Amazon CPG Digest - 08.24.24

Hope is in the air. I am talking about Back to School day.

Pencils and backpacks bought, haircuts done, uniforms cleaned.

Series of Q2 Earnings from major retailers are ushering us in from the summer haze into the fall.

Back to School season is great not only because it allows to regain your parental footing.

But also because Back to School Shopping (BTS) is like a step-child retail season: while important, somehow under-appreciated by many brands.

Consider some stats from Fit Small Business:

Total BTS spending is expected to reach $126 billion in the US

46% of BTS shopping takes place in August

57% of BTS shopping is online

54% of BTS shoppers use online search

I hope you see that reflect in your Amazon August sales.

With that..

E-commerce news

YouTube and Shopify Expanded Partnership

YouTube is expanding its partnership With Shopify.

Creators will be able to seamlessly integrate product tags into their videos, allowing viewers to discover and purchase products directly from YouTube.

Some specifics: 

• Content creators can tag brands they want to partner with directly in video content

• Tracking via discount code/URL for brands, which makes attribution

• Affiliate model gives brands more predictable cost per acquisition  

This is obviously YouTube take on TikTok growing threat, and TikTok recent partnering with Amazon.

YouTube + Shopify vs. TikTok and Amazon. Who wins?

Regardless of who you think will dominate the content and commerce partnerships, what is definite is video criticality in brand growth and building. 

Content from influencers, humans in general, that have an audience that trusts them is no longer for information, education, and selling own products.

It’s for driving ecommerce going forward. 

Marketplaces like Amazon will continue to be THE most important digital channel for brands online.

But the meta principle is shaping up to be:

Ecommerce alone keeps retail sales growing

According to the Department of Commerce, Q2 growth for e-commerce spending up 6.5%. While for brick-and-mortar sales it was a modest 1% growth.

Ecommerce is still a small part of total retail sales (16% of all US retail sales), but it is continuing to be the growth engine based on growth rate.

E-commerce leaders are the usual suspects: Amazon, Walmart, Temu, and Shein.

Perhaps we will see TikTok Shop on that soon as well.

Amazon August Insights

The Clashing Rocks of FBA Inventory Management 

There is a story of The Symplegades (Clashing Rocks) in Greek mythology. 

The Symplegades were two cliffs at the entrance of the Black Sea that clashed together whenever a vessel went through. 

They crashed many ships, with remaining timbers scattered by the sea or destroyed by flames.

FBA Inventory Management and planning in 2024 has felt very much like having to pass between The Clashing Rocks.

Here is a rundown of FBA Inventory Management biggest changes in 2024

March: 

New Low Inventory fee for items that fall below the threshold of anticipated sales volume

New Inbound New Placement fee for distributing inventory to fulfillment centers closer to customers. This fee averages $0.27 per unit for standard-sized products and $1.58 per unit for large bulky items

June:

Return processing fee- expanded to more categories to now include Home & Kitchen, Grocery, Pets if returns exceed the category return rate threshold. Return fee range of .30- $3.50 per item

August:

Amazon announces October 19 as the cutoff deadline for Black Friday and Cyber Monday availability.

Side note: In 2023 this deadline was October 26th, in 2021 - November 2nd. 

October:

The FBA inventory reimbursement window eligibility for claims will go from 18 months to 60 days. That means sellers will have only 60 days to file FBA reimbursements claims

October 2024-January 2025:

FBA Holiday Peak fulfillment fee - additional .19 to .40 fee per item. This fee is not new, but will play into your Amazon SKU economics for these months.

But business continues.

Here are updates in 2024 that help navigate FBA Management and its part of P&L easier.

May:

 The FBA Analytics Dashboard rolled out, with enhanced tools to monitor inventory levels, sales performance, and key FBA metrics. I am a big fan of it.

April:

Amazon waived Low Inventory level fees in certain instances, after sellers’ justified response to the fee original announcement. 

Side note: In its Q2 Earnings call Andy Jessy referred to this as “..our seller fees are a little lower than expected given the behavior changes we've seen from our latest fee changes.” Those misbehaving sellers. More appropriate would be to frame it as reacting to feedback from sellers, who Amazon itself call partners.

Lower FBA fee automatically applies for products priced under $10. Fee reduction average is .20 less per item

July:

 Amazon eliminated the overage fee for storage above your allotted capacity limit.  

August:

 Sellers can choose a transportation carrier from the Amazon Partnered carriers options. This gives sellers an ability to choose carriers they prefer to work with.  

While telling sellers in August to ship their FBA holiday inventory in, gulp, August and September, is unreasonable, this does push brands into more granular planning, with better alignment between holiday marketing promotion and anticipated  in-stock rates.

Inventory + marketing alignment = better results 

Ability to augment with FBM will give stronger footing as well.  

Back to The Symplegades: they stopped clashing when they were outsmarted by Jason from the Argonauts.  

 We help brands with strategy, channel management, revenue and profitability optimization, and operational buildout of Amazon channel. Schedule an intro conversation here, or simply reply to this email with your Amazon challenges

Stacked Promotions Setup Change

Many a horror story I heard about inventory wipeouts virtually for free due to oversight in making promotions stackable.

This is a small but very helpful change to minimize an operator type of error:

Brands can explicitly state if coupon or a promotion can be stacked with others or not.

Digital Services Fee (Canada only)

This applies to Canadian based brands selling on Amazon US:

The Canadian government has introduced a digital services tax (DST), similar to taxes in the UK, France, Italy, and Spain.

A typical fee will be 3% of the item’s price. An example: A $15 item will have a new DST fee of $.07 effective October 1st.

US based sellers selling on Amazon Canada will not be impacted.

Until the next edition.

Saludos,

Irina

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