Editors Note: Effective Jan. 8th, 2015, Mercent is now CommerceHub
Create a holistic Amazon strategy, including Amazon third-party marketplace, Amazon Product Ads, and automated repricing.
Eric: Today’s webinar is focused on Amazon’s rise to become the world’s leading retail product search engine, and that’s really where Amazon sits today, they have eclipsed Google in terms of the amount of consumer intent that they process through their search engine. While Amazon in terms of transaction value represents about 12% of the domestic eCommerce that we will see in a few minutes here, their influence over both online as well as offline consumer purchasing behavior is much greater than the dollar value that flows through their own shopping cart.
Since we are talking about Amazon as a search engine, obviously there are implications for Google in terms of their strategic positioning in the market, and the other major consumer shopping destinations online, so we’ll talk about what we’re seeing in the market in reaction to Amazon’s dominance in search.
With that let’s dive into some specifics here. I have just taken the liberty of pulling together some data from our own business as well as various sources, including Comscore here, just to kind of paint a picture for how Amazon’s business is growing and evolving. It’s no secret that Amazon is a force to be reckoned with in eCommerce and retail. But, particularly when it comes to their influence over consumer behavior on mobile, and just in terms of general product awareness, promotions awareness, Amazon has this outsized influence that is represented here.
You can see that according to Comscore, search queries for consumer products grew 73% on Amazon’s platform, according to Comscore. We look at the number of mobile cross-category product searches that originate on Amazon that ultimately end up resulting in a purchase from a general merchandise store, characterized here as a department store, and that is 59% mobile search share when you’re talking about kind of general consumer merchandise.
Amazon’s own numbers represent their third party seller GMV growth at roughly 40% YOY, and generally Mercent’s customers are out-performing that number. Also when you look at the unit volume in terms of Amazon’s total sales, we have actually seen this number come down a little bit. I think we hit a high of 41% according to the earnings disclosures that Amazon made late last year, but we are still in that 40% range in terms of the total units sold on Amazon coming from third party sellers who own and often fulfill the inventory.
And lastly for our part specific to Amazon, as we talk about how relevancy is changing, search relevancy is changing in terms of Amazon’s influence, merchandising and operational metrics and criteria are becoming increasingly important. For our part we are now dynamically setting the price on more than two million products each hour and publishing those new price points on two million SKUs to Amazon’s marketplace platform.
Google of course is still a huge search player in retail, obviously, and we see for Google’s part in spite of this conversion from the free Google product search program to the paid PLA program, about six months ago, that we are still seeing 30% YOY same store sales growth on Google Shopping. And that’s looking at the combined volume of those free and paid programs collectively.
Maybe even more telling when we look at our clients who are participating in both PLA and Adwords on Google today, 30% of the total spend that Mercent is managing for customers who are participating in both Google programs is going toward Product Listing Ads with the other 70 cents of every advertising dollar going to Google Adwords.
The next slide here really contrasts this fundamental inversion that has occurred in the market, this is Forrester data based on a survey that they ran a while ago, and you can see that while the overall influence on consumer purchasing behavior online has kind of stayed fairly consistent in the 42-43% range, (we actually think the 2012 total number here is somewhat understated, because we know eCommerce is growing faster than that and we know for our part that Amazon and Google are generally growing faster in eCommerce than the organic market). The really telling data element here is that whereas Google held 24% of retail product searches in 2010, and Amazon was only at 18%, you can now see that as of 2012 Amazon is driving a third of consumer online purchases in America, and Google has ceded some significant market share, they are now down around the 13% mark.
The one caveat here is that it’s not always clear whether or not “Google” is the entire search engine results paid traffic or whether this number is tied more closely to the shopping sub-domain on Google, so this number may be somewhat understated in terms of Forrester’s survey. On the other hand we have seen other statistics that say that as much as 80% of consumers on a mobile device will check Amazon at some point during their purchasing process.
Here is the key information we want to try to convey today, it’s a framework for thinking about the differences between Google as a search platform and Amazon as a search platform for consumers who are performing retail product searches across this continuum.
