Is Hybrid Selling on Amazon Right for Your Brand?

Is Hybrid Selling on Amazon Right for Your Brand?

Our latest insights YouTube video covers the important questions brand manufacturers need to ask, as well as benefits to consider before adopting a hybrid (1P/3P) selling model on Amazon. Andrea Leigh, Ideoclick’s VP of Strategy and Insights, discusses the four elements to consider when adding a 3P/FBA channel. The Amazon expert also covers the three main benefits brands can achieve when adopting a hybrid approach to selling on Amazon.

Tune in here.

Amazon hybrid selling model
Can Amazon Turn Off Your Hybrid Selling Account?

Can Amazon Turn Off Your Hybrid Selling Account?

What Q4 Earnings Mean for Manufacturers – What Amazon Will do with Pillpack

Written by Andrea Leigh, VP of Strategy and Insights

IN THE NEWS

Amazon announced their Q2 earnings, and the big story is that they posted their largest quarterly profit ($2.5B)…ever. Wall street is happy, as they’ve now been profitable for 13 straight quarters – thanks in large part to their ad business (growing at 100% Y/Y), AWS, and the “squeeze” they’ve been putting on all of you, manufacturers. (Keep that in mind when they ask for terms improvements this fall!) External hiring has slowed, as they have consolidated their Retail and Third-Party teams and are filling open roles with internal transfers. They also indicated a slowdown in fulfillment center expansion, signaling growth fueled by third-party sales. Expect greater integration and consolidation across the retail and third-party platforms, teams, and strategy and increased reliance on third-party for inventory (see “Word on the Street” below).

Amazon acquired the online pharmacy, Pillpackfor just under $1B. In addition to prescription pharma being a robust, $450B/year business opportunity, this move will also enable Amazon to steal repeat foot traffic from the Walgreens, Rite Aid, and CVSs of the world…driving down the value of these retailers and making them prime potential future acquisitions. Each drugstore chain represents a large number of small-format, potential pick-up points for grocery products and/or AmazonGo stores. This will also give them a ready market for new private label products typically sold at pharmacies, which they’ve already begun developing. And you can bet there will be some special prescription service for Prime customers.

WORD ON THE STREET

Can Amazon turn off your hybrid selling account?The short answer is, yes. The Product Availability Policy for Manufacturers (commonly known as the Manufacturer on Amazon policy or MOA), has recently changed (changed portion is underlined): “If you are a manufacturer and your products are sold by any other retailers or distributors, we expect you to offer Amazon Retail the option to source those products at competitive terms for sale as Retail items only.” Amazon is applying this policy inconsistently across categories – right now, hard goods categories seem to be getting hit the worst. If your behaviors flag Amazon’s attention – such as holding back portions of your assortment for FBA-only (vs. retail), using FBA to drive Amazon’s retail prices down, or trying to move your business from retail to FBA – you’re at risk for a review.

What we learned from Prime Day (well, when Amazon’s site was up, that is)… It isn’t enough to run a deep (think 30%+ off) discount anymore – you have to drive external traffic to it, too. The deals that performed best across our client base all included some traffic-driving activity on the client’s side, such as promotion through social channels, AAP, AMG, and/or other advertising. Many clients had deals shut off due to profit or inventory concerns, or because Amazon did some price matching leading up to the event (rendering the deal invalid). Takeaways for next year: Given the new-for-2018 item-level participation fees, go big on a few items, and have an external marketing plan. Missed the cutoff or don’t want to fork up the fees? Use a Vendor Powered Coupon to improve conversion. 

WHAT’S COMING UP

Holiday, that’s what!  It’s time to start thinking about your deal calendar, internal resourcing to support more vigilance in everything from auditing detail pages to monitoring chargebacks (expect an increase) and making sure your warehouses ship products quickly and correctly to Amazon. The window is also closing to open and generate enough credibility with your seller account in time for holiday, so set up those FBA accounts now! (Amazon doesn’t usually allow brand new sellers to sell product during Q4).

Annual Negotiations…Starting in September, Amazon will begin sending out their annual terms requests. Here’s how to not get eaten alive. Need to talk it out? Clients, please schedule a “negotiations consult” with your Account Manager.

New Items? – Now is the time to set them up to get the flywheel going before Q4. Contact your account manager and we can get the new assortment rolling.


