Tripled Sales and Boosted Margins on Amazon

Getting to grips with Vendor Central, improving margins and accelerating sales is no mean feat if you have a small in-house team.  The complexity of the trading relationship and lack of support from Amazon makes it hard for 1P sellers to make headway.

By working with FordeBaker, WHM Pet Group was able to nearly triple sales within a year.  Here we’ll outline what challenges we faced that were impeding growth, how we solved them and detail the stunning results we achieved with WHM’s team.  This is a lesson in how to get the most out of Vendor Central and the importance of deep expertise with the uniqueness of trading with Amazon.

Before we get to that, a quick bit of background on WHM Pet Group. The business runs multiple brands that are producing pet food, animal feed and feeding equipment for the UK market. WHM has been trading on Amazon since 2019 and started working with us in June 2022.

Challenges

WHM came to us because they had big ambitions but commercial challenges impeded their progress.

Primarily that Amazon’s Vendor terms were punitive. The pressure on margin, particularly as raw material costs had increased through the pandemic and Ukrainian war, meant that WHM were reluctant to expand their catalogue and were unable to invest in advertising. 

Whilst low percentage margins were a constraint we were still able to improve the absolute profit. By improving sell-through rate on the existing traffic levels and thereby increasing the volume of sales.  We identified that most products had a low Best Seller Rank versus direct competitors. That meant the demand was there but our market share was low. Our first goal was to improve conversion rates and organic sales.

Knowing what we could immediately influence and what would take time to deliver enabled us to start showing results very early on whilst we developed our strategy to improve the business fundamentals.

Solutions 

With this two-pronged approach we set about improving the listings. That started with product selection. With over 150 SKUs, multiple brands and products with varying seasonality we had to properly understand the range and consumer behaviour before committing our resources.

Knowing where to assign resources based on product potential and demand is critical when trying to find the optimal way to scale. 

30% of the range was delivering 80% of sales so that’s where we started. At the outset, always try to build on success or signs of success rather than trying to revive your poorest performing SKUs.

With our newly formed product understanding, SEO methodology and conversion rate principles decided we could quickly move through listing improvements batch by batch.

Prior experience with very specific product types told us that we could achieve very high ROAS and increase spend with tightly focussed ad targeting combined with prominent placement of our target keywords in the listings.

Whilst our marketing and creative teams got to work on that side of the strategy our highly experienced Account Strategist sought to improve the commercial terms. Thankfully as a former member of the Vendor team at Amazon he knew exactly what to do.

Gross margin had to improve, and significantly so. WHM didn’t have an assigned Vendor Manager and we knew that all of our demands couldn’t be met within the first year of negotiations. That informed our strategy.  We established a negotiation position that would balance Amazon’s commercial goals with those of WHM.

That actually meant increasing rebate percentages in some areas but balanced against increases to cost prices (what it costs Amazon to buy the products) whilst understanding Amazon’s red lines.  Managing expectations and not asking for the world is important when conversing with very busy Vendor Managers who have their own KPIs to meet.

Negotiations are never easy but this is a difference an experienced Vendor Central specialist can make. Changes to terms and cost prices led to a 5% improvement in Gross Margin. Though it might look like a small percentage it was enough to unlock a 7-fold increase in ad spend and rapid improvement in sales.

Results 

With greater organic visibility and an increased ad budget we were able to drive sales from our target keywords and increase sell through rate.  Sending these targeted signals to Amazon’s algorithm enabled us to achieve a wide range of Amazon Choice badges.

Sales grew so fast that key products became top 100 best sellers in the very competitive Garden & Outdoors category.

Moving onto more commercial results…

• Conversion rate increased to 39.5% in 2023 and has since increased to 53%!
• Organic Sales were up +141% YoY and most importantly contributed 75% of total sales
• Ad Sales increased +200% YoY
• Shipped COGs increased +178% YoY 
• Units Sold increased 137%
• Amazon’s sales increased +154% YoY 

Key Learnings

When managing and scaling a business with a wide range of products, it’s crucial to identify business priorities, namely:

(i) focusing on the top sellers first

(ii) finding out what makes them unique compared to competitors and conveying these values to customers through the product detail pages, and most importantly

(iii) concentrating on the SEO strategy to improve organic ranking. Only once these actions are implemented is it optimal to push advertising as a growth catalyst. 

And perhaps most importantly, unlocking growth and understanding what levers to pull as a Vendor Central brand is critical to success. Navigating a 1P relationship without expert support is difficult and risks leaving profit on the table. At a minimum, know what your commercial terms are, how they influence your P&L and how changes to terms (rebates and cost prices) can be traded off each other to improve your margin when negotiating with Amazon.