We have laid out this retail search continuum and on the left hand margin you can see that we start with traditional organic search, which is a function for retail advertisers in terms of success factors of content optimization, on the other extreme side here we are seeing Amazon’s marketplace really being driven by merchandising and offer optimization, a combination of some key variables including your seller reputation, your speed and cost of shipping, and your product pricing.
We’re going to reference this continuum throughout the rest of the presentation today, but again just to kind of restate it here, Google’s programs in optimization historically have centered on content relevancy and bid optimization along with other detailed variables of campaign optimization. Amazon, for their part, has really taken a fundamentally different approach to product search. One that ignores traditional signals in favor of merchandising variables, which in plain English means that the keyword library, control over creative ad copy, and bidding for placement are all effectively thrown out the window and they are replaced by seller reputation, fulfillment speed, and total price including shipping as the key influencers of seller visibility on Amazon’s programs.
We see that both Google and Amazon are borrowing from and influencing each other, and while Google’s organic search and Amazon’s marketplace define kind of the pure edges of the continuum, it’s in this messy middle here in product listing ads where we think the complexity lies ultimately for the retail advertiser, but also that’s where the opportunity to be competitively out-performing other sellers can occur. We’ll talk specifically about the practices that successful retailers can take in optimizing all three of these disciplines: content, campaigns and the underlying merchandising offer in unison, to win on both of these major channels.
A final comment here before we get into some additional information, whether you are philosophically opposed to selling on Amazon’s marketplace, either through competitive or brand considerations, or whether you’re all in on Amazon with marketplace FBA, checkout, web stores and so on, we’re hoping that you’re going to come away with some directly applicable techniques and knowledge that you can apply to your own retail practice.
The next slide here is a key channel comparison, we have presented this before but this information has been updated for the first quarter of 2013, this looks at 84 different brands that are live on the Mercent Retail Platform that are selling through all of Amazon, Google Product Listing Ads, as well as we’ve included the top four shopping engines or Ad Networks here, to provide additional context and a benchmark.
Here is what we can call out, Amazon’s volume really dominates among the three channels when we have merchants that are participating in all three and they provide a lower cost of acquisition for the order, anyway, if not the customer to the retail advertiser who is participating in that channel.
The data does support conventional wisdom that Amazon orders are often bolt-on purchases to Amazon’s own retail transactions, which results in a significantly lower average order value, and order per customer on Amazon than we see on the alternative channel types.
You have real measurable pros and cons for each of the channels that we see here, and how you elect to capitalize on these channels really comes down to your strategy and your tactics on each one individually. With that, I am going to hand things over to Dan Myers who is going to walk us through the consumer experience on Amazon and talk about some best practices that are specific to Amazon, as we think about Amazon as a search engine.
Dan: Thanks Eric and hi everyone. We at Mercent know from some past analyses that close to 90% of product searches start in the search bar, first is that faceted browse that you see in the left-hand navigation on their home page, so this is obviously the grand-daddy of landing pages for Amazon.com, a page that garners the most traffic. And consumers either spear-fish for a specific item using a model number of specific brand or product they are looking for, or we’ll make more often a more general query like in this case “ice cream maker.”
When you drill through to the search results that a customer would get after making one of those general queries, they land on what’s commonly referred to as an All Product search page or the APS, and will make a decision relying heavily on the sort order, I think the data suggests that it’s the product that are showing up at the top third of that landing page, the ones that garner probably 60-70% of the click-through and ultimately the conversion. That sort order is generally based on things like previous customer’s behavior, in terms of which items they viewed when they used similar queries, which items they have clicked on, and obviously which items they purchased in the past.
There is often likelihood that you’ll see items that have already gotten a lot of reviews, have a lot of offers, and lots of historical traction within Amazon search algorithm, and of course they often have compelling pricing and delivery options and SLAs there.
One thing to sort of quickly point out, we at Mercent focus intently on search terms, among other things, and correctly inserting brand names into the data feed that Amazon requires, optimizing titles, so at least our clients are getting a good running start when it comes to competing for placement on the APS, but of course our pricing app really changes the game when it comes to competing on offer.
Eric: Two quick thoughts on that, one is I am assuming you chose “ice-cream maker” because it’s 70 degrees in Seattle and it’s April.