Andrea Leigh | Ideoclick VP
Andrea Leigh is the VP of Strategy at Ideoclick. Prior to joining Ideoclick, she co-founded Andrea K. Leigh Consulting, where she advised brands on their Amazon.com strategy. 
She is a former 10-year senior executive at Amazon, where she led over 15 product categories, worked on the launch of Amazon’s automated pricing system and CRaP programs, and ran Amazon Prime for Amazon Canada. 
Andrea is frequently quoted on the topic of Amazon and eCommerce in the media. She is also a speaker at national eCommerce, retail and digital marketing conferences, a contributing writer and podcast interviewee for educational forums and media.

Insights

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Amazon Terminology, Acronyms, Abbreviations – A Complete List

Amazon Terminology, Acronyms, Abbreviations – A Complete List

Amazon is a complicated world. Even for seasoned sellers, it’s difficult to keep up with all of Amazon’s terminology, acronyms and abbreviations.  Not only is the Amazon ecosystem highly dynamic, it also has its own unique vernacular.  While many might think they know or understand Amazon, we are always surprised by the number of things that maybe they don’t know.  For instance, if you don’t sell on Amazon, you probably have no idea that an ASIN or Amazon Standard Identification Number is synonymous with a SKU.  Perhaps you have been offended when you heard someone talk about “CRaP”, when in reality it’s a commonly used Amazon acronym for products where Amazon “Can’t Realize a Profit”.  To address this, we have put together a comprehensive list of Amazon Terminology, Acronyms, and Abbreviations to help both neophytes and experts should they stumble across an unfamiliar Amazon reference. 

A

A+ = A+ Content

Manually created through A+ Detail Page tab in Vendor Central from custom templates. The A+ content appears on detail pages below the bullets and above Product Description.

A9 Algorithm

The A9 algorithm is Amazon terminology for a complex and highly proprietary search function on Amazon that serves up a set of product results in response to keywords that are typed in by the user. 

AAP = Amazon Advertising Platform

Amazon terminology for Marketing programs on other platforms to drive traffic to Amazon.

ACoS = Advertising Cost of Sale

ACOS is measured as a percentage showing you how much a sale costs you in advertising money. The lower the ACOS, the better an ad is performing. ​ ACoS = Ad spend / Ad sales​.

AL = Allocated

A replenishment term – used for Amazon private label.

AMG = Amazon Media Group

AMG is a program that runs ads outside of Amazon and on Amazon devices like the Kindle to drive traffic to the site.

AMS = Amazon Marketing Services

AMS is advertising on Amazon to increase rankings and impressions.  Advertising is used to drive impressions on the Search Results Page.  Learn more about Amazon Advertising Strategies

AOV = Average Order Value

Average sales price for an ASIN for a determined time period. Because of Amazon’s fluctuating buy box price, ASP is an average view of the product’s price. ​ AOV = Sales / Orders. ​

ARAP = Amazon Retail Analytics Premium

ARA is an analytics tool on Amazon Vendor Central.  It is typically priced as a % of gross sales on Amazon and sold thorough an Amazon Vendor Manager.

ASIN = Amazon Standard  Identification Number

A 10-character alphanumeric unique identifier Amazon Terminology assigned by Amazon for product identification.  An ASIN is further delineated as a Parent ASIN or Child ASIN whereby SKU’s of different sizes, colors, flavors, etc. can be grouped together on a listing typically with the ASIN having the highest projected volume identified as the Parent ASIN. For example, with shoes, a parent is the style (Nike Jordan) where the child is the individual size/colors with the Style (Red, Size M).

ASP = Average Sales Price for an ASIN

Average sales price for an ASIN for a determined time period. Because of Amazon’s fluctuating buy box price, ASP is an average view of the product’s price. ​ Ordered revenue/ordered units​.

AVS = Amazon Vendor Services

Amazon Vendor Services is vendor-funded support service which provides a Brand Specialist at Amazon to support a Wholesale (1P) business on Amazon. Learn More about Amazon Vendor Services and Mistakes to Avoid.

Amazon Born to Run Program

A Self-Service program in Amazon Vendor Central where a merchant submits a request to Amazon requesting a full amount of inventory to drive product consumption over a specified period.  Any excess items at the end of the period can be returned to the merchant or they can provide Amazon with a 25% discount on any items remaining in inventory. Learn more about the Amazon Born to Run Program.

