Amazon holiday selling - An outlook
Despite gloomy economic projections, experts believe that the holiday peak season of 2023 is not going to be lackluster. According to Insider Intelligence, the holiday season retail sales are expected to grow 4.5% YoY (almost identical to last year’s 4.8% growth), bringing total retail spending to $1.328 trillion for the 2023 holiday season. Additionally, retail ecommerce is expected to make up 19.6% of total 2023 holiday sales.
To get the most out of this holiday season, it is important to ensure that your Amazon business is all set. You don’t have to take our word for it. Here are the numbers: in the 2022 holiday season, Amazon’s U.S. consumer sales increased by 9% compared to Q4 of 2021 and greatly contributed to its staggering $149.2 billion in GMV. And as a seller, we are sure you do not want to miss the Amazon holiday selling season.
Amazon holiday selling is crucial for most businesses; even seasoned sellers face multiple bottlenecks during this period. However, you do not have to fret. In this Amazon guide for the holiday season 2023, you will find the best and the most useful tips – for both FBA and FBM – to have a profitable and successful peak season.
Preparing for holiday selling on Amazon
As a seller, you must be prepared on multiple fronts to tackle peak season Amazon challenges and increase sales. From what’s the best Amazon marketing strategy to how to make your fulfillment and operations efficient, we have listed down everything you need to know to ace the Amazon holiday sales.
Amazon holiday policy and updated fees
Amazon, during the holidays, will levy peak season fulfillment fees for FBA sellers starting on October 15, 2023, and this will be in effect till January 14, 2024. And on January 15, 2024, the FBA fulfillment fees will return to the standard rates. FBA sellers have to pay an additional fee ranging from $0.20 to $2 depending upon the product size and category.
Similarly, during the peak season, Amazon also increases its FBA monthly storage fees between October and December. The increase in storage fees is anywhere between $0.20 to $2.5.
A recent Amazon policy that can affect FBM sellers during the holiday is its decision to impose a new price on merchants who do not utilize the company's logistical services. According to reports, third-party merchants who ship products using Amazon’s Seller Fulfilled Prime program will start paying an extra 2% fee on each sale they make from October. This is in addition to the 8% to 15% fee sellers usually pay Amazon. This move will make it more expensive for the sellers to ship their own products and push them to pick up Amazon’s FBA services.
Stocking up for the holidays
Ensure optimal inventory levels
Ensuring optimal inventory levels is crucial during peak seasons. Overstocking ties up capital, while running out of stock results in lost sales and disappointed customers. Also, sellers must adjust their product portfolios to align with shopping habits and consumer demands during peak season.
Effective supplier collaboration
Shopping activities and demand significantly increase during the holiday season, and informing your suppliers and vendors beforehand is important. Reach out to your supplier and share information regarding predicted order volume to help them deliver products on time and avoid stockouts.
Merchants fulfilling their own products must distribute inventory properly among their warehouses and 3PLs or a combination of both. However, for FBA sellers, Amazon suggests sellers how they must distribute their inventory among multiple warehouses.
Alternatively, sellers can opt for the Amazon Inventory Placement service that allows for shipping inventory to a single location, and the distribution is handled by Amazon thereon.
How do you sell more during the Amazon holiday season?
Promotions, coupons, and more
Did you know that 44% of Amazon shoppers are more likely to buy a product if it is on promotion? Therefore, promotions on Amazon are the way to go if you want to persuade customers to buy your products during the holiday season. Sellers can create and manage their promotions using Amazon's Seller Central platform. They can target their promotions to specific customer segments and product categories. Coupons are another way to attract customers during the peak season and help you stand apart from the competition.
Similarly, you can start running Amazon holiday deals to increase sales and drive traffic to your product listings. Also, sellers can offer a BOGO (Buy one get one) offer to sell out their products fast. The continued success of deal days like Amazon Prime Day shows consumers are willing to spend if they feel they are getting a great deal. A 2023 peak season report states that more than 50% of sellers are introducing new deal days, coupons, or promotions to encourage more sales during the holiday season.
Invest in advertising
Advertising on Amazon is a great way to drive conversions and grow seasonal sales on Amazon during the holiday season. Leverage Amazon’s advertisement types, such as Sponsored Products, Sponsored Brands, and Sponsored Displays, to reach a wider audience. To promote individual products, Sponsored Products are ideal, while Sponsored Brands help you boost brand visibility. Sponsored Display is effective for retargeting and reaching potential customers off-Amazon.
