Recently, many Amazon sellers have found that the order volume has dropped a bit. Even if the price cuts and big discounts are launched, the conversion of advertisements is still ugly, and it is difficult to increase the orders. Following the disappointment of various operational optimization effects, the most effective low-price strategy in the past has also failed.
The low price play has caused heated discussions in recent days. Some industry Vs shared the experience of earning 10 million yuan for low-priced products, and believed that for ordinary trade sellers, low price is the best way to sell, and there is no one. Compared with the public enemy of the whole people last year, some sellers now believe that the low-price strategy is reasonable; but some people believe that this is an unsustainable war of attrition for individuals and categories, and it is difficult for the initiators to have the last laugh. .
Sales are difficult to increase, and low-priced "explosive single pills" fail
The dividends of the epidemic are gradually disappearing, and the development of the industry has retraced. Compared with the considerable sales and profits of the past two years, this year's earnings have made many sellers feel disappointed. Beauty and home furnishing seller Li Tiancai said that compared with last year, the company's performance this year has stagnated and declined slightly, while advertising CPC costs have increased by 50% compared with last year. In the words of the sellers, orders are getting smaller day by day, and advertising fees are getting higher day by day.
After Father's Day, perhaps due to the restraint of consumption before the Prime Day promotion, the orders on the platform seem to have decreased, and many sellers felt uneasy, so they started fancy promotions to increase the order volume, but some sellers resisted the low price to no avail. , joined the price reduction army with the idea of joining if you can't beat it. Now there are many categories on Amazon, as if there is a national spiral.
A seller said that many similar competing products of one of its products have recently dropped to a very low price, and the low price has indeed effectively improved the ranking and sales of these competing products. In this fierce competition situation, their own products After using the low price and not much effect.
"Now the price war is very fierce, everyone is not making money, and they are losing money with the mentality of dragging their opponents to death. Amazon is also happy to see this kind of competition. It is really heartbreaking to sell such a good product at the price of cabbage." a seller said.
This white-hot price competition occurs at multiple sites.
For example, some sellers complained about why there are many domestic sellers who go to the price after registering a local company in the UK to avoid tax. This year, they have already seen the newly registered UK account in multiple categories. The other party is not taking the low-price route because there are too many stocks and needs to clear the warehouse, but simply using tax avoidance to further reduce prices to force old sellers back. Now that the purchasing power of Europe has decreased, the exchange rate of the pound and the euro has fallen to a low level, which is very unfavorable for export business.
"There are a lot of free shipping for $1.50 on the platform. I'm tired of looking at it. I don't know why everyone is doing this." A seller sighed.
This kind of scene that is almost a national spiral makes the low-priced "explosive single pill" also ineffective. More than one seller has found that no matter how strong the low-price spiral is today, it is difficult to make a significant improvement in sales, and promotions such as price cuts and big discounts have collectively failed. There are no winners in the price war. Even if they have achieved higher sales through promotions such as spikes, in addition to obtaining rankings and clearing inventory, the seller's profit in terms of profit has been greatly reduced.
Is the low-price spiral justified?Some sellers raised their hands in approval
Last year, the low-price spiral approach came into the spotlight and was hotly debated. At that time, a large number of new sellers entered the industry, hoping to break the original market pattern with low prices, grab a piece of meat from the original sellers, and even more want to seize the market with low prices to replace it. Until now, many new products have rudely taken the low-price route, directly offering 20% or even 50% of the price, preparing to lose a few months to be a pioneer.
Most people in the industry scoffed at this strategy, believing that the strategy of the practitioners with small profits or even losses is too naive, and it is difficult to pull the entire category into the water.
But after a year, people's opinions have changed, and some sellers are starting to think that the low-price spiral is justified.
Not long ago, a big V seller published a post titled "How to earn 10 million yuan for products with low customer unit price", sharing his experience of creating products at low prices through models and finally obtaining high profits, which aroused the industry's concern about low-price play. heated discussion. The seller believes that for ordinary trade sellers, low prices are the best way, and there is no one.
Many advocates say that existence is reasonable. Even if the current business environment has changed from a few years ago, it is still feasible to play at an appropriate low price; but some sellers believe that this is a war of attrition for the interests of themselves and the industry group. , the advanced model is too idealistic.