Amazon Coupons

Amazon coupons are dollars or percentage off offers that appear on the product detail page of an item.  Coupons require a checkbox selection in order to receive the discount.

Amazon FBA Fulfillment Fees

Fulfillment by Amazon is a flat fee per unit depending upon the size and weight of the product. 

Amazon Margin Guarantees

Amazon Margin Guarantees provides Amazon with a guaranteed target to hit a specific PPM that protects them if they need to price match.  Learn More about Amazon Margin Guarantees.

Amazon Promotions

Amazon promotions are incentives on specific products consisting of a percentage off, free shipping, or a buy on, get one (BOGO) offering.

Amazon Referral Fees

Amazon’s Fee for listing products on Amazon Seller Central.  It’s calculated as the greater of the referral fee percentage or per item minimum referral fee. 

Amazon Seller Fees

Amazon Seller Fees consist of an Amazon Referral Fee, a Fulfillment Fee based upon the size and cube, and a Storage Fee based upon the footprint for items held inventory over 30 days.

Amazon Sponsored Brand Ads

Sponsored Brands are Amazon ads that typically appear across the top of a search results page on Amazon.  It features a brand logo and up to 4 product listings. Ads are sold on a cost per click basis through Amazon Marketing Services.  Learn more about Marketing on Amazon.

Amazon Sponsored Display Ads

Sponsored Display Ads, previously known as Product Display Ads, appear on an Amazon Product Detail Page.  They are part of Amazon’s Display Advertising Program, DSP. 

Amazon Sponsored Product Ads

Sponsored Brands are Amazon ads that typically appear across the top of a search results page on Amazon.  It features a brand logo and up to 4 product listings. Ads are sold on a cost per click basis through Amazon Marketing Services.  Learn more about Marketing on Amazon.

Amazon Storage Fees

Amazon Storage fees are based on the daily average cubic foot volume for space that inventory occupies at an Amazon Fulfillment Center.  The fees var depending upon time of year, with a higher cost/cubic foot from October to December when space is at a premium for holiday shopping.  Learn more about Amazon FBA Fees

Amazon Subscribe & Save

Amazon Subscribe & Save is Amazon terminology an automatic delivery program where shoppers can save between 5% and 15% on items when they enroll in a replenishment program. The discount is funded by the Merchant.

Amazon Trade Terms

Amazon Trade Terms are Amazon terminology for Co-op fees.  They negotiated between Amazon and the Seller, paid by the Seller and calculated as discounts off wholesale price for Amazon 1P Sellers.  They typically include: Co-op, returns, damages, customer service.  Freight might or might not be included in the terms depending upon negotiations.   Learn more about Amazon Annual Trade Term Negotiations

Amazon Warehouse Deals

Amazon Warehouse Deals refers to products that have been returned, damaged, used, or refurbished.  They are typically in “good” condition but because they are no longer considered “new” they are offered at a deep discount.

B

BOL = Bill of Lading

A type of proof of delivery. It is required by a carrier at time of pickup.

BOPIS = Buy Online Pick-up in Store

An eCommerce term referring to the shopping model whereby consumers buy directly from brands or retailers and pick the item up at a retail location.

BR = Basic RP

Replenishment term – used for manual orders or high-priced items.

Best Deal Promotions

Promotions running up to 2 weeks that appear on Amazon’s “Today’s Deals” page providing increased visibility for the Merchant.

Brand Analytics

Brand Analytics is an analytics tool on Amazon Seller Central.  It offers data including keywords, market basket analysis, click and conversion, share, search terms, demographics, etc.  It is available at no charge to Brand Registered Marketplace Sellers.

Brand Code

Brand-specific code linked to Vendor Code and Brand Name.  Links an ASIN to a vendor, brand name, and brand store. Brand store is at blue link at the end of the product title on the detail page.  This makes coupons easier to create by grouping ASINs by brand in VC and ensures the ASIN(s) show in the brand’s store page (link on detail page underneath title).

Brand Name

The brand name currently written on the product’s packaging. This should be changed each time packaging changes to avoid receiving issues caused by a title/brand name/packaging conflict.

Brand Registry

Amazon terminology for a program developed to give brand owners increased control of their listings on Amazon.  It allows trademarked brands to have direct influence on the detail pages with regarding to images, content, configurations, etc.  The program also helps brands control listings of counterfeit goods.

