Amazon sales are down in 2018 for sellers across the board and forums are packed with small businesses questioning why their sales have slowed. Thousands of Amazon sellers have been affected with some reporting the lowest sales they’ve had in years
In this Surge Session we cover a recent algorithm update by Amazon and how it is to blame for this drop in sales for small- to medium-sized sellers. We are joined by Duran Inci (Co-CEO), Joe Hassun (Director of Marketing), and Ohad Yarel (Marketing Specialist).
Around June/July 2018, Optimum7 discussed our hypothesis on how the algorithm was changed and why it’s inducing this drop in sales. We also considered what this means for different types of sellers and how they can improve their current sales.
The metrics point at a new facet in the algorithm prioritizes items that are physically closest to you and promotes them to the top of your Amazon search results. This means Amazon will show you items in their warehouses that are closest to you in order to save on shipping costs.
As a result, smaller sellers that don’t have access to a wide distribution of Amazon’s warehouses are being pushed to the bottom of search results. Meanwhile Amazon and major sellers are dominating the top results as they are able to place their products at many, if not all warehouses.
What does this mean? With better coverage, these larger sellers will have higher rankings simply by generating more sales. With more ratings and reviews they can grow at an exponential rate. This in turn will allow them to increase their distribution and further dominate the top of the Amazon search results. All while small- to medium-sized sellers struggle to make their way to the top.
Lower sales means lower distribution, and that leads to falling to the bottom of the Amazon search results, creating a situation that inhibits smaller sellers from ever being able to expand.
What was Amazon’s intentions with implementing this new algorithm? The smaller sellers suffering from the repercussions seems to be an unexpected side effect but is it? Or is it a way for Amazon to edge out those smaller sellers?
Amazon, with its own brands like ‘Amazon Basics’, is basically killing certain markets due to its complete dominance over them. Amazon Basics sells so many products with reviews and ratings to match in comparison to other sellers that it is virtually impossible to compete with them. There is no way for a small seller to generate reviews, ratings, and sales at a rate that even comes close to Amazon itself, making the possibility for entrance into those markets a losing game. With our own experience of eCommerce operations on Amazon, we know how this algorithm update has directly affected our clients and that certainly seems to be the case.
What can these small- to medium-sized sellers do to offset the negative effects of this new algorithm update?
Our first tip is to leverage the keyword section in the back-end of your product descriptions, which is measured in 250 bytes rather than limited to a character count.
Secondly, you need to generate reviews. In not the same terms, what we described above is the vicious circle of the review paradox:
- No sales means no reviews
- No reviews means you won’t rank
- Not ranking means no sales
So how do you fight this? We are still not entirely sure. Since we don’t think Amazon is going to reverse this algorithm sellers have to wait it out while engaging in smart strategies on paid Amazon ads. With an awareness of the situation, focus on increasing conversions as much as possible along with the quality of your product and hang in there.
If Amazon isn’t in fact trying to edge out the smaller sellers, then they are certainly trying to get sellers to start leveraging their paid tools such as their advertising services and their trusted review program.
Our best suggestion is to be proactive when algorithm changes happen. Identify the changes to your bottom line and make sure to diversify your strategy and operations. Try to find alternative ways to disperse your inventory while the situation develops further. We believe that there will be other updates in the near future that will be helpful for smaller sellers instead of hurting them as Amazon doesn’t want them to abandon the platform altogether. Provide the best products and customer service to generate positive reviews so you can convert on the traffic from your paid ads.
If you have any questions, please reach out to us. We are happy to help. Contact us today.