Beauty and home furnishing seller Li Tiancai believes that this model is similar to an optimization based on the spiral play. "In the early stage of product promotion, low price is indeed the best strategy, but I rarely do it. Personally, I feel that the sales and ranking of products promoted at low prices are too sensitive to price. When you want to go up , as soon as the price goes up, the sales volume and the ranking will go down.” In fact, even for products with a middle price, there is often an embarrassing situation in which the sales volume is greatly reduced when the price rises by one dollar.
Small sellers talk about strategic losses like a joke. The premise of the success of the low-price game is to have strong capital and supply chain resources to support it. The ideal situation is for the seller to survive the competition at a low price and achieve a staged victory. One seller said that he spent more than a year to kill similar products through low-cost play, and then rose from $16 to $27, and came out on top.
But it is impossible to predict how many Cheng Yaojin will be killed in the process.
"You think, now so many operations and developers are staring at Amazon's front desk every day, if they find that you are standing still, this product is only sold by you or a few sellers, everyone will look at this data and think that I can also enter this immediately. Category. So it’s not a very long-term approach.”
In addition, if the seller's product advantages are limited, it will inevitably be replaced quickly, and the life cycle exchanged for low prices may not reach the stage of smoothing out losses or making profits. At present, the development of many new products is mainly based on the old models to do some functional improvements, appearance optimization, packaging adjustments, etc., to form a certain differentiation with the existing products, under the micro-innovation + low price, the products are easier to break through and take off. This is also a more common operating routine. However, unless the product style is classic and can not be updated for several years, it is difficult to maintain the sales advantage for a long time.
The popularity of low-price play has exacerbated involution and created an industry gap. "You need to earn 5 yuan. There are only three or two people in my small company. I can earn 2 yuan. This situation will always exist, and there will always be sellers with this idea."
It is precisely because of the thinning of the overall profit of the category that the spoilers have been criticized for their low-price tactics. Excessive low-price competition has induced white-hot competition in the industry. Therefore, many people in the industry have accused the low-cost method of lighting the lamp and boiling oil, which is not a sustainable tactic, and many of them are top sellers. However, some sellers believe that this is not the original sin of low-priced play, but that the big sellers avoid too many peers using this tactic to compete with them, so as to leave a space for themselves to play low prices. This view has also been received a lot. people's recognition.
A seller analyzed that the low price strategy depends on how low the price is, whether it is a loss or a meager profit. If there is still profit, this low price is meaningful; if it is low enough to lose money, this is not a common seller's game. up. When launching a new product, a profitable low price is a relatively reasonable sales method and is normal. The purpose of the low price is not to sell at a loss, but to add an operating strategy on the basis of a certain profit, and then do it.
“Last year there was a product that was hopping $0.99 to $9.99 to $0.99 a day, and now it’s on sale for $9.99. We did the math when he was doing that, he switched between $0.99 and $9.99, actually It was enough. After that, the sales started to increase, and the category continued to be classified. It achieved more than 200 household items and more than 1,000 orders a day. This seller used this strategy to push in the early stage, and then Amazon plugged this loophole and did not let 0.99 to sell."
It is not impossible to play at a low price, but it depends on the product and the courage of the seller. When a large number of orders are placed, it becomes a homework to control the stocking volume. In order to maintain the ranking, the products must not be out of stock. Once a sudden order is sold out of stock, the previous layers of bedding are basically invalid.
Obviously, this requires a variety of resource packages. Li Tiancai said that a big sale will spend a certain amount of money to smash a product, but this kind of heavy krypton gold is not something that ordinary sellers dare to play.
Pushing up the daily performance of Prime members, Amazon and sellers make moves
The low-price competition between sellers has escalated again, or it may be related to the warm-up for the Prime Day promotion . Before the big promotion, a wave of low-price promotion links appeared, just to occupy the pit. Some of the top sellers have already started preheating outside the station, and they took the lead in fighting for traffic.
Recently , an outdoor power supply product from Anker has joined the low-price promotion. The original price of this product is 359.99 US dollars. The promotional price of the product on the US promotion website Slickdeals is 200 US dollars. Due to the large price reduction, the product rushed to the Slickdeals homepage post. At the same time, Zhiou, Mujia Home Furnishings and other big sellers also have products discounted on Slickdeals, with a minimum discount of 70%.
