Unless you’re living under a rock, you know about — and have probably ordered from — Amazon. Amazon is the retailer of everything.
Many consumers begin their purchase journey online, even if they ultimately buy in-store. Two-thirds of consumers start their search for new products on Amazon, according to Feedvisor data, seeking everything from product details and price comparisons to customer reviews and brand credibility.
Food and beverage is the fastest-growing category on Amazon, up 40% in 2018.
You’ve probably already moved portions of your shopper marketing budgets to digital channels where buying activity is growing.
For CPG brands, it’s important to establish a digital presence. It will maximize your reach, control your brand’s message, and drive incremental growth.
Once Upon A Time…
… products weren’t delivered to your doorstep within days (or hours!). Amazon changed that.
In 1994, Jeff Bezos launched Amazon from his garage. What started as selling books online quickly became the ecommerce giant we know today.
In 1997, Amazon.com went public. The following year, Amazon’s revenues hit $600 million. Amazon updated its logo to feature a curved arrow leading from A to Z, a stylistic nod that the company carries every product from A to Z in 2000. A few years later, Amazon launched its web hosting business, Amazon Web Services (AWS). Amazon Prime debuted in February 2005.
In honor of the website’s 20th anniversary, Amazon held its first ever Prime Day on July 15, 2015.
In 2018, Amazon reached a $1 trillion market cap. And the company’s history continues to be written…..
The millions of US Prime subscribers spend about $1,400 annually. Amazon Prime Day features promotions exclusively available to Prime members.
🧨 We’re talking about the biggest online event of the year — a shopping extravaganza.
In 2018, Amazon doubled its CPG sales for Prime Day compared with an average two-day span. Year over year, Amazon saw a 20% gain in CPG sales versus Prime Day 2017, Nielsen reported.
In 2019, Prime Day lasted 48-hours and brought in roughly $3.58 billion in total sales. Customers purchased more products during the sale window than on Black Friday AND Cyber Monday.
📦 Amazon sold 1.75 million items… That means 398 items were ordered every second.
Originally planned to run from July 15-July 16, Amazon Prime Day 2020 was postponed until mid-October. Hosting the event later in the year means there are only 40ish days between Prime Day and Black Friday. Prime Day 2020 unofficially launches the holiday shopping season, and advertising strategies will have to adjust accordingly.
Amazon Prime Day – History
2015: Amazon Prime Day is born! The first Prime Day lasted 24 hours. Customers ordered 34.4 million items.
2016: The 2nd ever Amazon Prime Day surpassed 2015 numbers by more than 60% worldwide.
2017: Prime Day lasted 30 hours. The Echo Dot was the most popular Prime member purchase.
2018: The biggest global shopping day lasted 36 hours! More than 100 million products were purchased
2019: For the first time, Prime Day was extended to 48 hours. Sales surpassed the previous Black Friday and Cyber Monday combined. Members purchased more than 175 million items.
2020: Prime Day took place October 13 and October 14 across the US and 18 other countries. It’s estimated that Prime Day 2020 sales hit $10.4 billion.
CPG Digital Spend
Because of the pandemic, US consumers have shifted to ecommerce which is keeping consumer packaged goods digital ad spending afloat. More than 3 in 5 US internet users said they were more likely to purchase cosmetics, personal care products, and food and beverage products online during the pandemic.
💻 Emarketer expects the CPG industry to increase its digital spending 5.2% to $19.40 billion this year.
💻 2/3 of US internet users start product searches on Amazon, compared with 34.6% who search on Google first.
CPG brands that fail to keep pace with consumers’ digital trends risk losing the opportunity for a long-term competitive advantage as ecommerce inevitably continues to grow.
Feedvisor says that in less than 10 years, online grocery shopping will grow from 23% to as much as 70%. The majority of consumers agree that they’re more likely to purchase products from Amazon than other ecommerce sites, so it’s crucial your brand’s products are properly represented on Amazon’s marketplace. There’s no arguing, Amazon is a powerful platform.
“Amazon is viewed as both a brand and a retail platform, and so it has access to both brand marketing and shopper marketing dollars,” said former Amazon executive Connor Folley. “This is most notable in CPG where brands are accustomed to spending massive shopper marketing budgets for shelving.”
Now, he continues, this has “moved online where CPG brands view Amazon search results as the digital retail shelf.”
For consumers, Amazon is a great resource for product research. For you, your product details page(s) offer endless digital space to convey your story and message. Tap into that… Give shoppers complete information about your brand and optimize your product listings. Include images, descriptions and prices.
“We strongly encourage all consumer brands to load their content onto Amazon,” notes James Thomson, Partner at retail consultancy Buy Box Experts. “We have seen brands shift a large portion of their advertising dollars to Amazon over the past two years, as brands recognize that they can advertise directly to consumers when they are ready to make the purchase decision.”
Grocery is One of Amazon’s Fastest-Growing Categories
24% of US Prime members plan to make a grocery purchase on Prime Day. Last year, grocery items were the second-most shopped CPG category (behind health and beauty), accounting for 17% of Amazon’s total US CPG sales.
Since 2019, ecommerce sales have also been responsible for 90% of the growth in the CPG industry.
It’s expected that grocery items will continue gaining ground since more consumers have embraced online grocery shopping. You have an opportunity to expand your customer base with Amazon...
It starts with these 2 critical tactics:
👉 Introduce new products. Prime members are willing to buy a product on Prime Day that they wouldn’t normally try.
