Amazon wants Alexa to be everywhere, and it needs more voice data to feed and 'train' it so that talking to the assistant feels like talking to a friend. — Reuters
CHRISTMAS came early this year for Tea Forté Inc.
Amazon.com Inc. selected the company’s loose-leaf tea samplers and tea-steeping mugs as some of its Cyber Monday deals, causing one sampler to skyrocket to No. 4 in Amazon’s grocery rankings, up from No. 588 the day before.
“For us, the deal of the day is a game changer,” said Jurgen Nebelung, vice president of e-commerce and digital for Concord, Mass.-based Tea Forté. By sacrificing 35% of revenue per unit for the Cyber Monday discount on Amazon, Tea Forté did 6.5 times its normal sales volume on the site.
Tea Forté is one of more than two million independent merchants on Amazon, many of them jockeying to get their merchandise into the rotation for one of the site’s seemingly random holiday promotions. For an item to be considered, the online giant typically requires merchants to take a minimum 15% price reduction; sellers often slash prices further to try to get picked.While Amazon sells and promotes its own merchandise, third-party sellers of everything from coffee pots to pet accessories to pajamas contribute about 70% of the site’s sales, analysts say.
Such is Amazon’s holiday selling might that winning a slot in one of Amazon’s short-term promotions can not only propel a merchant to a higher ranking but also trigger a windfall of sales for the rest of the season, third-party sellers say. In addition, those chosen say the promotions improve their odds of showing up in consumer search results on the site.
Third-party sellers sold more than 140 million items on Amazon.com over the five-day Thanksgiving holiday weekend this year, according to Amazon.Because the window can be short between submitting an item and notification that it has been selected as a daily deal, some merchants take a risk and stock up on inventory before they know the answer.
For Amazon, promoting third-party sellers via limited-time offers is a way to offer a broad selection of merchandise and keep shoppers interested. In addition to its roughly 30 “deals of the day” on Cyber Monday and other big shopping days, Amazon also promotes outside merchants in less-selective “lightning deals,” which typically cost a seller a $300 fee although in some cases are free. Amazon collects roughly 15% of each purchase, plus fees for warehousing and shipping under its Fulfillment by Amazon offering.
An Amazon deal prompted Emily Kardamis to click “buy” late last month on a third-party item, a cat-shaped silicone touch lamp that cycles through eight colors. Ms. Kardamis, a web designer, discovered the $12.59 item in a tweet and clicked through to Amazon.com’s deal page, where she found the item was almost sold out.
Ms. Kardamis said she wasn't intending to buy a lamp. But “it strikes my fancy, and the price is also really good,” the Cleveland, Ohio, 24-year-old said.Amazon’s ability to keep up the steady stream of tempting impulse offerings year-round is possible in large part because of its vast base of third-party sellers. Many smaller brands sell only on Amazon, making some of the deals exclusive.
The variety of promotions makes for a type of “gamification of the shopping journey,” says Forrester retail analyst Brendan Witcher.
Traditional retail rivals like Best Buy Co. and Macy’s Inc. tend to take markdowns across entire categories or offer selected “door buster” prices to drive store traffic. Amazon’s third-party deals, in contrast, feature a huge variety of products in categories consumers might not actively search.
Amazon’s deal of the day selections hinge on two important factors—whether it thinks an item will be a hot seller and whether the discount is deep enough. Amazon also takes into account the number of units the seller is willing to offer and customer reviews, among other factors.
On Cyber Monday, Tea Forté featured eight products priced from $10.40 to $19.25. At the peak, it was selling one unit every three seconds. Tea Forté is offering additional deal lineups on Dec. 18.Deciding on the discount means “we just find that sweet spot,” Mr. Nebelung said. It is a price where the company can make money, protect its brand and fuel sales for the entire holiday season, he said.
Last year, it participated in a holiday deal on Dec. 2 and made it to some of Amazon’s best-seller lists. “It had a halo effect,” Mr. Nebelung said, adding that products that weren’t part of the holiday deal also saw a sales uptick.
A sales surge will influence Amazon’s algorithmic suggestions to consumers. Recommendations might include items frequently purchased together or purchased by customers looking at the similar items.
Coffee Gator Ltd. signed up for three deals on Black Friday and four on Cyber Monday. It marked down canisters and pour-over coffee makers by about 20% and sold more than 3,500 units on Cyber Monday alone, more than five times its normal volume.
Company founder Phil Williams says he submitted the number of units and the suggested discounts about two months beforehand. In mid-November, Amazon let him know he was selected. He was prepared, having already sourced inventory from China and warehoused it in Los Angeles.If he hadn’t been selected, Mr. Williams says, he would have sold most of the product in December and January and decreased his orders for the first quarter next year.
Amazon’s deals are a way for him to reach shoppers who aren’t searching for a coffee maker, Mr. Williams said. He has been selling on Amazon for about two years. “The deals are profitable,” he said.
Jason Boyce, chief executive of retailer Dazadi.com, hopes to help launch a rowing machine in a daily deal on Amazon this holiday season. He plans to offer 15% off its retail price of $129. Most of the company’s more than $20 million in annual sales come to it through Amazon.
“It gets more eyeballs,” Mr. Boyce said, adding that the deals page is “one of the most highly trafficked portals on the website.” - WSJ
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