Eric: When our listeners, retail advertisers, think about traditional SEO techniques, it really is the product attributes that become the focus of that organic search engine optimization effort, right – your title, your description, your structured attributes become the searchable content that gets attached to the product listing. Although I think it’s also worth noting as well that in the case of Amazon, often times you don’t have control over that. Do you want to quickly touch on kind of how ASIN matching works and product authority?
Dan: Given UPC code requirements within the Amazon feed, merchants will submit data into the system and it will often match to an item that is already in their catalog, literally hundreds of millions of SKUs, if not approaching billions some days. The goal for most merchants is to, while it’s important to have an optimized title and brand and other meta-data components, really the key piece is going to be pricing and fulfillment latency when you are matching to an existing item, in this case a pretty widely available residential ice-cream maker from a big commercial brand.
Dan: On the next page, we have experience that is slightly different, this is a landing page within APS for a soft line product which in many cases, Amazon moved into clothing and shoes, it does require a finer grain level attribute. So things that you might normally see as important drivers to placement success on Google, here it’s more sort of building a customer experience that makes sense with the product line, so attribute level, feed data like shoe size or shoe style or width and so forth, are part of the ongoing innovation that Amazon does on behalf of customers, and requires a little bit more of their sellers in terms of providing that data in the feed. But this is a great example of a page where as opposed to picking the first or second or third item that you see on the landing page, you are actually able to drill in slightly and find a more specific item.
By contrast the Google Shopping experience, specifically Product Listing Ads, so when you look at the screen graph on the right side of the left hand screen grab, you see that Google Product Listing Ads treatment, and this is a pay-to-play service that Google has today. Folks are paying for that top level visibility within the Product Listing Ads treatment. However when you move to the next screen, the products are presented according to relevancy, so as we see here Google is presenting content following a traditional eCommerce marketplace paradigm rather than their classical SERP paradigm. There is an obvious influence of Amazon in relevancy here in addition to traffic or click-through rate, we are seeing relevancy on the page driven by product price, the total price or landing price, the shipping price, the seller’s reputation, the seller’s volume reflected in the feedback volume, their participation in programs like Google Wallet, and we expect Google Trusted Stores participation to influence ranking in the near future.
Given all that, Amazon and Google are really driving to the same results, but there is a philosophical and semantic difference in their approach getting back to the continuum that Eric talked about earlier where on Google it’s all about content for the most part, on Amazon it really comes down to merchandising.
Eric: At least for the moment, right?
Dan: For the moment, and merchandising in the form of clear pricing and fulfillment. We talked a little bit about that growth of mobile searches, and obviously there is no shortage of data and press about how mobile is almost overwhelming brick and mortar and becoming a primary driver of eCommerce sales in some corners. The Amazon mobile app is very efficient and focuses on key areas of their dot com site where they know customers like to spend time. So primarily the home page, search pages, the shopping cart, wishlist, all easy to access buttons within Amazon’s mobile app. An then of course any product search that results in some listings, all the same refinements that we looked at earlier on that shoes page, for example, are available, all the product details, the color, the size, the different price points that are available from the different third party merchants that they are available from. All the customer reviews are found here as well, within their mobile app.
Eric: I can tackle Google Shopper app as well, but I think it’s worth noting since we are on this topic of mobile, that while Amazon’s Product Ads surfaces on the desktop Amazon site, it’s not currently included in the mobile app today. So really the only way to get into the Amazon shopping app is through the marketplace program if you’re a third party seller.
When it comes to the Google Shopper app, we see that the user experience is becoming more closely aligned with the Amazon experience, but I think it’s worth calling out here that there is still this major difference in that there’s ultimately a click-through to your ideally mobile optimized website in order to capture the sale.
We are not going to have time on this session today to get into details on local retail advertising, product advertising, but Google that has been a strategic focus of theirs. A lot of your success on Google is really going to come down to your ability to capture and convert that traffic that’s coming through the app by having a mature, robust, mobile optimized presence. If you’re not there yet, Amazon of course represents an opportunity to capture that mobile business. If you have invested in your own mobile optimized site and you have high conversion rates on your own branded mobile storefront then Google is going to perform well for you.