Brand Store

A form of enhanced brand content utilizing Amazon templates to tell a brand story.  It is typically used to drive conversion and/or increase average order size when a shopper clicks on a Sponsored Ad.

Browse Nodes

Browse Nodes are Amazon terminology for the lowest-level product category (Department) on site that an ASIN can appear. Shown on the detail page at left side of search and on some detail pages at top left of the white space (e.g., Home > Kitchen and Cooking > Utensils > Sporks).

Buy Box

Refers to the featured listing on a detail page using Amazon terminology.  Typically, the buy box is an Amazon Prime listing and offers the lowest price.  Maintaining the Buy Box is critical to maximizing sales.  

Buy Box %

In order to win the buy box a product must be in stock, available for purchase for other reasons, and the lowest price. ​ Number of page views where a product appeared in the buy box / total page views of that product​.

C

Chargebacks

Amazon Chargebacks are fees levied by Amazon for Operational deficiencies for vendors selling Wholesale to Amazon.  Chargebacks can occur when there are PO confirmation and ship window delays, Receiving Issues related to barcodes or label content, Prep Issues when products received and do not comply with Amazon bagging and carton requirements, ASN (Advanced Shipping Notice) not being sent correctly from Vendor Central, and Transportation Issues related to failure to comply with routing request setup requirements. 

COGS = Cost of Goods Sold

The cost to manufacture a product. It might or might not include terms.

CPC = Cost Per Click

CPC is the amount of money you spend every time someone clicks on your ad. ​ CPC = Spend / Clicks​.

CPM = Cost Per Thousand

The cost per thousand impressions/views from an advertisement​.  Total impressions / 1,000​.

CRaP = Can’t Realize a Profit

This is specific Amazon terminology related to products that Amazon identifies as having low profit values, being unprofitable or items “at-risk” of being unprofitable.

CTR = Click Through Rate

Ratio between ad clicks and its impressions. A high CTR is generally better, indicating your ad is compelling enough for shoppers to click-through. ​ CTR = Clicks / Impressions​.

CVR = Conversion Rate

Conversion rate is the percentage of shoppers who have clicked on your ad and purchased. ​ Ordered units divided by glance views​.

CX = Customer Experience

A term encompassing the multiple interactions that factor into the customer’s experience with a brand or retailer.

Confirmation Rate

A low confirmation rate indicates lost sales to Amazon, as there is a demonstrated customer demand that Amazon is ordering to that the vendor cannot meet. ​ Units Confirmed/Units Ordered​

Content

Content on Amazon refers to both visual and written content that appears on a Product Detail Page or a Brand Page.  It includes title, bullets, description and enhanced brand content on the Product Detail Page and additional visuals and written content typically telling the brand story on a Brand Page.  Learn more about Content Strategy.

Custom Enhanced Content

Manually created through A+ Detail Page tab in VC from custom templates. Appears on detail pages above Product Description.

D

DP = Detail Page

A Detail Page is the listing page where an ASIN is sold on Amazon.com. It is also referred to as a Product Detail Page and may contain a single ASIN or a parent ASIN with variations (child ASINs).

DSP = Demand Side Platform

Targeted advertising programs off Amazon that drive and retarget consumers based upon demographics and shopping behavior.

DS = Drop Ship

Drop ship refers to a scenario where the product is fulfilled and shipped by a third party rather than directly by Amazon. 

DTC (or D2C) = Direct to Consumer

An eCommerce term referring to selling products directly to customers, bypassing any third-party retailers, wholesalers, or any other middlemen.

E

EBC = Enhanced Brand Content

Below the fold content on the Detail/Listing Page.  Referred to as Enhanced Brand Content for Seller Central sellers and A+ content for Vendor Central sellers.

F

FBA = Fulfilled by Amazon

A fulfillment solution in Amazon terminology offered to Third Party Sellers whereby Seller-owned product is shipped and stored at an Amazon fulfillment center until it is sold to the consumer.  Amazon picks, packs and ships the order.  

FBA Fees = Fulfillment by Amazon Fees

FBA Fulfillment by Amazon Fees are variable fees levied by Amazon for warehousing, picking, packing, and shipping products under the FBA Model. 

FBM = Fulfilled by Merchant

An Amazon 3P/Third-party selling model where sellers manage their own product inventory, picking, packing, shipping as well as customer service or it is managed through a third-party logistics company.  Also known as MFN or Manufacturer Fulfillment Network.