All Amazon ads follow a pay-per-click (PPC), auction-based model. Every year, due to heightened competition, there is a drastic increase in PPC costs during peak season. The average cost of your PPC can vary from $0.10 to $6.00 per click.
The competition is fierce in popular categories like apparel, electronics, beauty, personal care, etc. According to AdBadger, the average CPC for the apparel and beauty categories on Amazon in 2023 is $1.50 and $1.60, respectively. And, during peak season, their average CPC can range anywhere from $0.20 to $5.00. Similarly, the average CPC for the electronics category is $1.75; during peak season, it can go up to $10.00.
How to create an advertising strategy to minimize CPA and maximize sales
Use long-tail keywords
Long-tail keywords are specific and often contain more words than generic short-tail keywords. They tend to have less competition and can be highly relevant to your target audience. Bid on long-tail keywords in your product category for higher conversion rates and lower CPAs.
Target high-volume and low-competition keywords
Before the holiday season, conduct thorough keyword research and identify high-volume keywords with low competition. You can use keyword research tools to understand search volume, keyword difficulty, and the level of competition. With less competition, you can achieve higher ad positions without overspending and increase the visibility of your ads. Additionally, make sure you add holiday-related keywords synonymous with gifting and all the festivities.
Start the adverts earlier
By starting your advertising campaigns earlier, you can enjoy several advantages. For example,
running ads for a longer duration allows you to accumulate more data, which is essential for optimizing your campaigns. And Amazon promotes advertisements that have been running for a longer time. Additionally, using the wide range of data, you can make informed decisions about keywords, targeting, etc.
Optimize your product listings
Always optimize your product listing before you launch your advertising campaign on Amazon. By doing this, you can convince your ideal shopper to click on your ad and purchase your product. Ensure the titles, images, and descriptions are optimized accordingly.
Understand the season-specific keywords that your competitors are targeting. You can start including them in your product listings to target and attract your competitors’ audience with this strategy.
Have a bidding strategy
According to most sellers, the bidding strategy that works best for the holiday is dynamic bidding – up and down. Dynamic bidding will increase the chances of your ad displaying for holiday keywords that are guaranteed to drive conversions and boost sales.
It’s no secret that customers who buy things online adore fast and free shipping. A 2023 Consumer Deliver Preference Report states that 63% of shoppers will forgo 1-to 2-day shipping in favor of free shipping.
Amazon Prime and Seller Fulfilled Prime (SFP) are popular shipping options on the Amazon marketplace that do this. For sellers who want to fulfill their own orders and have a Prime badge, SFP is the only option. However, to qualify for SFP, sellers must meet the strict requirements set by Amazon.
On the other hand, sellers who opt for FBA are automatically eligible for Amazon’s Prime badge. Amazon offers same-day, one-day, or two-day shipping options for FBA products. Furthermore, by opting for FBA, you tap into the customer base of 80 million Amazon Prime subscribers, who make up half of Amazon's customer base. Amazon FBA sellers also experience 3x more sales than FBM sellers.
Fulfillment and operations
Split your fulfillment between FBA and FBM
During the holiday season, ensure you split your fulfillment between FBM and FBA. For cost optimization, the best thing to do is to review your sales data to understand what items are your best sellers and identify those that make sense for FBA and FBM.
An easy go-to mantra is assigning your higher-volume products to FBA and your lower-volume products to FBM. The rationale behind this is your highest-volume, best-selling products must be processed through FBA to reduce your workload, and by keeping your sales volume high, you can increase your FBA limits.
Whereas lower-volume products that don’t sell as quickly must be fulfilled through FBM. You do not want them to lie in Amazon warehouses – the longer it stays, the more it costs. Another strategy is if you are selling in a highly competitive product category, FBA is a better option since it comes with benefits like fast shipping, reliability, Prime benefits, etc. Additionally, Amazon’s efficient fulfillment and high customer experience can help improve competitiveness. Whereas, if you are selling in a low-competition category, FBM is a good option.
To give you a perspective on the cost factor for FBA and FBM, let’s assume you are selling a paperback book on Amazon. Here are some of the areas where you will spend in FBA and FBM:
Fulfillment by Amazon (FBA):
- Amazon Referral Fee: 15%
- Amazon Fulfillment Fee: $3 per item (can change depending on the size and weight of the product )
- Prep fee and shipping cost to Amazon's warehouse
- Amazon levies penalties in the form of fees for packaging that does not meet FBA standards, like unplanned services fees, manual processing fees, etc.