I think the only other thing worth noting here on the Google side is that with the advent of Enhanced Campaigns, in some ways advertisers have ceded a bit of control in terms of the way Google provides optimization and management tools for mobile versus desktop at this point. It’s likely that whether you know it or not or whether you’re actively managing it or not, you will be manifesting your products on the Google Shopper app and on mobile ads.
Dan: Thanks Eric, so some product search strategies in the marketplace mentality that we like to apply here, and we socialize among our client base. What wins on Amazon? There is three big levers that drive what we call the “virtuous cycle” what Amazon calls the “virtuous cycle” that achieves a certain flywheel effect. That once you’re sort of plugged in and playing within this paradigm generally you’re going to be pretty successful within that marketplace. It’s really just the three elements – price, selection and convenience.
Working backwards, convenience is a matter of being in stock with the best possible fulfillment, including by the way your potential use of Amazon’s fulfillment network and their different programs there. Selection will hinge on having the widest assortment possible, organizing according to their taxonomy, pressing your items into search where you can, but the key is having as large a selection as possible, particularly because you want to take advantage of their tremendous SEO reach that they currently have and have had for a long time. Then of course the last piece being price, so we talked a little bit about that.
Managing to your lowest possible landed price, which a lot of cases could include free shipping, will get you sort of the best positioning in terms of you capturing share of that customer and that traffic. By the way you can still maintain margins, particularly when you think about areas where Mercent can help with dynamic repricing and managing your pricing and managing your margins to the point where you’re an effective competitor with a buy box offering on Amazon. Mercent’s retail feed optimization and our agency model plus our software and transformation services that allow us to manipulate feed data, and then of course your own fulfillment in real time inventory updates that you provide Mercent, that we send into Amazon on an ongoing basis, and of course Amazon fulfillment and their fulfillment by Amazon program.
A little bit quickly about the Amazon Shopper, these numbers likely will change by the way with their earnings report which I believe is happening today. But roughly 200 million active global accounts, 97 million unique monthly visitors, 6.5 million revisits from those unique monthly’s and of that it all points to what’s probably their largest and most successful achievement in recent years, which is the growth of their Prime program.
This program, they don’t report on the numbers, various outlets have put the number at roughly 10 million, it’s only getting bigger, and given the relation there to what we’ll talk about in a second in their expanding fulfillment network, this becomes a far superior fulfillment experience being a Prime customer than it does being a non-Prime member.
Eric: This is key in terms of what Google is effectively fighting against, in terms of control over retail search. Amazon is leveraging all of these post sale services and capabilities that are really founded in their fulfillment and distribution capability. Again, it’s just another data point that shows you have to think differently about the Amazon customer and the Amazon search relative to Google.
Dan: Thanks Eric, one other quick data point on Prime, data suggests that those Prime customers spend nearly twice as much per morning star, than the non-Prime customers in the same time period. Again that fulfillment center footprint, they are able to reach those customers much faster than their competitors, but those Prime customers spend more time on the website, they look for Prime-eligible offers, in many cases almost exclusively and this is where if we go to the next slide, the FBA program really comes into play for our third party clients. Mercent is seeing tremendous growth among our Amazon sellers who are selling through the FBA program and we can walk you through some of the details of how it works in depth later, another webinar perhaps.
This is the way for third party sellers today to inject themselves into that sort of Prime ecosystem, through Amazon’s fulfillment, logistics and customer service. It’s a relatively low risk commitment, a sort of opt-in opt-out at will at the SKU level. It’s very extendable so your own website or ancillary or sister website that you may own or operate, can pull inventory from your Amazon fulfilled by inventory, and it’s very supply chain friendly as well. So injections from your own warehouse or from a vendor are not uncommon within FBA.
When it comes to pricing, so another component to that virtuous cycle flywheel we were talking about earlier is of course dynamic pricing. Without giving too much detail, the formula is relatively simple. If you would like to be competitive and win the buy box, which is typically going to get you 95% of the sales on a given detail page, you need to have a compelling price point. Well we think, given our software and our application, you probably don’t need to sacrifice much margin as a percentage in order to get yourself into the buy box, and in doing so your total sell-through volume will increase in some cases by 7x, such that you will improve your gross margin dollars without eroding that contribution margin as a percentage. We think there is a compelling argument to be made about having a dynamic pricing strategy on Amazon.
