Currently in beta mode, this program allows the ability for merchants to bid on keywords to have their Amazon products show up alongside search results, similar to Google’s  Adwords.

In short, how it works is, say you’re Tom’s Tennis Shop, and if you’re selling tennis rackets on Amazon’s marketplace you’re in for a bit of competition:

As of now you have little ability to leap the rankings in either getting your specific product to the top (where the Wilson Energy product currently is), nor do you have a ton of ability in getting your store to the front–at least in any quick or easy manner.

For anyone that’s never had to deal with the hassles of marketplace selling, essentially it’s a long-winded process in which Amazon will reward you for providing good service and positive feedback as your products get more popular, by increasing your product’s and store’s rankings for search terms.

But ultimately it’s a chicken/egg effect–how will your product ever gain popularity if it’s buried at the bottom to start with?

How It Works

Amazon is trying to help people like Tom’s Tennis Shop (for a fee) escalate the process by allowing them to gain quick exposure through bids. So if tennis enthusiast Tim does a search for “tennis racket”, he can find Tom’s Tennis shop in an ad that’ll take him to Tom’s shop–and in turn Tom pays Amazon a fee for the click.

This is on top of the commission he pays Amazon if Tim does make a purchase of course.

Doesn’t Amazon Already Have a CPC Program?

The difference between Amazon’s Sponsored Results and their Product Ads program is that Product Ads will take a merchant from Amazon to the merchant’s site, e.g. tomstennisshop.com.

What Amazon’s Sponsored Products program does is keep the merchant on Amazon, letting Tim purchase from Tom’s Shop from Amazon–so Amazon gets to keep the click money and the commission fee.

It’s somewhat similar to Google’s Adwords, where if a merchant finds it difficult to rank organically in Google’s results for competitive terms, they can purchase ad space from Google for a fee.

What Does It All Mean?

If Amazon starts to roll this out to more merchants, this could absolutely change how the largest marketplace on the planet operates.

For any merchant that either:

• is new to Amazon’s marketplace
• is currently doing low volume
• has good margins on their products even with Amazon’s commission
• wants to increase Amazon Marketplace volume (hint: nearly everyone)

This program will prove to be a tremendous asset if managed correctly. It should automatically provide a boost to a marketplace campaign, similar to any website that advertises using Google’s Adwords seeing a boost in traffic.

In short, like any marketing campaign, it allows merchants to throw money at Amazon to help their store.

Furthermore, any user that’s already on Amazon and is doing a search for your product (e.g. “tennis racket”) is automatically a very motivated buyer–as opposed to a Googler who may just be looking for information–and their conversion rates should be quite high depending on the specificity of your targeted keywords.

Not only that, the increase in orders–provided the merchant provides a high level of service–should automatically boost the merchant’s credibility in Amazon’s eyes.

This then provides them with a boost in “organic” search results in Amazon–so even if a merchant operates at a loss with this program, it could help them out big time in the long run.

In the end, with more merchants coming on to the program, the free-market (place) will dictate bid prices for keywords.

Similar to how Google’s Adwords have evolved with bids ranging from pennies to $40-$50+ per click for certain terms, a properly managed Amazon Sponsored Results Campaign could absolutely be a game changer.

For full information on what it offers, check out Amazon’s website.

If you qualify Amazon will be contacting you by e-mail.

BUT…

Who am I kidding, I work in E-Commerce and all E-Commerce retailers understand the pain associated with selling on the Amazon marketplace. Whether it is feedback management, ASIN matching, paying seller transaction fees or my all-time favorite — the Undercut. If you have not had the pleasure of being undercut by Amazon I have detailed the struggle below.

Step 1: You optimistically sign up for the Amazon Marketplace.

Step 2: You capture sales and profit, you have an excellent store rating – Life is good.

Step 3: Amazon recognizes that life is good.

Step 4: Amazon then contacts your manufacturer and says, “I am the King of E-Commerce.” Provide me with these same products so that we can sell them under our corporate Amazon account.

Step 5: The manufacturer understands how many more units he can sell with Amazon and offers Amazon “aggressive” pricing for the products your seller account helped them identify.

Step 6: Amazon resells the same products you do but at a lower price because of their scale, efficiency and (potentially) a sweetheart distribution deal.

Step 7: Your margins have become razor thin, and you now compete regularly with E-Commerce super power Amazon.  Life is not good.

E-Business pro Brian Walker elaborates on Amazon’s stance here.

“And while Amazon is contractually obligated not to observe individual merchants sales, it is not hard to aggregate data and gain insights. Some will see Amazon as a key partner in driving demand, others a lurking, very dangerous competitor.”

One way to avoid the Undercut but still tap into Amazon’s trusting consumer base, is to sign up for Amazon Product Ads. Depending on the inventory available, Amazon displays your listings at the bottom of SERPs or as product pages themselves. The kicker being that with Amazon Product Ads, the potential shopper is redirected to your actual website. You pay per click, avoid the fees, have the ability to remarket to your buyer and your information is kept safe.

But I digress…

As of yesterday I noticed another confounding issue with the empire that is Amazon.  A client of mine that lists on Google Shopping and on the Amazon Marketplace mysteriously had two listings for the same product on Google Shopping.

I followed the first listing back to the product page of the website it’s supposed to. Then I followed the second listing back to an Amazon Webstore. FYI, the Amazon Webstore is an “All in One E-Commerce Solution,” where Amazon creates a destination URL for you to list your products. Think of it as a concrete extension of your marketplace listings where your products are grouped together. The catch is that for all sales on said Webstore, you still provide Amazon with their cut — the processing fees, transactions fees, and the standard 6-25% markup. It doesn’t a take a rocket scientist to see how interests can diverge here.

