Sales Playbook: Amazon 101

Question 1

What is the breakdown of 1P Sales on Amazon vs. 3P Sales?

Answer 1

• 1P=30%

- 3P=70%

Question 2

What is the % of market share that Amazon has in the retail e-commerce space?

Answer 2

39% (compared with next up Walmart at 5% and Ebay at 4%)

Question 3

How many sellers are on the amazon marketplace?

Answer 3

1.6M

Question 4

How many new sellers join annually, daily, hourly?

Answer 4

Annual - 5M
Daily - 3.5K
Hourly - 146

Question 5

What is the average ACoS on Amazon?

Answer 5

22%

Question 6

What is the percentage of clicks an ad coverts to a sale (aka the average conversion rate)?

Answer 6

12.5%

Question 7

What is the average cost of 1 sale?

Answer 7

$6-7$ (8 clicks at 0.85 per click to generate one sale)

Question 8

What are the top 5 marketplaces across the globe?

Answer 8

• USA
• Japan
• Germany
• UK
• India

Question 9

What is the Amazon Flywheel?

Answer 9

The Amazon Flywheel is the strategy that arguably has made Amazon as successful as it is. The general idea is that the flywheel uses customer experience to drive traffic to the platform meaning more 3P sellers will use Amazon as a marketplace.

Question 10

What is the first cycle in the Amazon FlyWheel?

Answer 10

1. Amazon opens up it’s marketplace to 3P SELLERS
2. Doing so significantly increases PRODUCT SELECTION
3. This in turn improves the CUSTOMER EXPERIENCE for Amazon customers
4. This good customer experience then creates MORE TRAFFIC to Amazon
5. This motivates more 3P SELLERS to therefore join the marketplace (back to step 1)

Question 11

What is the second cycle in the Amazon Flywheel?

Answer 11

1. Amazon’s 3P SELLERS exponentially grow due to the first cycle
2. More Sellers on the Marketplace means more competition (supply increases) therefore creating a DECREASE IN PRICES
3. This in turn improves the CUSTOMER EXPERIENCE for Amazon customers
4. This good customer experience then creates MORE TRAFFIC to Amazon
5. This motivates more 3P SELLERS to therefore join the marketplace (back to step 1)

Question 12

What is the Amazon Flywheel in a nutshell?

Answer 12

In a nutshell, the exponential increase in both sellers and product selection both improves the customer experience while also lowering prices. Since a good customer service experience (due to lower prices and product selection) drives more traffic, more sellers are motivated to join Amazon. Overtime growth will create greater efficiency and lower fixed costs, which again lowers prices and improves the customer experience and so on..

Question 13

What is the third cycle in the Amazon Flywheel?

Answer 13

1. Amazon’s efficiency exponentially grows due to the first and second cycle cycle
2. This creates a decrease to fixed/transactional costs which allows Amazon to again decrease prices
3. This in turn improves the CUSTOMER EXPERIENCE for Amazon customers
4. This good customer experience then creates MORE TRAFFIC to Amazon
5. This motivates more 3P SELLERS to therefore join the marketplace (back to step 1)

Question 14

What are some pain points that arise for Brands and Retailers due to the Amazon Flywheel?

Answer 14

1. Amazon’s visibility on lower prices upsets retail partners and customers who charge/pay a higher price
2. Poor content management/photography is pushed by unauthorized sellers devaluing the overall brand
3. Poor customer service experience and counterfeit products sold by unauthorized sellers under the Brand’s name