The next slide highlights a case study that we ran through where in fact the merchant did re-price slightly, the green dotted line represents their CM and then the blue line is their overall revenue and you can see the large spike once they started repricing. Their profit dollars increased as well from previous, however they didn’t lose much on the percentage side.
With that I will hand it over to Eric again who will talk a little bit more about some of the ancillary products that the Amazon’s services team has.
Eric: Okay great, thanks Dan. I am going to go quickly through these remaining slides so that we have plenty of time for Q&A here on the presentation.
As I mentioned earlier in addition to its marketplace platform, Amazon operates an arguably very Google-like Product Ad Platform, and we are also seeing that Bing is about to bring out their own equivalent offering as well in the Product Listing Ads or Product Ads space.
Here, if you need some coffee to go with your ice-cream, you come into the Amazon environment as a consumer along with the marketplace and Amazon owned inventory offerings on the page, you’re seeing these click-through ads that represent third party sellers selling through their own website, their own shopping cart, and these ads basically click the consumer off of the Amazon website, the same way that any Google ad does today. These are ASIN matched, they are category mapped, so a lot of the basic blocking and tackling that’s involved with the marketplace, seller relationship with Amazon exists here, too. But I will say that Amazon has pretty forced limitations in terms of open categories. For instance, apparel is an excluded category, you cannot promote apparel through Amazon Product Ads. On the other hand you can promote health and beauty, and jewelry and accessories, and so on.
Really what’s going on here is Amazon is looking for product exclusivity and unique products to continue to push that long tail of the product assortment on Amazon, and drive increased selection.
We go to the next slide, here is a quick overview of kind of pros and cons of participating in the program. In terms of the upside, you are increasing your exposure and traffic from Amazon, ultimately you own the customer and you are generating traffic to your own website through Amazon, and in terms of campaign efficiency for all of the traffic generating, referral-based shopping engines that Mercent supports. In Q1 Amazon Product Ads, I think because of the obvious high consumer intent on the channel was the highest converting shopping channel that we manage for our clients.
The downsides for APA are limited category availability, that I mentioned earlier, you are getting reduced exposure within Amazon’s own search results. It’s a CPC program versus CPA, so you’re paying on the clicks and there is no current mobile or in-Amazon app visibility for these ad units.
We would be remiss to talk Amazon about a search engine without acknowledging that certain merchants are not going to participate in the Amazon marketplace or Amazon Product Ads for their own reasons. And before we switch to just a few strategic alternatives, the next slide here shows, effectively what the opportunity cost is. Ignoring Amazon, basically means you are ignoring up to 30% of the addressable online shopping audience in terms of where purchasing decisions are being made by shoppers today.
If we move onto the next slide, this is really sort of a quick and certainly incomplete list of the other high volume opportunities. Paid Search still dominates in terms of source of traffic and Google of course is getting more sophisticated in terms of the ways and means that advertisers have to optimize their search campaigns. At Mercent, of course we are focused on optimizing your Adwords program as well as Bing text ads and other channels based on SKU-level data, including real time inventory, real time pricing, profit margin, customer lifetime value and other metrics.
I mentioned earlier that Bing will be launching their own Product Ads program, we think that’s kind of a late spring early summer timeframe, and Google Shopping and PLA are taking increasing overall share of budget on Google. Make sure you are being as aggressive as you can be on the Product Listing Ad side. Other shopping ad networks, at Mercent we recently announced support for Sears and we are seeing really positive results from some of the early adopters of our integration with Sears through the Mercent Open Marketplace Platform. And of course, social and mobile continue to grow and influence, and drive traffic and conversions for our customers.
A couple final slides here just on Mercent technology, particularly when it comes to leveraging Amazon as a channel and capitalizing on that 30% of the market that Amazon is now influencing as a search engine, we have specific technology built by Amazon veterans for retailers to manage their marketplace listings, including full integration with FBA, the ability to dynamically price on an intra-hourly basis, quickly and easily standup Amazon Product Ads and properly match and categorize those ads to the Amazon catalog taxonomy. And we also for our part, do fully support Amazon’s international presence.