In addition to the big sale, some small and medium-sized sellers also joined it. Many sellers frequently offer 50% discounts in off-site channels.
While sellers are warming up for the Prime Day sale, Amazon is also trying to make some changes to boost its sales.
Some sellers have found that the weight of Amazon's bad reviews has dropped recently, and the rating system has been adjusted. Now the negative comments on the homepage are basically hidden, and more positive comments appear on the homepage, and the comment time is concentrated in the last 2 months.
However, some sellers said that the negative reviews on the computer side are indeed gone, but the mobile phone side can still see that the negative reviews are still in their original positions.
Bad reviews on the homepage are hidden, which is good for sellers. A seller introduced that the performance was not good at first, but there were just four bad reviews on the home page and there was an excuse, but the bad reviews disappeared, and now there is no reason for the poor performance.
There are also sellers who bluntly said that everyone’s homepage has gone down, and the well-converted links will only get better, while the poorly-converted links are still the same. Although our homepage has no negative comments, the overall weight is still not as good as peers.
Aside from the competition factor with peers, the disappearance of negative reviews on the homepage is good for sellers. Even if there are negative reviews on the homepage, competition with peers is inevitable. The seller's negative reviews can disappear, which also proves that Amazon treats them equally. The platform makes the homepage comments of sellers look better. Taking advantage of this year's Prime membership days, more orders are placed, which in turn promotes a wave of performance and makes the stock price rise again.
In the first quarter of this year, Amazon’s operating income was US$3.7 billion, down 58% from US$8.9 billion last year. The growth rate of revenue hit a new low growth rate, the slowest in 20 years, with a net loss of US$3.844 billion, compared with a net profit of US$8.107 billion in the same period last year. Dollar. It was also Amazon's first quarterly loss since 2015. Regarding its second-quarter outlook, Amazon said it expects revenue to be between $1 billion and $3 billion, compared to $7.7 billion in the second quarter of 2021.
With a loss in the first quarter and an expected loss in the second quarter, Amazon will definitely do its best to drive results. The Prime Day promotion in the second quarter is its greatest hope. Before the Prime Membership Day, in addition to the negative reviews being quietly hidden, Amazon also high-profilely updated the homepage of the website to the Prime Membership Day theme page to create an atmosphere for the big promotion.
To drive Prime Day sales, Amazon also launched a campaign to support small and medium-sized sellers.
According to an Amazon announcement, from June 21, 2022 to July 11, 2022, customers around the world who purchase items sold by eligible small businesses on Amazon will have the opportunity to win an Amazon gift card worth up to $5,000 each .
Customers located in the U.S. will also receive VIP tickets to the 2023 Super Bowl, New York City screening rights to Prime Video's The Lord of the Rings: Ring of Power, VIP tickets to Amazon Music-sponsored music festivals, and other exclusive prizes. This promotion is fully funded by Amazon to help small and medium sellers and customers connect.
This sweepstakes for small and medium sellers will be available on sites in the US, UK, Canada, Mexico, Germany, France, Spain and Japan. Sellers will receive an email on June 21, 2022 if their product is included in the promotion .
In addition, Amazon is also helping sellers trying to increase traffic during this time. According to the official introduction, if sellers want to increase sales, they must first sort out the relationship between sales, traffic, and conversion, as well as the factors that affect each other.
( Image sourced from Amazon )
The level of traffic and conversions directly affects the final sales. For Amazon sellers, if they want to get traffic, on the one hand, they can write keywords into the product details page and place advertisements; on the other hand, they can set up coupons and promotions.
In terms of conversion, in most cases, the click-through rate of the product is about 0.2%-0.8%. If the click-through rate is lower than 0.2%, the seller can first check whether the main image is attractive, the quality of the title, the price of the product, and the quality of the comments. Quantity and star rating, whether there is a Prime icon, etc.
If the click rate is normal, but the conversion rate is not ideal, the seller can focus on checking the five-point description and whether the attached picture clearly shows the selling point of the product.
