Amazon Digest - 12.22.24

Today’s edition is short because I got happily distracted by this view below for few days.

When this lands in your inbox I will be staring at the ocean, counting sand grains, and stuffing my face with freshly caught grilled fish.

It ALMOST could be called recharging, except for the minor element of constantly corralling two active children. *But not complaining

Amazon reimbursement policy changes

Amazon is coming for your net margins in FBA lost or damaged reimbursements.

Currently lost/damaged FBA inventory reimbursements are calculated by Amazon as: Selling Price - Fees.

Going forward it will be purely based on your COGS, with two options: you provide your COGS, or Amazon will determine that. Pick your poison.

“Effective March 10, 2025, we’ll reimburse you based on the product manufacturing cost of the affected inventory. To help provide you greater control and accuracy, you can choose how we determine the manufacturing cost for your products:

• We’ll provide a manufacturing cost estimate for you. This estimate is based on a comprehensive evaluation of comparable products sold by Amazon, by other sellers, and through wholesale channels.

• You can provide your manufacturing costs directly. If you don’t provide your own costs, we’ll automatically apply our estimate which you can change when you’re ready.”

Amazon JUST partnered with Intuit QuickBooks to help sellers do Amazon accounting, and have access to loans. Pure coincidence that inviting more transparency in your COGs via this policy announcement is coming few days after.

My strong recommendation is NOT to disclose your COGS - transparency is fair in an equal partnership, but Amazon, while being a powerful distribution channel, is a distribution channel, not your business partner.

This policy change will not break your Amazon P&L in your CPG business. However, I wanted to highlight this as a guard of keeping your COGS data to self, and the fact that Amazon continues to push margin optimization as a priority for the retail and FBA part of the business in 2025.

Perhaps like all should in our own business.

Offer - coming

Still in the works, but I am so excited to be working on what will be my flagship Amazon consulting offer in 2025: helping small businesses grow on Amazon with confidence and profit on Amazon. More sales. More profit. More sanity.

Coming January 2025

Product and pricing strategies  

Since I‘ve been doing some product and pricing focused work this week I wanted to share thoughts and decision framing that you may find helpful.

What products to offer and pricing are a HUGE piece of the success puzzle on any channel. It’s not even the product inherent features, or even product innovation. Albeit that is a must for true scale. But also product-channel suitability, product offer composition, pricing.

1. Your brand catalog belongs on Amazon - Amazon is like a town square for ecommerce. Everything that is worth offering or paying attention will be there. So if you have accomplished enough to get traction with consumres OFF Amazon, your products will be on Amazon. And the best person to offer your brand products is you. Not a reseller, distributor, or retail arbitrager. Brand equity, visibility, awareness even before sales and profit is the first goal of being on Amazon.

2. Product offer is not the same as your product - single unit, multipack, variety pack, bundle? Product offer is the right mix of a selling unit of your product. It can be singles, but often is not.

3. Unit economics is the yellow brick road - I always start here, because unit P&L has to have healthy margin on Amazon. Ideally 30%+ before marketing spend. I do hear a phrase that profit comes with volume, but it’s more suitable for retail than DTC. I’ve seen unit economics become THE healthy growth maker or breaker.

4. Seasonality and evergreen - to me evergreen are the backbone of sales and profit. And seasonal ones are the ‘double down’ opportunities. The barbell effect. Seasonal SKU give the burst of growth, as long as inventory and marketing resources are not overstretched

5. Killing SKUs to grow - it’s inevitable. Some SKUs have to be let go to let room for growth. This one at times creates healthy friction with passionate founders, because it can be tough to let underperforming SKUs retire. But there has to be a clear reason for a SKU contribution to the business: margin/money, customer journey, channel requirement. The worst territory is the ‘but it’s bringing some sales’. These middle ground SKUs take resources from winners but are not clear cut dead weight, so it can be hard to cut them.

Merry Christmas to you and to yours.

Irina