Amazon has just turned 30, starting life in 1994 in Washington, USA. Yet it took until 2017 to launch down under, and material growth and success have only been seen in the last few years.
While the global giant is still in its infancy on Australian shores, its impact is not to be underestimated, with Amazon believed to now account for 10% of all retail spend online in Australia according to The Australian, and now boasts the largest online audience of any retailer according to the IPSOS ranking report for retail & commerce in May 2024.
Amazon’s most recent Prime Day, saw the retailer record 19% growth, acquiring 1.1 million new customers in the year to June 2024 – a number most brands can only dream of achieving. In comparison, David Jones and Target saw declines in shoppers of -5% and -7% respectively, while Big W and Myer remained neutral. The only other major retailer to have gained customers over the period was JB HiFi, gaining 300,000 additional shoppers, barely scratching the surface of Amazon’s performance.
7.9 million Australians now shop on Amazon (almost 30% of the population) and 4.1 million of these own a Prime subscription. Kogan and One Pass are estimated to have approximately 500k in members each, which is nothing compared to the global giant.
Amazon also came out on top for frequency, with shoppers purchasing six times a year on the platform, only rivalling Kmart, which holds an average frequency of 7.5.
So, what are shoppers buying?
Whilst Australians can buy almost anything on Amazon, books, small electrical goods, clothing, computers and accessories continue to be the top-selling categories on Amazon Australia, according to Roy Morgan data. However, during sales periods, different products and categories spike.
Amazon, which is aptly monikered ‘the Everything store’, released a list of the top products Aussie’s bought during the Black Friday sales last year, which ranged from bulk packs of baby wipes to XXL air-fryers, while 2024’s Prime Day saw Snail Serum and Scrub Daddy sponges flying off the virtual shelves. Amazon attributed its success to ‘its huge selection of products, made possible through a vast network of much-loved brands alongside local and independent sellers, many of whom are small and medium businesses on Amazon.com.au’.
What does this mean for Aussie retailers and CPGs | FMCGs?
Amazon is undeniably the biggest fish in the eCommerce sea, and its growth shows no sign of abating.
The marketplace jugger-naught has announced its plans to move into ‘big box’ retail – furniture and electrical – with a $490 million investment into two new fulfilment centres in Sydney, one of which is 4.5 times the size of the Sydney Opera House and will create 1000 jobs. It has also introduced same day delivery in certain Sydney and Melbourne postcodes, something we will see replicated across more locations across the Eastern Seaboard, creating a more compelling proposition for customers to shop via Amazon.
Amazon is also reported to be launching a strategy to win a share of the growing ultra-cheap retail market dominated by Shein and Temu, who are single-handedly disrupting the eCommerce market. Reports suggest that Amazon is planning a new section specifically for non-branded products under $30, shipping directly from China to consumers. Whilst, this is initially planned for the US market, if it is successful, it is likely to roll out to other key markets.
And with Amazon also set to take on the world of TikTok with in-app buying, and even plans to dominate the world of grocery, no sector is safe from Amazon’s advances.
It really is a case of 'if you can’t beat em, join em'.
So how can Aussie retailers and CPGs leverage Amazon?
56% of shoppers start their product search on Amazon according to research by Jungle Scout currently within the US, and over time we are likely to see Amazon becoming a key discovery tool for products in Australia, rivalling the likes of Google. With almost 8 million Aussies shopping on Amazon, this is a massive opportunity for retailers and CPGs | FMCGs alike.
We’ve unpacked 4 key pillars to win on the Amazon shelf.
Build Killer Product Listings
When customers are looking for a product online, they want to know everything about the product before they hit ‘Buy Now’. They want information on the size, colour, shape, style, and features. Including this information within the product page is key to creating a winning product listing.
As is the case with most search engines, Amazon uses an algorithm that determines which products to rank within the search results based on keywords, relevance and rankings.
Some key information to know:
Each product on Amazon is assigned an ASIN (Amazon Standard Identification Number)
Amazon’s algorithm then checks that the ASIN or SKU matches the search term
If they match, this forms what’s called pairwise data
This helps the product index against that search term.
The stronger the link between the ASIN and the search term, the more likely your product will appear in search.
The more your listing converts, the more your product will rank for the specific search terms, creating a positive feedback loop.
A great product listing is made up of 7 key details:
1. Title – Amazon advises using 200 characters max (although the sweet spot is less than 80) and capitalising the first letter of every word
2. Images – These should be good quality images with a transparent background, and it is recommended to use at least 7 images, showing the product from different angles as well as lifestyle-type images showing the product in use
3. Variations – Clearly display what options are available, such as different colours, scents, or sizes.
4. Bullet points – Amazon advises using at least 5 bullet points made up of short, descriptive sentences highlighting key features and benefits
5. Featured offer – This appears at the top of the detail page with ‘Buy Now’ and ‘Add to Cart’ buttons and helps customers compare products at different price points
6. Description – The product description is usually the least viewed section of a product page as it sits well below the fold and is quite wordy. However, with a 1900-character allowance, this is the key section to optimise your listing for SEO to ensure that it will appear on the results page.