- Removal order fee
Do not forget the storage and fulfillment fee increases during peak season. If you are a small seller dealing with products for $10 or under, the increased rate can significantly impact your profit margin.
Fulfillment by Merchant (FBM):
- Amazon Referral Fee: 15%
- Cost of packaging materials
- Labor and warehouse costs
- Shipping cost to the customer
- Customer service costs
Sellers can also outsource fulfillment by merchants (FBM) to 3PLs to meet the peak season demand. By optimizing your FBM operations using a 3PL, you save money and time. Moreover, some 3PLs will help you with gift-packing orders during the holiday season.
Use a prep center for FBA fulfillment
You must be on top of your sales game during the holiday peak season and have an efficient warehouse order management system.
Sadly, you cannot avoid mistakes creeping into your fulfillment process, and remember, Amazon does not take mistakes lightly – especially when packages do not meet FBA requirements. This is where FBA Amazon prep centers can help you.
FBA prep centers can ensure your products are prepped, picked, and shipped according to Amazon holiday selling guidelines and requirements set by Amazon. Furthermore, most FBA prep centers also offer storage facilities.
During the peak season, sellers do not have to invest in leasing a warehouse as it can get expensive. Finally, you will deal with high order volumes during the Amazon holiday season. This increase in order volume is not new for prep centers, given they deal with high-volume orders throughout the year.
Preparing for returns
According to Salesforce, it is estimated that 1.4 billion orders during the 2022 holiday season were returned, a 63% increase over 2021. Additionally, returns spiked during the six days after Christmas. Every shopping season is followed by the returns season, which is inevitable.
With FBA, Amazon completely handles fulfillment and customer service on behalf of sellers; this includes customer returns processing. It operates by its own customer return policy when determining if the item in question is eligible for a return and sellers have no say in it. Based on the return request, Amazon charges the sellers a restocking fee. To provide sellers with more insights into their returns, in March 2023, Amazon released a new tool under Manage FBA inventory called Return Insights.
For FBM sellers, in their seller-fulfilled return policy, Amazon states that the sellers must match or exceed Amazon’s return policy and accept returns within Amazon’s 30-day return window. To ensure a smooth returns process, we recommend you have a defined process in place before the peak season begins. Additionally, sellers can partner with 3PLs that offer returns as a service to manage the high volume of returns effectively.
Here are some steps sellers can follow to minimize returns:
- Fulfillment accuracy: Implement stringent quality control measures to ensure near-zero errors in order fulfillment, reducing the likelihood of customers receiving incorrect or damaged items.
- Size charts: Provide clear and accurate size charts for clothing and apparel products, helping customers choose the right size and minimizing returns due to sizing issues.
- Accurate product information: Ensure product descriptions, specifications, and details are precise, avoiding misunderstandings and returns from mismatched expectations.
- Original product images: Use high-quality, detailed product images that accurately depict the item, reducing the chances of customers returning products that differ in appearance from what they expected.
Returns statistics, processes, and challenges
According to a Shippo study, apparel has the highest return rate of 10.1% - one in every ten apparel purchased online is returned. The second on the list is electronics, with an exchange rate of 8.1%.
Returns for different product categories can vary significantly in terms of warehouse processes and challenges. For example, return processes for clothing and apparel are generally well-established and straightforward.
Customers typically initiate returns online, and sellers have to inspect and assess the condition of returned items and determine whether they can be restocked, refurbished, or need to be discarded. For electronics, the returns process often involves technical assessments and troubleshooting to determine the reason for the return.
The biggest challenge for apparel returns is restocking clothing items if they show signs of wear, such as makeup stains or odors. On the other hand, in electronics, handling and diagnosing technical issues can be complex and time-consuming, especially for high-end electronics.
How Hopstack helps FBA and FBM sellers with accurate high-volume fulfillment
Every holiday season has multiple fulfillment challenges for FBA and FBM sellers. This is precisely where a platform like Hopstack can help you. Hopstack simplifies the fulfillment process while ensuring high efficiency and zero errors. Furthermore, the platform is highly scalable and can handle high-volume fulfillment effortlessly.
For e-commerce sellers, accuracy is an essential factor for success, especially during the peak season. Hopstack WMS software ensures maximum efficiency and accuracy in high-volume pick, pack, and ship operations, and its built-in checks and balances can help you to drastically increase cost efficiency with every step in the fulfillment activity. If you are an Amazon seller looking to maximize the efficiency and accuracy of your Amazon fulfillment operations, schedule a call with our product specialist.