I think in the interest of time, I have already touched on these channels, but again Mercent has proprietary technology and services to support you in all of these various channel categories, and I am going to talk a little bit about our presence at Internet Retailer coming up in June here. But before we get to that, as final sign-off here, at this point we will turn it over to the team and we’ll take your questions and try to provide additional insights.
Kristine: Thanks Eric, we will get into the Q&A portion of our session right now. The first question comes from Amy and her question is, “How did Amazon become the number one retail online search engine?”
Dan: I think it’s probably a component of three things, the first is obviously the sheer size of the catalog, there’s so much selection, it’s easily in the hundreds of millions of SKUs if not bordering on half a billion at some point soon. That’s one, two, that catalog is so heavily SEO’d, for lack of a better word, so optimized for Google’s free search that they’ve got a very strong hold on those organic search results on Google for that catalog. And then the third piece would be of course their own branding, which goes back to really the early days in the mid to late 90s when they launched the store and they invested heavily into traditional media to get their brand out there, and have since ratcheted that back with the exception of the launch of Kindle, which obviously now has a much more sophisticated media approach related to it. However, have relied heavily on technology to do marketing for them, to gain sort of mind-share when it comes to their brand. Again, those three things, the size of the catalog, the way it’s optimized for search engines, then of course the brand equity which they started building long ago.
Kristine: Thanks Dan, next question comes from Matthew, “What factors are most important for seller visibility on Amazon?”
Dan: It really boils down to three things, its price, selection and being in stock. We talked a lot about the sort of marketers continuum or that retail search continuum where on one side you’ve got content and opt-in pay-to-play meta-data quality of listing and then on the far end it’s a CPA model that really looks at price, landed price, shipping, latency and fulfillment, SLAs, along with being in stock, maintaining in stock levels, and then of course having the widest assortment possible. So a selection play where you play in the fact that a couple of hundred SKUs in a catalog from a merchant that has tens of thousands, is probably not betting heavily enough on the Amazon marketplace and that merchant needs to work very diligently on expanding their selection as much as possible.
Kristine: Great, thank you. Next question comes from Matthew, “How will the increase in Amazon shipping costs affect originating traffic from Amazon?”
Dan: If I understand correctly, Amazon increasing its FBA pricing or the shipping pricing related to FBA sellers, certainly that will force retailers to stay in that program to sharpen their pencil a bit and understand which products make sense for that specific program. If we’re talking about something different than that I would have to research it a bit more thoroughly.
Eric: A couple of thoughts just on the broader topic, when we see Mercent customers participating in the fulfillment by Amazon program, by virtue of the fact that we’re serving enterprise customers that generally have a mature eCommerce business, this is not an all-in migration to FBA by any stretch. And so we see very specific use cases around the adoption of Amazon’s fulfillment programs. We see FBA used as excess capacity during peak holiday or the run-up to the holiday, as you sort of hit peak inventory before holiday shoppers begin depleting inventory on-hand. We certainly see that historically, directly to the question that’s being posed here, our clients use FBA in cases where they cannot necessarily economically ship large bulky items through their own fulfillment centers and through their own negotiated carrier rate cards. This is one that might actually be effected as Amazon increased their rate card for third party sellers, because we have really seen that our clients have actually FBA as an opportunity to cost-effectively expand their own assortment, and promote products through their own eCommerce storefront through FBA basic that they might not have been able to sell, again cost-effectively otherwise.
And then obviously the primary motivation for participating in FBA among our customer base is to A) participate in Prime, which I think I saw as another customer coming up here, and B) increase the relevancy of, I think you mentioned this earlier as one of the variables that Amazon uses. If you’re in FBA, and by virtue of the fact that you’re in FBA, you’re Prime eligible, you can win the buy box on Amazon, the add to cart button, for those who are less familiar with the vernacular here, but you can basically win higher relevancy on the product detail page on Amazon by participating in FBA. Even at a higher price point, it’s about a 2% delta that we’ve observed between an FBA, Prime eligible product versus a non-FBA, non-Prime eligible product when you’re talking about price discrepancy. I know that was a little broader answer to the question, but hopefully that helped clarify what we expect to happen as the rate cart moves up and down for FBA.
