover for the remaining inventory.
- High customer returns: Amazon builds return costs into allowances. If returns are high, Amazon may need more funding from the vendor to avoid CRaP status. Returns can be driven by not only poor packaging, but also confusing or misleading information on Detail Pages.
- Heavy, bulky items: Heavy, large, or odd shaped items may cost more to ship than margins allow.
Proactive actions to avoid CRaP status
- Enforce your minimum advertised price (MAP): MAP allows brands to ensure none of their products are reduced below an unprofitable price. Brands should not only monitor all retail channels, but also 3P Sellers on Amazon.
- Manage your margin: When offering costs to Amazon find a balance that is fair to both parties, but keep some margin in your back pocket for future adjustments. This will help with annual vendor negotiations, running promotions, and CRaP negotiations.
- Create eCommerce optimized SKUs: Retail profitability does not always directly translate to eCommerce profitability. Additional fulfillment costs should be considered and case pack sizes should be adjusted accordingly.
- Evaluate Prime Pantry (CPG): Spreads shipping costs across many lower priced items by allowing Prime members to order a large box of groceries.
- Bundles: Create multipacks of the same product or variety packs to spread the shipping costs across more units.
- Consider a hybrid strategy: Should you need to remove items from Amazon due to CRaP status consider selling them as a 3P with FBA or direct fulfillment.
When your ASINs are impacted by CRaP status it’s important to quickly take action to mitigate the impact to your business. Once you’ve identified the root cause and the scope of the problem you should focus on resolution at scale and proactively implementing guardrails to prevent other ASINs in your catalog from being placed on Amazon’s CRaP list.
If your brand needs help optimizing sales on Amazon or specifically with Amazon CRaP, we’re here to help.