The pandemic drove more consumers to shop online than ever before. Some of your clients want to position themselves in front of the biggest possible market, and they may be asking about advertising on Amazon and whether advertising on Prime Day can boost sales. Your clients can use their presence on Amazon as a way to leverage their position locally. Here’s the latest from a new Feedvisor.com study.
Marketers made big changes during the pandemic because so many consumers shifted their buying habits. The Feedvisor study reports:
- More companies are setting up shop on Amazon: 42% increase in the past year
- Sales increased in the past year on Amazon: 30% increase for 61% of surveyed brands
- Strong ROI for Amazon advertising: 44% of brand advertisers realized at least a 7x return
Who’s Selling on Amazon
In the new normal, 78% of U.S. brands are now selling on Amazon in addition to other channels ranging from other e‑commerce sites to their traditional storefronts. And 26% of brands who aren’t currently on the site are exploring making the change in the next year.
If your clients are exploring making the change, they should know there are two ways to sell on Amazon.
First-party: This business model allows Amazon to control pricing, returns and customer experience. The marketer ships product to the Amazon warehouse and Amazon, in a sense, owns the product. 22% of brands on Amazon use this model.
Third-party: In this business model, the marketer sells to consumers from the Amazon site, controls pricing and messaging, and manages inventory levels either at an Amazon warehouse or their own warehouse. 19% of brands on Amazon use this model. And most brands using the first-party business model want to change to the third-party model to gain more control over what’s happening in their marketplace.
Hybrid: 59% of brands on Amazon use a mix of the first-party and third-party models.
Businesses like many aspects of working with Amazon. They get access to new customers and can usually count on increased sales volume. They also like getting shipping and fulfillment support. But businesses aren’t using Amazon as their sole e‑commerce provider. 80% of the marketers in the Feedvisor survey report making between 50% and 75% of their e‑commerce sales on Amazon.
Advertising on Prime Day Can Boost Sales
Consumers have been trained to shop for deals, both online and offline. Research shows that Prime Day, Black Friday, and Cyber Monday are among the biggest sales days for e‑commerce operators, whether they sell on Amazon or not. Marketers now pay attention to when Prime Day will be held and they plan their promotions accordingly. At least 54% of marketers in the Feedvisor survey say they ran promotions on their own sites that competed with Prime Day in 2020. If your clients haven’t been using this strategy in the past, suggest it to them for 2021.
The Power of E‑commerce Advertising
Marketers are shifting more of their ad budgets to e‑commerce sites. In 2020, “e‑commerce advertising represented over 12% of U.S. digital ad spending — and Amazon is the largest platform, with over 75% market share,” reports Feedvisor. About $17 billion in total went to e‑commerce site advertising last year. And 59% of brands on Amazon spend at least $61,000 a month on the site.
Selling and advertising on Amazon is not inexpensive, facts that explain why many large marketers, instead of smaller companies, use the site. But 64% of marketers say their customer acquisition cost is higher on Amazon than it is elsewhere. They are willing to bear this cost because they have specific goals for marketing on the site:
- Drive brand awareness 68%
- Acquire new customers 65%
- Drive sales 60%
- Gain market share 54%
Amazon is happy to help them achieve these goals by offering a mix of advertising format. Here are the percentages of brands using the various formats offered on the site:
- Sponsored products 61%
- Sponsored brands 54%
- Sponsored display 54%
- Amazon DSP 49%
When Brands Advertise on Amazon
Marketers also shared advertising timing insights with Feedvisor. There’s plenty of competition on the site, especially from Amazon as it sells its own branded products alongside the inventory from its marketplace partners. Realizing that, “[B]rands are becoming more strategic in when and what they advertise.” At least 30% of marketers advertising all year long, but that’s down from 51% in 2019. 29% of brands try to optimize spending around key holidays, including Prime Day, and 16% ONLY advertise during Prime Day. Otherwise, 10% advertise only a few items and 11% advertise only for specific product launches.
Future Challenges to Amazon
One of Amazon’s chief competitors is Walmart Connect. To some extent, this platform may be targeting a different customer base. About 50% of companies currently advertising on Walmart’s platform don’t advertise on Walmart.
In the past year, the digital ad spending allocated to Amazon from brands increased by 3%, to 28%. Google’s share dropped from 29% to 22%. And ad spending on paid social sites decreased from 29% to 23%. These shifts suggest Amazon’s strategy may be succeeding.
You can help your clients determine where to spend their ad money by understanding their objectives and their channel positions. In the Feedvisor survey, marketers reported selling on the following sites in addition to Amazon:
- Their own site 50%
- Their own traditional retail store 42%
- eBay 30%
- Google shopping 28%
- Target.com 21%
To learn more about the media formats that sway your client’s target audiences and where they prefer to shop, check out the AudienceSCAN profiles available on AdMall from SalesFuel.