Last week, Amazon, Google, Facebook, and Shopify announced their first-quarter financial reports. It is worth noting that the sales of these e-commerce giants in the second quarter of this year all declined. In particular, Amazon not only failed to meet Wall Street's expectations in the first quarter, but also is a real loss. However, the growth of Amazon advertising alone has continued to grow. What is the reason behind this, and what changes will be brought to your current operation and product selection, we will share with you today.
Part 1: The impact of the end of the epidemic on the e-commerce market
According to reports from overseas media such as The Wall Street Journal and Bloomberg Finance, the financial reports of tech giants represented by Google, Facebook, and Amazon in the second quarter were basically lower than market expectations last week. With the end of Western countries, consumers' purchasing channels have become more dispersed, and the online shopping boom that has lasted nearly two years has come to an end.
At the same time, although Amazon's quarterly report was lower than expected, from the financial report, it seems that the Amazon market is still developing at a rate of 7%, and because Amazon invests more money in electric vehicles and new energy, Amazon's first quarter A loss occurs. But the 7% growth rate is still the slowest for Amazon in nearly 20 years.
Part 2: What do you think about the growth of Amazon's advertising business?
In addition to the growth of Amazon's online platform, the fastest-growing of Amazon's various business segments is the advertising business, which is growing at 25%.
I believe that the above two sets of data will make everyone worry about a problem. The Amazon market sales growth is only 7%, while the advertising revenue increases by 25%, which means that the sales growth of Amazon sellers will be less than the advertising growth of 18%, which is likely to cause Profits fell further.
And let's look at another set of data on Amazon advertising released by analysts last week, in terms of each order sold: Amazon's advertising investment is only
Google's 32% Facebook's 56%
In short, Amazon is still a relatively low advertising platform for Chinese sellers.
Part 3: What do you think of Amazon's inversion of sales and advertising growth?
This problem should be a challenge that our members and sellers cannot avoid. We can break it down into 2 aspects:
Amazon’s e-commerce market grew by 7% in Q2. Considering inflation and the entry of new sellers, it can be basically understood that for Amazon’s old sellers, sales basically did not increase, and even decreased. Q2 advertising spending continued to increase by 25%, which means that everyone’s Ad spend and ad ACoS are on the rise, almost an irreversible problem
But at the same time, compared to other platforms, Amazon still has a higher conversion rate, and the cross-border e-commerce industry continues to develop. And where will the seller's profit come from, this is a question that every seller needs to think about now.
From the point of view of Hui.com, Amazon's profit is likely to have to be further explored for the selection of products. The following are some summaries of Hui.com's smart camp process:
1. Profit margin
Let’s talk about the reason for this problem first, because this value is relatively intuitive, and everyone can find it through many tools. In the previous article, Hui.com shared with you that the current selection needs to be able to select products with a unit price of about $30 and a gross profit of about 40%, because the average CPC price of a single click on Amazon has reached $1.5-$3. between. If the listing copywriting, pictures, videos, and A+ are done well, and there are no negative reviews, the new product promotion needs to open different ad groups and discover conversion keywords, so the rational advertising ACoS for 7 days should be 20-50% , and then further optimized to reduce. Considering that advertising can also drive the generation of natural orders, products with a gross profit of about 40% can be profitable, and the profit margin can be further improved in the process of continuous optimization of advertising.
Amazon's pricing is very sensitive and closely related to ad performance. If a product is priced lower, you will find that your conversion rate will be better, but the overall ACoS will still be higher due to the higher ad CPC (price per click).
On the other hand, if the price of a new product is high in the entire market, and it is operated by a seller account (not a VC account), the problem that everyone is likely to encounter is that it is difficult to spend the advertising fee after your advertisement is opened. Meaning Amazon doesn't give you enough exposure. The other situation is that even if your advertising costs are spent, and you can see your own ads in the foreground, the conversion rate is very low. This also shows that your traffic on Amazon is completely obtained by advertising, and Amazon does not give you natural exposure to precise customers and more keywords. So even if you set a high price at this time, it is very likely that the ACoS will be high because the conversion rate is too low.
Therefore, placing an advertisement is not only to adjust the advertising campaign, but also to adjust the product price according to the order conversion.
The category we are talking about here is "precise sub-category". In terms of advertising, this category determines your keyword bids when advertising is placed, as well as the target ASIN bid. We will see that many sellers are more inclined to select products in categories with high sales volume of precise sub-categories, because such categories are easier to sell, but you may not have noticed that your advertising keywords and Bids for target ASINs are bound to be high, the highest we’ve seen even reach $8 for a word click, while the average selling price for a category is less than $20. If you want to make new products profit from such a category, or reduce ACoS to a rational level, it should be very difficult. The reason why old products can compete with you in price is that they already have a daily natural order volume. Even if the advertising ACoS is high, they are still profitable overall. However, new products can get orders from advertising, and the natural order volume will be very high. few.
Part 4: Amazon advertising costs give birth to new tactics
Summarizing the above points, now let's talk about a few suggestions for controlling and reducing advertising budget:
1. Unpopular categories
Regardless of whether you are selling old models or selecting products, it is recommended that you not focus too much on categories with fierce competition, but need to look at some categories that are not very large in sales, have few competitors’ evaluations, and are easy to obtain BSR rankings. , we call these categories "unpopular categories"
2. Virtual bundling
Everyone needs to have a flagship product in a highly competitive category and another product in an unpopular category. Then virtual bundle these two products, and push the bundled product as a new product, so that you will gain traffic and sales from the highly competitive category, and also make this virtual bundled product rapidly popular in unpopular categories. Get a good BSR ranking and even the Best Seller hit mark. Having this tag will further increase the conversion rate and reduce ACoS;
3. Pricing skills
Don't set a high price for new products on the shelves. It is recommended that you set a lower price than similar products first, and then start to increase the price after the conversion rate improves;
4. On-site activities
From the perspective of Hui.com, if you rely solely on on-site advertising, it is difficult to quickly improve ACoS. Generally, products with lower ACoS will regularly participate in spikes and other on-site activities.
5. Off-site promotions
Off-site promotions are also important, because the cost of off-site promotions is often much lower than that of on-site activities, and when you do off-site promotions, you must remember to display the discount code on Amazon’s front desk, otherwise Amazon will think that you are manipulating rankings. In addition, everyone also needs to pay attention that when setting promo codes for off-site promotions, be sure not to take effect at the same time as other on-site activities and coupons, so as to avoid unnecessary losses.
Part 5: Are there still less popular categories on Amazon?
Maybe everyone will now ask, with such fierce competition on Amazon, are there still unpopular categories? In fact, Hui.com can tell you here that there are many unpopular categories. Of course, finding similar categories also needs to be related to your main products, such as:
Waterproof fishing jackets are more competitive:
However, the hip pads used for fishing are in the outdoor category, and no sellers have released products in the entire category.
Therefore, everyone will make a virtual bundle, and then I believe that the products that are originally very competitive in fishing jackets will soon display the Best Seller mark in the front desk, and further improve the conversion rate and reduce the advertising ACoS.
I hope today's sharing will be helpful to you, and you are welcome to pay more attention to Huiwang Zhiying and join Huiwang Zhiying!