FC = Fulfillment Center

Refers to Amazon’s Fulfillment Centers used to fulfill orders to consumers.  A Fulfillment Center location for FBA sellers is determined by Amazon at the time an order is created in Seller Central or in the case of Wholesale Orders, it is determined by Amazon and identified on the Purchase Order.

FFP Program

Amazon’s packaging program to encourage packaging that delights customers, eliminates waste and ensures product arrive intact and undamaged.  It offers FFP, Frustration-Free Packaging, the highest level of packaging certification by Amazon.  Learn more about Amazon Packaging Certification Requirements

FT = Fast Track

A glance view weighted in stock metric for Amazon.  In order to get a fast track offer, the ASIN must be in stock, win the buy box and be prime eligible. ASINs with Fast Track generally have higher conversion. ​ Number of glance views with a fast track offer/total glance views​.

Fill Rate

Fill rate measures the quantity that was shipped vs identified as being shipped.   Units Received/Units Confirmed​.

1P = 1st Party Seller

Amazon Wholesale or 1P.  Products are sold through the Vendor Central Platform.

Fulfillment Fees

FBA Fulfillment Fees are the fees charged by Amazon to pick and pack products as part of the Fulfillment By Amazon program.  The fees are flat for parcels under a certain size. Over-sized goods are charged a flat fee plus a cost/additional pound. Learn more about Amazon FBA Fulfillment Fees.

G

GV = Glance View

Number of times an ASIN is viewed. This is calculated on a child ASIN level; parent ASINS do not generate glance views. ​

H

Hidden Search Terms

Backend terms searchable by customers.  Open text search terms (limited to 500 characters) that show an ASIN in site search whenever a customer searches for a word in the Search Terms string.

Hybrid Selling

Hybrid Selling is Amazon Terminology for a blended selling model.  A Hybrid Selling Model for brand manufacturers involves selling as a 1P seller through Amazon Vendor Central as well as selling as a 3P/FBA/Marketplace seller.  Learn more about Hybrid Selling on Amazon and Is Hybrid Selling Right for Your Brand.  

I

IPI = Inventory Performance Indicator

An Amazon IPI score combines the past three months of sales, inventory levels, and costs into a single rolling metric. When an IPI gets below a certain threshold, sellers will be subject to storage limits which might hinder their ability to add new inventory or create new items.

ITK = Item Type Keyword

A set of search keywords chosen by a vendor, from a list Amazon maintains, that show an ASIN in search when a customer searches for any word(s) in the ITK string.

Impressions

Impressions refer to the number of times your ad has been displayed. ​ 

L

LBB = Lost Buy Box

The buy box can be lost to another merchant due to various reasons, most commonly where we are not the lowest price, or we are out of stock. Lost buy box directly correlates to lost sales, as there are captive consumers on the detail page ready to convert but are buying from another merchant. ​ Number of glance views where we lost the buy box / total glance views​.

Lightning Deals

Lightning Deals  are promotions in Amazon Terminology lasting up to 6 hours that are available in both Vendor Central and Seller Central.  Lightning Deals will appear in Amazon’s Lightening Deals category providing an opportunity to target deal-targeted shoppers. Program eligibility requires the following: Amazon sales history, a rating of at least 3 stars, prime eligibility, the product must be in new condition.  

M

Merge

After which one ASIN disappears from site. The ASIN that is being merged becomes the same ASIN as the ASIN being merged with. 2 types of merges are possible: 1) Retail-to-retail: Combining a vendor-owned ASIN and all of its data (including reviews) into/with another vendor-owned ASIN, 2) 3P to Retail: Combining a 3P ASIN with a vendor-owned ASIN because the 3P ASIN is not using the correct UPC/GTIN or, is using the UPC/GTIN but the Offer was created with a different ASIN.

MAP Pricing (MAP)

Manufacturer’s Advertised Price.   A brand can require authorized resellers to not sell below MAP.  Oftentimes, products being sold below MAP are secured by unauthorized resellers.  

MFN = Manufacturer Fulfillment Network

An Amazon 3P/Third-party selling model where sellers manage their own product inventory, picking, packing, shipping as well as customer service or it is managed through a third-party logistics company.  Also known as FBM or Fulfillment by Merchant.

N

NIS = New Item Setup

Creation of a new item on Amazon.

