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5 Business Mistakes Amazon Sellers Should Avoid

In this blog post, Feedvisor's business strategy expert Lotem Alon explains five critical business mistakes that Amazon sellers and brands should avoid. By Lotem Alon August 2, 2018
5 Business Mistakes Amazon Sellers Should Avoid
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About the Author

As Director of Corporate Strategy and Operations at Feedvisor, Lotem creates business methodologies to enable customers to make informed, strategic decisions and also makes sure that Feedvisor's go-to-market teams are aligned across various business objectives.

As part of my work helping large sellers create and implement their online strategy, I frequently encounter business practices and tactics that prevent them from becoming more effective and efficient in their work. They are either utilizing outdated practices that can be improved or are missing the most valuable aspect of the process, both of which can be optimized in order to yield high-impact results.

This article addresses five tips that can help sellers focus on their growth and strategies while avoiding unnecessary seller traps. By placing the focus on the account’s big picture while removing any white noise and selecting the right scalable tools, sellers will be able to prioritize their time and zero in on the factors that truly impact their account’s success, such as replenishment and converting slow-moving and excess inventory into cash.

1. Not looking at or comparing performance on an aggregated level.

Many sellers look at their performance on a SKU-by-SKU basis and in many cases, end up missing the big picture. Understanding the big picture first can help sellers hone in and focus on the SKUs that are the most impactful and move the needle the most. For example, a seller of this mentality might see that many of their SKUs have a low profit margin and then in an attempt to increase it, will spend their time going through their catalog on an item-by-item basis.

If they were to take the investigation one step further and compare the different sales and margins associated with different vendors, they might find that some vendors provide more profit margin than others. This realization would serve to help the sellers shift priorities and develop the relationships with the stronger vendors, rather than trying to squeeze more margin from vendors that are just not as profitable. Slicing and dicing the data in different ways can help sellers understand their business in a big-picture view, identify strategic opportunities and challenges, and create the necessary focus for their business.

2. Taking on too many major projects simultaneously.

As a seller, there are several things that need to be accomplished at any given time. Many times sellers find themselves swamped, not knowing what to do first, and moving quickly between tasks. This can be detrimental to a business and not suitable for the long term. Sellers need to know what to do, but mainly what not to do. For every undertaking they take on, they should ask themselves what impact it will have on their business versus the effort it will take to do it. If the effort is too high for the impact, don’t do it!

Sellers should decide where they want your business to be in one year. Break that into quarterly plans, break those into monthly plans, and those into weekly plans, and set work routines based on what is decided to focus on. The seller should use Feedvisor’s tools to get the proper data needed to decide what to do next, according to their own business strategies, goals, and needs.

3. Not leveraging analytics tools and software for scalable and actionable analysis.

Many sellers don’t harness the power of big data to receive valuable insights about their business performance, which in turn help them make better business decisions. When I work with sellers, I often ask them two questions to help me understand how they are using data for decision-making: do they know how to do a v-lookup and do they use pivot tables in Excel? Excel is a tool that a majority of businesspeople use on a regular basis. Even with the best analytics software that will the necessary data in a navigable view, knowing how to manipulate it quickly and slice the data in different ways will help sellers receive strong insights so they can quickly act upon them in an effective manner.

4. Underestimating the importance of staying in stock.

Many sellers don’t regularly track their current inventory levels and projected demand, and this oversight often leads to them running out of inventory of their best items. By focusing primarily on moving stock, they sometimes don’t give enough attention to the low hanging fruit of replenishment. Going out of stock of high selling items directly correlates to missed profits and can cause steady income to go out of balance. Demand is already there, so the only effort required is making sure replenishment happens on time. Sellers should track their best sellers at least once a week to make sure they do not go out of stock.

5. Allowing inventory to stay stale for too long.

Inventory that is not moving is a “trapped” investment. The longer the inventory is stagnant, the more difficult it will be to move it and the losses sellers will incur will accrue. Looking at the behavior of the major sellers on Amazon, they always have promotions designed to help them move their inventory. Review items with low to no velocity in the last 30 days and understand why they are not moving, whether it is due to competition, price position, demand, or another factor. Then, decide which strategy to apply to these items — liquidation, target velocity, Buy Box optimization, increased aggressiveness, advertisement, etc. After that, the strategy on those items can be changed wherever necessary.

In order to focus on what moves the needle, sellers should prioritize items that are profitable, available, and sellable. As a seller or brand on the Amazon marketplace, the main objective is to maximize your profits given a variety of constraints: demand, inventory availability, and variables that impact profitability such as fulfillment costs, advertising costs, returns, and cost of goods, to name a few. An end-to-end catalog analysis will not only help online operations view their overall account performance, but will help connect the dots to other facets of their business such as reacting faster when identifying new opportunities through scouting, pinpointing at-risk items, or increasing promotion of highly profitable items.

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