30 Apr The Era of Private Labels and Profit Maximization
Making sure that marketplaces work to your benefit is increasingly important and competitive for online sellers. Success here impacts both your brand’s growth potential as well as your profits.
Here we discuss how recent trends impacted consumer behaviors, and what that means for you as a private label seller.
An Evolving Marketplace
COVID-19 accelerated the growth of e-commerce worldwide, triggering an irreversible impact on consumer behavior and how it will continue to evolve over time. As the pandemic progressed, more consumers stopped going to brick and mortar stores and shopped everything online. This trend is likely to continue in the future.
The exciting part of this transition is consumers no longer focus (foremost) on brand names when searching for what they want. Instead, they focus on features.
The Default Household Brand
On Amazon, features are represented as a combination of keywords, and the ranking of these features defines the value of the private label. When consumers find the features they desire, the next thing they consider is price.
People buy on Amazon for low prices, free shipping, and convenience; it’s widely recognized as the brand that people trust the most. This is an excellent advantage for the private labels within the Amazon marketplace to focus on feature marketing.
That said, price and profit management are the real key to long-term success on Amazon.
Focusing on these three areas—Price Management, Reimbursements, and Restocking Optimization—can generate up to 50% more profits and increase the competitiveness of private labels on Amazon. They are often underestimated by the private label sellers, although e-commerce retailers have long been prioritizing them.
Amazon-owned private label revenues tripled during the last three years. Their prices change every day, as the market is dynamic and advertising costs are also in flux. Still, private label sellers did not fully unleash the power of dynamic pricing, even though trend-based pricing can significantly impact success.
Dynamic Pricing plays a crucial role in avoiding and delaying stock-outs which can cause keyword rankings to go down. These pitfalls are not easily recovered from, even by quickly restocking. Price management can also help avoid buy box suppression. Although the private labels keep the same price on Amazon, due to several other factors, Amazon suppresses the buy box even if the listing has a single offer. Sales drop significantly, and certain advertising functionality does not work without owning the buy box.
Amazon logistics is becoming more complex every day, which results in lost or damaged seller products or process anomalies. This reimbursement process lacks transparency and real-time updates, as the company’s claim to audit seller data fails to understand the complete picture. Sellers simply don’t have unlimited data access and understanding of logistics in full.
On the contrary, auditing such anomalies using the power of Artificial Intelligence in a fast and accurate way can result in up to 4% of revenue claims back from Amazon.
One of the biggest headaches of Private Label sellers is when and how much to restock items, and Amazon forecasts help only a little.
The main challenge is not about replenishing the top-selling item or the lowest available item. It’s about restocking the top profitable item without ignoring a balanced replenishment of the portfolio. A Profit Velocity–focused solution is required to have the maximum return on investment.
Meet: Your Profit Maximization Guru
Eva.guru is the first Profit Maximization platform where Private Labels can benefit from Dynamic Price Management, Reimbursements, and Restocking optimization like all e-commerce retailers.
With this, many new Eva Customers enjoy 40% profit growth over 90 days, making them more competitive so they can invest in winning product features to increase their store’s value. Eva.guru also provides end-to-end consulting services (Eva Smart Store) if you need a partner to grow your private label business value.
This post was drafted and contributed to Yardline by Hai Mag, CEO of Eva.guru