Kristine: Going on to the next question, it comes from Wiley, he has a two-part question. First, “How does Amazon determine whether your products are presented to Prime customers?” And the second question, “Does Mercent integrate with any Saas eCommerce sites?”
Dan: Amazon determines whether your product is represented to Prime customers, if the SKU or the offer is Prime eligible, and simply put, only SKUs that are sitting in an Amazon fulfillment center are Prime eligible. So that’s really it, if you’re a buyer who is working with a vendor over at Amazon, you obviously have all of your SKUs and your assortment in an Amazon fulfillment center and so those items are automatically Prime eligible. If you’re a third party merchant selling on Amazon, your catalog is Prime in-eligible unless you opt-in for the FBA program and you start injecting your inventory into Amazon’s fulfillment center and then it becomes Prime eligible.
Eric: And for the second part of the question, there is an extensive list of platforms that we have live integrations with, and for most of the names that I am going to mention here we’ve built some extensible software that generally makes it easier to onboard Mercent clients when they are running these platforms. There’s always category specific customizations that require some custom work on the integration. But for our part, in terms of SaaS Platforms we have live customers on Demandware, NetSuite, Magento, Venda, I think is kind of mixed format in terms of on-premise versus SaaS, but we have Venda clients, we work with MarketLive, and then in terms of more pure on-premise platforms that we are currently integrated with in production. We are working with Hybis, Oracle, ATG, IBM WebSphere and others, virtually every other flavor of hosted or on-premise eCommerce platform you can think of in the market.
Kristine: Great, thanks Eric. Next question comes from Tawny, “What are the strategic alternatives to Amazon?”
Eric: It was Sucharita Mulpuru, who I think put it best last year at our Internet Retailer event in Chicago, she basically said the number one consideration for retailers is you have to have an Amazon strategy. You don’t necessarily need to sell there but you need to have an informed position as to why you will or will not sell through the marketplace or participate in Amazon Product Ads, and then act accordingly.
And as we mentioned earlier, there is the entire universe of performance marketing channels including Google paid search and PLA, comparison shopping engines, affiliate networks, retargeted display ads, email and not to mention organic search. And all those are important but ultimately if you are electing not to be on Amazon, you can expect that collectively those channels combined, all other non-Amazon channels combined, are going to provide you with roughly 70% of your total domestic addressable eCommerce market. We’d be happy to talk in more detail about programs and channels that might be appropriate for your business if you’re interested in having that conversation with Mercent.
Kristine: Next question comes from Roy, “Does Mercent provide Amazon integration services?”
Eric: I’ll quickly hit this one and you can weigh in. From scratch means a lot of different things for a lot of different sellers, we have seen very mature companies that have gone in and experimented with selling on Amazon, and whether it was the data integration that they underestimated or whether it was the service level requirements, in terms of fulfillment consistency and speed, that they underestimated. It’s easy to approach Amazon thinking it’s going to be a fairly straightforward process and that’s not always the case.
There are a few things that we typically require, I wouldn’t say Mercent requires them, but ultimately are going to be important success factors for you if you are evaluating Amazon as a new seller, and that’s going to be the container or data store for your product catalog. How malleable is that? How easy is it to get information in and out of that system? How frequently is it updated? And so on. Typically we are looking for, you don’t need to be selling direct to consumer through your own eCommerce website, but you need more structured data than is typically available from your supplier or manufacturers, or if you are a manufacturer and you’re looking to sell direct to consumers through Amazon, we would typically encourage our customers to start with either some form of commercial product information management system, which is often part of an ERP Platform, or at least look at getting a basic relational database in place for the product catalog. The flipside of course is the ability to collect and process orders through a platform like ours, Mercent, or by pulling them directly from Seller Central, which is really only viable for companies that are just beginning and expecting pretty low order volumes on the platform. Again, an ERP system or order management system which allows you to handle one-off, onsie-twosie, consumer orders flowing through the Amazon cart is going to be important in terms of your ability to consistently over time meet Amazon’s SLAs, which are critical. If you blow it in the early days, the problem, if you go in unprepared is that you’re quickly going to find yourself in a situation where you’re under-delivering according to the Amazon shopper’s expectations and you are going to get hit with negative feedback from the buyers, and we have seen this create, and I don’t want to overstate it, but it kind of creates this death-spiral where feedback gets worse, consistency is poor and eventually Amazon by virtue of their service level standards will drop you as a seller. It’s better to go in eyes wide open and do some preliminary pre-launch work on your catalog data and your order fulfillment capability so that you don’t find yourself in that situation.
