The bad news...
…for the average Amazon seller (regardless of their niche), it's going to be more expensive to conduct business in 2022.
- The cost to promote products using Amazon Advertising will continue to increase throughout 2022. Ad revenue will steadily grow for Amazon as a greater number of sellers pay more to get prominent placements for their ads on product pages and in the search results.
As more people create in-home businesses, the allure of Amazon has created a steady influx of ever-growing competition which, in some instances, has ignited bidding wars. Cost-per-click has risen sharply in recent months and will continue to do so in 2022 for the most popular keywords.
- Amazon FBA fees in 2022 will increase.
These fees have become so lucrative for Amazon that they now represent the company’s most profitable segment as well as its fastest-growing revenue stream.
On January 18, 2022, Amazon will increase FBA fees for fulfillment, removal, and disposal, except where otherwise noted. It will then follow up on those changes with increases to storage fees on February 1st. Amazon also plans to introduce a new long-term storage fee that will go into effect sooner than the present 365-day period.
Amazon frames the need for adjusting the current FBA fulfillment fees as a way to partially offset the higher permanent operating costs that they are facing moving into the new year and beyond.
For those Amazon sellers already struggling due to pandemic-related margin eaters, or who are in highly competitive niches where margins may be slim, even small increases in fees across the board can have serious implications for the overall profitability and survival of their businesses.
The Good news…
…despite these serious challenges, Amazon still offers an unprecedented and lucrative opportunity for those sellers who are able to quickly respond to these and other challenges ahead.
The road to profitability in 2022 starts for those sellers who incorporate the latest advertising innovations from Amazon. Sellers should keep a close eye on the Amazon Ads update page for information on the most recent updates and new features released by Amazon that will help them to further optimize their advertising on the platform.
Sellers should continuously seek out and implement strategies specifically designed to reduce the impact of various “margin-eaters” on their profitability throughout the year.
How To Be Profitable On Amazon in 2022
Sellers who wish to reach their full profitability potential in 2022, should:
Have a Clearance Sale
Clearance sales help to increase a seller's profitability by removing slow-moving items from their inventory by motivating shoppers to make additional purchases even during the traditionally slow month of January right after the holiday season. Clearance sales also allow sellers to avoid FBA fees such as for long-term storage.
Learn From Previous Mistakes
It's critical for every seller to review their sales processes to learn from any mistakes made during the previous year in order to increase profits on Amazon during 2022 and beyond. No matter how good a seller's special event days and holiday season in 2021 may have gone, there is always the possibility of room for improvement.
Sellers should compile data from their Seller Central account which reveal any patterns that indicate gaps in their previous sales strategies or tactics. For example, sellers should look for those months, weeks, days, or time periods in which their products and sales underperformed. They should also look at customer reviews and customer support feedback comments. It may take some time, but once this process is completed, the seller will be armed with valuable insights that will help to improve those areas and their overall profitability.
Review Your Manufacturing Costs
Sellers should review their manufacturing costs to determine if there are other suppliers available that could supply their products cheaper while maintaining established quality standards.
Sellers should consider sending out an accurate product specification sheet to multiple suppliers in order to determine if they are getting the absolute best pricing.
One of the most common mistakes that established sellers make is to stick with their original supplier that they placed their first order with years down the road after they have outgrown them. While loyalty is a good trait, a variety of circumstances may have impacted their manufacturing costs that make sticking with their original supplier considerably less profitable in 2022 (like the sharp cost increases and uncertainty that epitomizes the current supply-chain environment).
Sellers should investigate if there are larger suppliers who could provide them with better lead times and product quality while saving them money.
If a seller does find better pricing, he or she can give their current supplier the opportunity to match it before switching. Also, if the decision is made to switch suppliers, the seller should be sure to obtain a sample of the product to gauge the overall quality of manufacturing it.
Follow the Latest Trends in Amazon Advertising
If you are actively selling on Amazon, keeping up with the trends coming down the road in 2022 is not optional, but mandatory. Sellers need to be farsighted and act before their competitors do.
Having awareness of what the latest Amazon advertising trends and the changing face of eCommerce in general, will give sellers an opportunity to respond advantageously, rather than be in the unenviable position of playing catchup with the rest of the niche pack. Speed of implementation will continue to be a vital component for building/maintaining a profitable business in 2022.
Take Advantage of Changes Amazon Made in 2021
Sellers should also explore how they can take advantage of some of the changes Amazon made in 2021 to help sellers to improve their advertising. These include:
Brand Metrics – a new measurement solution offering brands actionable upper and mid funnel measurement, built with predictive and causal links to purchase. Brand metrics helps sellers to:
- Understand their brand performance. Brand metrics measures the number of actual on-Amazon shopper engagements.
- Measure the impact of a seller's upper and mid funnel tactics, to see how they contribute to shoppers moving through the customer buying cycle.
- Evaluate engagement metrics to understand the value of a seller's branded intent, and how brand purchasers go on to generate additional sales in the 12 months following a purchase.
- Monitor a seller's performance relative to their category and peers at each stage of the buying journey and over time.
- Optimize a seller's marketing and advertising efforts in Amazon's store to engage more shoppers and build a seller's brand.
New Top-Of-Search impression share metrics – This feature measures how effective a seller's campaigns are at receiving impressions at the top of the first page in the search results.
Brands who use Sponsored Display ads are now able to target Amazon audiences with display ads on Twitch live streams – Twitch is a video streaming service with a hyper engaged audience of over 30 million average daily visitors, nearly half of which are between the ages of 18 and 34.
Now any brand using Sponsored Display audiences in the US, CA, FR, IT, DE, ES, or UK can better help build their brand with new creative experiences and additional opportunities to engage or re-engage hard-to-reach, relevant Twitch audiences during their video viewing experience.
Amazon allows all third-party sellers to add a video to their product detail page – Once only available to Brand Registered sellers, this feature is now open to all sellers.
Videos are a key ingredient for being profitable in 2022. 80% of shoppers say that watching a video makes them more confident about making a purchase. Amazon’s algorithm gets a boost when using additional pictures and videos.
There are still a surprising number of sellers who do not use videos making the competition smaller.
Also, videos tend to showcase the seller's products in more detail than pictures. It makes the shopping experience immersive. Videos help in generating additional sales because of better metrics, and a richer user experience.
Amazon added the ‘Manage Your Customer Engagement Tool’ – Available to sellers enrolled in Brand Registry, this feature allows brands to send email marketing campaigns to customers who follow their brands on their Amazon Stores.
It was created to increase customer engagement, retention, and loyalty, and is a great way to launch and highlight new products to a receptive audience, helping sellers to be profitable throughout 2022.
It means visualizing and 'future-casting' the next level of achievement and success that you want for your business.
Opportunities for growth and increased profits are abundant for those sellers willing to roll up their sleeves to do a deep dive into analyzing the current state of their businesses. Discovering what's working and what needs to be improved, then devising/executing the appropriate strategies and tactics, will open the doors for greater profitability throughout 2022.
If you require the expert guidance to find and seize the areas of opportunity in your business, consider working with Entourage’s Amazon Ads Coaching+. You’ll work one on one with one of our experienced coaches as they help you to reduce waste and grow profits in your Amazon brand. Our coaches work with sellers of every level. Click here to learn more and to schedule your first session right away.