NP = New Product

Replenishment term – after the first order has been received, RP code will switch to PR.

NR = Non-Replenishment

Replenishment term – possible for items to be deleted from catalog.

Net PPM = Net Pure Product Margin

A measure in Amazon terminology of Amazon’s profits after selling a product, including vendor funded coop – base, marketing discretionary fund (MDF), damage, freight, promotional funding, price protection, etc. A large gap between PPM and net PPM indicates high coop.​ (Product Revenue – Product COGS + Vendor Funded Coop)/Product Revenue​.

New Product

Replenishment term – after the first order has been received, RP code will switch to PR.

O

OB = Obsolete

This is a Replenishment Term identifying that an item has been discontinued.

OS = Off Season

Replenishment term – item is not currently in season, can be used to temporarily unpublish an item that will be back in stock during a hallmark holiday or specific time of year.

Offer

A quantity of an ASIN (or Amazon SKU) sold at a price.  A 3rd party seller wishes to sell an existing Retail ASIN, and creates an offer using the same ASIN. If the UPC/GTIN doesn’t exist on Amazon, the only offer will be the new 3rd party ASIN. Amazon’s best practice is to ensure all offers of the same unique product use the same ASIN and Product ID (UPC/GTIN). If they aren’t, a merge may be recommended.

Ordered Product Sales

Customer sales, also referred to as ordered revenue​.

Ordered Revenue

Customer sales, also referred to as ordered product sales (OPS), revenue, or product revenue​.  Ordered units * ASP​.

Ordered Units

Total number of units ordered by the customer over selected reporting period​.

P

PDP = Product Detail Page

A Product Detail Page is the listing page where an ASIN is sold on Amazon.com. It is also referred to as a Detail Page and may contain a single ASIN or a parent ASIN with variations (child ASINs). 

PPM = Amazon Pure Profit Margins

A measure of Amazon’s profit margins after selling your product​.  In Amazon terminology, Pure Profit Margin is the same as net profit margin.  (Product Revenue – Product COGS) /Product Revenue​.  Learn more about Amazon Margins.

Page Views

Number of times your ASIN is viewed. This is calculated on a child ASIN level; parent ASINs do not generate glance views. Page view percentage indicates how many page views your SKU/ASIN received relative to total number of page views for all your products. ​Number of page views for an ASIN / total number of page views for all your products​.

PR = Planned Replenishment

Replenishment term – used for items that are automatically reordered.

Prime Day

Prime Day is Amazon terminology for a major shopping day created by Amazon.  It typically occurs in mid-July.  Learn more about Amazon Prime Day.

PVR = Provisions for Receivables

Provision for Receivables are temporary credit memos, i.e. holds, that Amazon places on a Wholesale account related to forecasted payables due to Amazon.

R

ROAS = Return on Ad Spend

ROAS and ACOS are both indicators of the amount spend on PPC ads in relation to the revenue generated from ads. ​ ROAS = Ad sales / Ad spend​.

repOOS = Replenishable Out of Stock

% of glance views going to replenishable, out of stock items.  Number of glance views marked as replenishable but was out of stock/ total glance views.

S

SC = Seller Central

The Amazon platform used for Amazon Marketplace Sellers, often referred to in Amazon terminology as FBA, due to the high percentage of those who leverage Fulfillment by Amazon.

Sell Through %

Percentage of your inventory that you sold through in a specific time period​.  Ordered units / (Units on Hand + Units Received).

Session %

This metric is an indicator of how often customers are viewing your ASIN in their sessions​.  Sessions of one SKU/ASIN with at least one-page view / total number of sessions for all products​.

Sessions

Visits to your PDP within a 24-hour period. A user may view pages multiple times in one visit, resulting in more GVs/Page views than sessions. Storefront or browse node visit is not counted as a session. ​

Shipped COGS

Shipped cost of goods sold​.  It is the retail price on Amazon less direct Amazon Selling fees.

Shortages

Refer to charges by Amazon to Wholesale Accounts whereby inventory received is identified as less than the quantity of the Purchase Order.  The Wholesale Seller must refute these charges by submitting a ticket to the Help Desk and providing a signed Bill of Lading and other proof to get reimbursed for the variance.  Learn More about Amazon terminology related to Shortages

T

3P = Third-Party Sellers or Amazon Marketplace 

Products are sold through the Seller Central Platform.  They can be shipped from Amazon Fulfillment (FBA), Fulfilled by Merchant, or Fulfilled by a 3PL or third-party logistics company.