Whether it is preheating in advance or helping sellers, Amazon is working hard for Prime Membership Day, and many sellers are also eager to try and prepare in advance, looking forward to bursting orders during the big promotion.
However, the economic conditions in Europe and the United States may have a certain impact on the purchasing power of consumers. In the context of inflation, the United States may experience an economic recession, and demonstrations and strikes have also broken out in the United Kingdom to protest the high cost of living.
U.S. e-commerce sales to cross the $1 trillion mark in 2022
Federal Reserve Chairman Jerome Powell said recently that the U.S. inflation rate is too high and it is necessary to take measures to cool down. The Fed understands the difficulties caused by high inflation and is acting quickly to reduce inflation. The Fed has both the policies it needs and the determination to restore price stability on behalf of American households and businesses.
The U.S. economy may also struggle to grow in the second quarter after contracting in the first quarter, according to data from the Atlanta Federal Reserve. Under inflation, adjusted employee wages fell 3% year-on-year, and the U.S. job market may also be slowly contracting.
Compared with the United States, the British people are more "anxious" in the face of inflation. A massive march broke out in London in recent days, with thousands of protesters chanting slogans through the city center, protesting the high cost of living and demanding the British government to introduce more measures to combat severe inflation.
At the same time, 40,000 workers responded to the biggest strike on Britain's rail network in 30 years. On the 21st, members of the British Rail, Maritime and Transport Union officially launched the strike action. The main contradictions of the strike are workers' wages, working methods and possible layoffs.
On the 22nd, after the negotiations between the British railway workers and the company failed again, the second railway strike this week will be held on the 23rd as planned. The head of the union said the industry will continue to strike if job security and wage increases are not met.
Whether it is the United States or the United Kingdom, people's lives are not easy under inflation. However, Federal Reserve Chairman Powell believes that the overall economic situation in the United States is favorable, the job market is strong, and demand continues to be high. This promotes that people can continue to maintain their spending power and have a way to keep up with the rising costs of basic items such as food and household goods, even in the face of high inflation. But growth will slow in certain discretionary categories, such as clothing, toys and hobbies, and furniture and household items. Overall, American consumption is still relatively impressive.
eMarketer data predicts that US e-commerce sales will exceed the $1 trillion mark in 2022, reaching $1.05 trillion, and by the end of 2022, it is expected to increase by 9.4% over 2021. Meanwhile, total retail sales are expected to reach $ 6.988 trillion this year.
An estimated 238.1 million people in the U.S. age 14 and older will browse or research products on the Internet this year, and about 90 percent of that group will make at least one purchase online this year, according to estimates. By 2026, the U.S. online buyer population will reach 230.6 million.
The eMarketer estimates for back-to-school and holiday season purchases are as follows:
1. Back-to-school season : Last year's back-to-school season related products had a good growth, and this year's back-to- school peripheral products are expected to grow more moderately. Consumer demand for laptops and consumer electronics will be lower, with higher growth in categories such as apparel, accessories, and office and school supplies.
2. Holiday season : In 2022, U.S. holiday retail sales will increase by 3.3% to $1.262 trillion, of which brick-and-mortar retail will increase by 0.9% to $1.026 trillion and e-commerce will increase by 15.5% to $235.86 billion. Consumer spending momentum and an extended holiday shopping season should contribute.
3. During Cyber Monday and Black Friday : In the five days from Thanksgiving to Cyber Monday in 2022, e-commerce sales share will drop from 16.9% to 16.4%, down from a high of 20.0% in 2019. See the chart below for the specific sales of each day ↓
Looking back at the upcoming Prime Day promotion, RetailMeNot expects that the hot-selling categories on Prime Day this year are mainly: clothing and footwear, home decoration, kitchen supplies, cleaning supplies, electronics and home fitness equipment products.
Sellers of related categories can prepare in advance. As far as the current situation is concerned, many sellers are still looking forward to the Prime Day promotion and the holiday season in the second half of the year.
As the seller Li Tiancai said, after the "fight" in the first half of the year, some sellers have been eliminated, and the speed of entry of new Amazon sellers is also slowing down. There are fewer sellers, and the competition will be relatively small. Maybe in the second half of the year can usher in an explosion.