Adopt a more strategic approach to pricing
You might be thinking, well wouldn’t I just price the products the same as on my website? And in theory, yes the prices should be the same across channels to avoid confusion with your customers.
There’s no one-size-fits-all approach when it comes to pricing strategy, it will depend on your product’s quality, production cost and what the customer is looking for. But you need to consider your profit margins, your minimum and maximum price, your price entry point and product differentiation. All of these factors will determine the best price for your product.
But to influence a customer to buy your product on Amazon, where it sits next to multiple seller's products that are the same or similar cost, you need to price competitively. Price too high and customers might be put off, but price too low and you may start a pricing war with your competitors. Customers will also be considering other factors such as where your products rank among keyword search results, review count and rating, the image and description quality, and the shipping speed.
If your pricing isn’t competitive, think about going beyond an individual product, how can you bundle or sell in bulk and offer a discounted bulk price? When it comes to Amazon, shoppers are used to buying in bulk or buying solutions not just an individual item so thinking beyond the SKU can be important to differentiate and compel customers to buy.
Also, take into consideration Amazon’s free shipping minimums. Non-prime members pay for shipping on all orders below $59, which can cost around $10-15 depending on the order. This can put customers off from ordering, so pricing your product above the threshold may increase conversion among non-Prime customers.
Fulfilment can have a significant bearing on your success
Amazon sellers have two options for fulfilling customer orders:
1. Fulfilled by Merchant - FBM
or
2. Fulfillment by Amazon - FBA
And which of these you decide on will depend on your resources.
FBA means that you can offer fast, free shipping to Prime members, who are more likely to shop products with the Prime badge than products without or not covered by Prime delivery.
Amazon AU claims that FBA will help you save time, make money, scale your business and reach more customers, which is an offer any business wouldn’t want to pass up and can be a great solution for CPGs | FMCGs who don’t have D2C fulfilment in place.
For retailers who do, it can often be advantageous to fulfill their own orders to leverage their existing capabilities. For FBM, you can manage your inventory and delivery with precision, and avoid delivery related issues that are out of your control.
Promoting and advertising
As with many channels, simply being there is never enough. We need to integrate our core presence with strategies to cut through on the digital shelf and this is where promotion plays a vital role. Globally, Amazon has one of the most successful retail media networks, and commands approximately 80% of the retail ad market in the US, and therefore Amazon Ads should be a key part of the consideration set.
Amazon also offers the option to promote products directly, where brands can create ‘Lightening’ and ‘7 Day Deals’ that appear on the Amazon deals page, which is popular around online shopping events such as Prime Day. You can sponsor your products to appear at the top of search feeds or run pay-per-click ads to help your products reach more customers.
There are however other ways to get your products into the baskets and hands of customers.
The Amazon Affiliates program has been around for a while, offering content creators, publishers and bloggers an opportunity to monetise their website traffic. Members of the affiliates program receive their own unique ID and can share and promote products on their website in return for a commission on each sale.
More recently Amazon introduced the Influencer Program, where influencers and content creators can earn commissions on products they promote on social media. This has seen success on the likes of Instagram and TikTok, with some creators dedicating their accounts to ‘Amazon Finds’ within certain niches such as home, cleaning or fashion, and creating lists on their Amazon Storefront that their followers can shop from.
Working with influencers to promote your products on your Amazon store is a great way to increase sales, especially if their content goes viral!
Aussie brands already leveraging the Amazon advantage
Aussie brand ‘The Collagen Co’ has seen success listing their products on Amazon, and reported a record high on daily sales figures, receiving 8x as many orders during Prime Day than a regular day.
“We were really happy with how Prime Day went for The Collagen Co! We’re really looking forward to more sale events and putting more of The Collagen Co. selection on Amazon.com.au.” said co-founder Josh Woodley.
Key in part to their success, has been to build up strong positive customer reviews. They have over 200 ratings, 85% of which are 4 star and above. Their Amazon efforts have awarded them a ‘Best Seller’ badge on their products, which indicates a product’s sales rank compared to similar products on the Amazon store.
Aussie favourite, Bonds, also leverages the marketplace, stocking its range of men's, women's, kids and baby products on the platform. The brand’s storefront looks just like its website, allowing customers to simply and easily navigate through their range. Many of its products display a ‘Best Seller’ or ‘Amazon’s Choice’ badge, or ‘100+ bought in the last month’, which shows the brand's credibility and success on the platform.
Arktic Fox partners with an array of brands to develop eCommerce & digital shelf strategy and drive improved performance. Find out how we can help your brand win on the digital shelf and maximise the omni-channel opportunity.