3PL = Third Party Logistics Company

A third party that assembles, preps and/or ships products on behalf of a seller. 

U

Unit Session %

Number of units purchased relative to number of customers who viewed the product​.  Number of units / number of sessions. ​

UPC = Universal Product Code

A machine-readable code to identify a specific product.  It consists of 12 numeric digits that are uniquely assigned to a product.

V

VC = Vendor Central

Vendor Central is the platform used for an invitation-only program where Amazon cuts purchase orders and sends them to the Merchant.  Merchants will work with an agency or manage their own Vendor Central Account as part of their relationship with Amazon. Also referred to in Amazon terminology as 1P or Wholesale.

VLT = Vendor Lead Time

The amount of time it takes for a vendor order to be picked, packed and received by Amazon.

Weeks of Supply (WOS).

Variations

Listing 2 or more ASINs on the same detail page that share at least 1 common attribute like size, color, flavor for ease of finding similar products. Each variation consists of a parent ASIN with 1 or more “child ASINs” that have been variated under the parent (on the same detail page).  Variations or variated ASINS share reviews across all listings on the detail page. 

Vendor Code

An Amazon-created code (e.g. EMCW9) used to identify a unique vendor of an ASIN or group of brands. Any ASINs created in an account containing a Vendor Code will automatically be linked and have their Brand Code linked to that Vendor Code.

VM = Vendor Manager

The Vendor Manager is the owner of a category or categories at Amazon for Wholesale programs.  They are responsible for managing full category scope, including P&L performance and end-to-end vendor management, which requires development of new strategic vendor relationships, driving negotiations, managing growth levers and ensuring paramount operational and logistical performance.  Learn More about the role of Vendor Managers.

VPC = Vendor Powered Coupons

Amazon Coupons are available to both Amazon Vendors and Sellers.  The offers appear on the Product Detail Page in the form of a digital coupon.  Offers include percentage off, dollars off, BOGOs, Free Shipping, Social Media promo codes, or Giveaways.  For Marketplace Sellers, the account must be a Professional Seller Account, it must be in good standing, and it must have at least a 3.5 Seller Feedback Rating.   Discounts are funded by Vendor/Seller.

W

WOS = Weeks of Supply

The number of weeks of supply to determine cover.  For Wholesale Merchants, the Amazon Replenishment Team will determine weeks of supply.  For Marketplace Sellers, they are responsible for managing their own inventory. Inventory Available plus Inbound/Average Units Sold per Week.  

Three Surprises From COVID-impacted Amazon Earnings Release for Q2 2020

Three Surprises From COVID-impacted Amazon Earnings Release for Q2 2020

It’s the moment we’ve all been waiting for – Amazon earnings for COVID impacted Q2 2020.

Since the COVID-19 pandemic began, many of us are shopping on Amazon more than ever. My Amazon Echo pings all day with deliveries for my family of five. My kids open the front door several times per day just to see if any cereal or batteries or Legos have arrived. I’ve seen more Amazon delivery trucks on the streets than ever before, and you have to sell your firstborn child in Seattle to get an Amazon Fresh delivery appointment.

In Q1, we know Amazon saw such a demand spike that they had to focus entirely on essential goods and restrict everything else. But how much volume? And at what cost? Read on for three things that surprised me about Amazon’s Q2 2020 earnings release.

Link to the earnings call transcript (registration required) and link to Amazon’s press release about it.

1. Amazon’s inventory strategy is scarily lean

Amazon earnings release reveal that revenue came in at $88.9B, +40% Y/Y (vs +26% the previous quarter), and +18% Q/Q. Categories like fashion and electronics likely saw softer sales, dampening the overall growth rate. However, some categories saw huge spikes. Throughout the end of Q1 and much of Q2, Amazon struggled operationally.

According to Brian Olsavsky, Amazon’s CFO, “Online grocery sales tripled year-over-year.”

What’s incredible is that an additional 14 points of sales growth (vs. previous quarter’s run rate) created that much disruption at Amazon. They continued to miss and delay Prime shipping promises and restrict inbound and outbound shipments.

This doesn’t seem like so much extra growth. Could your organization manage an extra 14 points of growth without too much disruption?