👉 Create a SKU strategy for Amazon. The hero SKU for Amazon’s channel should deliver value per serve, frequency of use, and cost of delivery while being promoted to influence repeat purchases.
The Mix Matters Online
Trade promotion strategies built for an omnichannel world must follow the shopper flow and path to purchase. To do this effectively, manufacturers and suppliers will need innovative, collaborative shopper engagement strategies. In other words, don’t try to force the in-store visit. Successful strategies bridge the convenience gap between in-store and online shopping. Reimagine each step of the shopping journey to remove friction in the online experience, then encourage repeat use to make it even easier.
Amazon pushes suppliers toward lower prices and greater efficiencies. Sure, pricing and promotions are a crucial part of your Amazon strategy, but they mean nothing if your online listings aren’t optimized for search and conversion.
Most CPGs are supplying Amazon with the same inventory that they would stock at the supermarket, and that doesn’t work. Winning on Amazon means “creating different pack sizes or slightly different volume options, which can make it harder to make direct comparisons,” says marketing agency SoMe.
“Offering unique packaging, dropping prices slightly, and managing overall channel conflict – including pricing – are all part of successful marketing tactics that CPG brands can utilize for Amazon success.”
Address CRaP Challenges
Shipping is a big challenge for many CPGs. Cans of soup, jars of jelly, bags of rice… these are heavy items! Shipping adds a cost that doesn’t exist in-store. And to top it off, Amazon wants the best price on the market.
👋 If you try to sell the exact same items in store and on Amazon… you’ll end up on the CRaP list. That’s right… Amazon uses the acronym CRaP to describe items that are unprofitable to carry.
Falling under Amazon’s CRaP (Can’t Realize a Profit) policy is a fate all too familiar for CPGs.
Here are 3 reasons your product might land on the CRaP list:
- If your product is cheaper on another website.
- If your product is overstocked.
- If the price economics of traditional pack sizes are off.
As if that’s not enough to consider… You need to fit another piece into your Amazon shipping puzzle… Packaging. 🥫
That case of 12 items you sell to your retail partner isn’t going to work for Amazon because a consumer doesn’t usually buy 12 cans of soup or 12 jars of jelly. They might buy 2 cans or 3 jars. So Amazon charges a fee to break your case of 12 and repack your products into groups of 2-3, sending you right back to CRaP status.
Amazon expects items to be shipped in their own container (SIOC) certified, meaning you’ve delivered your items to Amazon already bundled in packs of 2-3.
Address These CRaPpy Issues
👉 Product Innovation. Start with packaging. Instead of launching a new flavor, launch the same product in a new packaging format. Tide eco-box is a great example of this.
👉Product Mix. Your top selling in-store product might not win online. Prioritize your products based on a balance between packaging, popular choice, and pricing.
Advertising Tips for CPGs
- Audit your product listings. Content is the most important thing brands need to win in ecommerce marketplaces.
- Plan for an increase in demand. Be prepared to sign off on extra inventory or budget if demand spikes.
- Consider your other promotional events – online and in-store. Outside of Amazon, consumers are still looking at your deals.
- Sponsor your products to increase visibility and sales. With sponsored search, the site displays your product in an ad when shoppers use search terms that match yours.
- Review performance. Test ad creative and to find the highest click-through rate.
- Personalize! Customers indicate they’re 110% more likely to add additional items to their baskets than they had originally planned when their experience is highly personalized.
Besides Amazon, other retailers are ready to entice shoppers with great deals. Work with all of your retail partners!
Target’s Deal Days were created to compete with Amazon Prime Day. There’s no membership required for these deals! Target’s promotion during last year’s Prime Day period more than tripled its average CPG sales compared with an average two-day span over the course of 2018.
Walmart offers a mega-sale that has historically lasted over a longer period than Amazon’s Prime Day. Digital sales of food, for example, were up 53% at Walmart in 2019, vs. just 8% growth at Amazon. About 40% of consumers plan to shop at Walmart during the sale days according to Bazaarvoice, a retail consulting firm.
Continue Success on Amazon
- Review Performance: Selling on Amazon amplifies your branding. How are conversions? Where can you improve?
- Promote Products: 70% of all people shop on the first page listing on Amazon. Use advertising to boost organic listing.
- Innovate: It’s not a one and done platform. Keep optimizing your product pages. Add images. Answer questions. Ask for reviews.
- Stay Relevant: CPGs can’t afford to not sell online if you want to be competitive in today’s marketplace.
Questions to Ask Yourself
- Should I position my products differently on Amazon? How will pricing and packaging change?
- How will I distribute my products?
- How can I take advantage of all of the Prime Day shoppers?
- How can I build brand relevance and gain traction on Amazon?
- Are my products profitable at the product level? Can I protect myself from “CRaP” (Can’t Realize a Profit)?
- Prime membership continues to climb. Is it important for your organization to offer Prime services?
- Drop shipping is low risk and maximizes profit. Is it worth losing control on inventory and customer support?
- What creative ways can I differentiate online products from in-store products to avoid price comparisons?
- Amazon is filled with my competition. How can I build brand loyalty?
Retool Your Trade Planning with Optimization Technology
✔ SMOOTH BASELINES are the foundation for promotional analysis and sales planning
Find out what your customer would buy without a promotion. With Blacksmith TPO, you can take out baseline anomalies post- Prime Day.
✔ ANALYZE PERFORMANCE to understand how effective your trade investments are
Evaluate your event’s success through automated post-event analysis. Take a deeper look at your promotional events to make better decisions on future promotions.