Kristine: Thanks Eric, the next questions comes from Dustin, How does a retailer achieve a high search ranking on Amazon?”
Eric: That is a great question, Dan go for it.
Dan: It’s a fantastic question. I am going to assume right off that the best prices compared to competition means you have similar SKU but not an exact match to an existing SKU in their catalog, in that case you’ve got your own secondary detail page carrying your product at a price point that is competitive compared to another similar product within kind of the search results or the Amazon universe. With that as sort of the background, what it comes down to is, like you hit on trying to get your item to surface higher in search and develop some customer feedback in different reviews.
Assuming all the meta-data is taken care of, the item is properly noted, it’s in the lowest leaf node that’s available in Amazon’s taxonomy, that it’s got all of the five search keyword fields filled in, that the title is stylistically correct, that it’s got the brand and the style and the color and so forth, in the title already, that the brand value itself is correct and accurate, that it’s got alternate images not just one image but more than one image, and the image is rich so 1001 pixels on one side. Things like pricing become important in that you can potentially spur some short-term bursts of sales in order to give the item some higher search visibility. So for example, if it’s $29.99 plus $5.99 shipping, consider dropping the shipping for a period of two weeks during a particularly high traffic period, using a promotion or just taking it out of the feed altogether. You’ll gather more conversions that way and the item will slowly build some of that velocity that’s so important to what they call their “king of the hill” algorithm. It’s sort of like getting your item to the top and keeping it there is the real answer. Once you’re there it’s much easier to maintain that position. There are a number of small levers, but probably the most important one for better for worse tends to be lowering price, but there are strategies to where you can lower your price for a minimal period of time in order to capture some quick hitting sales.
Kristine: Great, thanks so much Dan. We have time for one more question and then I’ll turn it over to Eric to close. The question comes from Jason, “Compared to other comparison shopping engines, how much traffic/sales did Amazon Product Ads represent in 2012?”
Eric: So excluding Google, Amazon still ranks consistently in the top five channels. And as I mentioned earlier in the presentation, it is the most efficient channel by virtue of the fact that it’s the highest conversion rate among the various referral-based shopping engines that we support at Mercent. I will say that we’ve seen a deceleration in the YOY growth of Amazon Product Ads, which has moved APA out of the generally number one or two slot, in terms of volume, which is where it sat relative to the other leading comparison shopping engines.
Over the course of 2012 we have seen the growth decelerate relative to some other channels, and so it’s probably ranked now down on the lower end of the traffic range that we’re seeing from the other leading comparison shopping engines, within that top five list. I hope that is helpful, and we can certainly provide more info if you want to follow up with me and the Mercent team here.
Everyone thank you again, just as a final invitation. We hope to see you at the Internet Retailer Conference and Exhibition in Chicago, coming up in June. We are going to have a phenomenal set of speakers and content. Basically we will be broadcasting from within our booth throughout the entire duration of the show, and just to give you a sense of who’s coming, we will have panels and speakers that include the Wells Fargo Retail Research team, folks from NewEgg, NetSuite, Rakutan, including MediaFORGE and LinkShare, Ebay, as well as the Ebay Commerce Network, formerly known as Shopping.com. We will have Google executives, folks from Systemax and Tiger Direct, folks from the Microsoft Bing team talking about Product Listing Ads, and we would encourage you to come by and meet these folks, get some great information that you can use and connect with us at the event. We look forward to seeing you in June in Chicago at IRCE.