The level of disruption made me realize how thin they keep their inventory (typically 2-3 weeks of cover, and often less for tail assortment.) When coronavirus hit, their lean strategy backfired. Not that anyone planed for a global pandemic. However, it shines a spotlight on how lean they run.

WHAT THIS MEANS FOR MANUFACTURERS

Amazon’s lean inventory strategy, and how sensitive their network is to fluctuations in demand underscores the importance of having a hybrid selling strategy, or multiple ways to sell goods on Amazon. At the onset of the pandemic, many of our clients rushed to get a 3P account set up, dropship capabilities, etc. Better to be prepared for future demand fluctuations and have your hybrid strategy ready-to-go.

Also, Amazon’s going to run out of space (for real) in Q4. This comment from Brian O. was shocking:

“Now as we move into Q3, we’re starting to – we need to build the inventory more for Q4, and we’ve run out of space. So we’ve got our hands full on that challenge, but we’ve got a really good team that’s been working very hard probably since late February on this issue.”

Well I’m glad you have a team working on it, Amazon. Manufacturers: better get your goods in now!

2. Where did all of that profit come from? If we believe Amazon’s position, their normal corporate marketing ad spend must be *huge* during non-COVID times.

Amazon earnings release show that net income came in at $5.2B, up 107% Y/Y. Earnings per Share increased 94% Y/Y to $10.30. Even looking at Net Income as a % of Sales, they improved 76% Y/Y to 5.9%. They made more overall profit (which makes sense, because they had more sales), but also a higher profit margin. Yet, they spent over $4B on COVID-related expenses, such as protective equipment, cleaning, safety protocols, additional family care benefits, and a $500M employee thank you bonus, among other things.

I was convinced all the low-profit grocery sales and increased cost of doing business would severely negatively impact profit. Heck, the analysts expected Earnings per Share to be $1.46. However, Amazon earnings show they managed to deliver 7x those expectations! How did they do this?

Apparently, I’m not the only one with this question. Analyst Mark Mahaney of RBC asked,

“…these profit levels are super high now. Is Jeff aware of how profitable the company is becoming? Is he happy about it?”

Sigh. Finance humor.

Osalvsky says it came from a 1/3 reduction in Marketing expenditures. Amazon must have previously spent a LOT on marketing for this to drive EPS up 7x analyst projections.

WHAT THIS MEANS FOR MANUFACTURERS

I guess the great vendor profit claw-back I predicted is not coming after all. Manufacturers, you are safe…for now. You may want to bring up Amazon’s stellar profit performance in your next vendor negotiation. Do they really need that extra 50 bps of co-op improvement?

3. Amazon continues to invest, while other retailers scramble to keep pace

Amazon is continuing to build fulfillment centers. They’re listening to and learning from us using our Alexa. They’re moving forward with international expansion. Their competitive advantage is that it’s always Day One. According to Jeff Bezos in the Amazon earnings press release,

“Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS.” 

No one asked Amazon anything about their foray into healthcare, and Amazon didn’t mention it. Amazon has quietly been acquiring all kinds of voice-enabled health technology companies (check out their Alexa Fund). They’ve launched a healthcare system for their employees. They’re doing their own COVID testing. They have like a million Healthcare experiments running, and likely COVID-19 is accelerating the customer need and general interest in all of these. Do you wonder why they’re keeping that under the radar for now?

WHAT THIS MEANS FOR MANUFACTURERS

Amazon will win by continuing to invest while others cannot. This is also how you, brand manufacturers and sellers, will win. Keep focused on your long-term initiatives. Stay strategic. Keep your head up. Finding ways to thrive, versus just survive, will put you ahead of your competitors as we adjust to the New Normal.

Also, the current coronavirus pandemic is crowding out any news about Amazon’s expansion activities. Keep reading, stay curious, and continue to dig. You definitely don’t want Amazon to surprise you!


Andrea K. Leigh Ideoclick

About the author: Andrea K. Leigh is both an e-Commerce strategy enthusiast and expert. She works with suppliers on e-Commerce strategy and execution, and writes, speaks, and teaches on commerce-related topics. She is the VP of Strategy and Insights for Ideoclick, an e-Commerce managed services agency that empowers manufacturers to take charge: e-Commerce without compromise. A 10-year former senior exec at Amazon, she worked on the launch and management of automated pricing, the Prime program, Amazon Fresh, and even Harry Potter book launches.