I contacted my client concerning the Webstore and he informed me that no one in his company started the Webstore. With this knowledge, I contacted seller support on his behalf and received the following response:

Wait… What!?

Amazon had been submitting the product data  provided through its marketplace to the FREE Google Shopping so they could drive additional revenue to the sales channel they control and charge for. Not only was Amazon attempting to profit from an otherwise free listing but it was competing against my own listing. An otherwise cost free sale, is accredited to Amazon and subject to the associated CPA fee, all while I lose the ability to remarket to the customer I would’ve already acquired.

The “additional opportunity” Amazon offers should not include using Google Shopping as an affiliate, especially without the consent of the merchant.

We know every story has two sides; we encourage Amazon to reach out to us and submit a guest post to help the merchant community understand the purpose of the webstore program for marketplace accounts.

I’ve discussed before the differences between marketplaces and comparison shopping engines.

In Amazon there are two ways that merchants can advertise their products:

1. The Amazon Marketplace (a cost per acquisition marketing program).

2. Amazon Product Ads (a cost per click marketing program).

Proceed with Caution

Managing accounts on Amazon takes time and knowledge on the part of the seller. Amazon has particular requirements for its Marketplace and Product Ads listings for both feed format and account management. Considerable time and knowledge are necessary to manage these campaigns. Still interested? Keep reading to learn how to list on the Amazon Marketplace and place ads on Amazon.

The Amazon Marketplace

The Amazon Marketplace is one of the most well-known marketing channels for online retailers. To list products on the Amazon Marketplace, sellers are required to set up an account, and send Amazon a product feed. Marketplace listings are the seller results that appear when a query is typed into the search box. Unlike Amazon Product Ads, the Amazon Marketplace program does not link shoppers to a merchant’s site, as all transactions are performed on Amazon.com. Within the Amazon Marketplace program, there are two ways in which you can sell your products.

1. Fulfillment by Amazon

Merchants that participate in the Fulfillment by Amazon program send their inventory to an Amazon warehouse, where Amazon stores the merchant’s inventory for a monthly fee, which varies dependent on size.  Amazon then fulfills orders placed directly on Amazon.com or fulfillment requests that merchants submit for sales not on Amazon.

Merchants that participate in the Fulfillment by Amazon program are also eligible to be highlighted in Amazon Prime, an Amazon customer loyalty program that offers free two day shipping on all qualifying orders.

2. Selling on Amazon

Another marketplace option involves selling products through the Amazon Marketplace, but the seller handles fulfillment.  The transaction still takes place through the Amazon website, but sellers are responsible for shipping products reliably and on time. Sellers who do not fulfill purchases on time are susceptible to negative review.

Amazon Marketplace Fees

Amazon charges sellers 3 ways for listing its products on the Amazon Marketplace.

1. Amazon charges 6-25(25 percent of Kindle accessories) percent of sale revenue made on each purchase.

2. A .99 cent fee is levied on each transaction for all sellers, excluding Pro Merchant Subscribers who pay a monthly subscription fee of 39.99.

3. The Seller is required to pay a base closing fee, also waived for Pro Merchant Subscribers who sell in categories other than books, CDs and Vinyl, Videos, DVDs, Video Games, Software, and Computer Games.

Amazon Product Ads

Sometimes sellers cannot list products on the Amazon Marketplace. This can arise due to many issues, such as gated categories, or feeds without UPC codes. Amazon Product Ads is a viable alternative to the Amazon Marketplace, which still allows merchants to list on Amazon. Merchants can set up an Amazon Product Ads accountin much the same way as the Amazon Marketplace, through submitting a detailed product feed, and filling out some basic seller information. Amazon Product Ads are the less known links at the bottom of the search result (SERP) pages, labeled as Product Ads from External Websites.

Or become product pages themselves when no marketplace inventory is available.

Unlike listings on the marketplace, Product Ads listings link shoppers directly to the seller’s site, where the transaction takes place. This gives sellers the ability to grow their email lists, increase the lifetime value of those customers, and gives their brand more visibility.

Amazon Product Ads Fee

Amazon Product Ads charges merchants a cost per click or CPC to list their product ads on Amazon.com. For each click thru on an ad, the merchant then pays a pre-determined click charge. Merchants can monitor ad spend by using a maximum bid, or a daily budget. To increase visibility, merchants can also increase the CPC bid on products.

Amazon Product Ads or the Amazon Marketplace?

In the video below, our CEO Rick Backus outlines the differences between the Amazon Marketplace and Amazon Product Ads:

If you are unsure of which selling method to use, or do not know if you are eligible to sell on the Marketplace, contact Amazon Seller Support.

Which selling method do you use on Amazon? What issues/solutions have you found to selling on Amazon?

Check out the infographic (A CPC Strategy First!) below to see where Amazon is challenging rivals for marketshare in the consumer and enterprise spaces.

<a href="http://cpcstrategy.com/blog/2011/12/amazon-vs-the-world-an-infographic/" ><img src="http://cpcstrategy.com/blog/wp-content/uploads/2011/12/AmazonInfographic.png" alt="Amazon Infographic" width="613" border="0" /></a></p> <p>Source: <a href="http://www.cpcstrategy.com/blog" >CPC Strategy Blog</a></p> <p>

In an effort to raise awareness and adoption of their price comparison app for the iPhone and Android Amazon is offering a 5% discount up to $5 this weekend to shoppers  who opt to check prices in physical stores and complete the purchase on Amazon instead. To receive the discount shoppers must use Amazon's Price Check App while they are out shopping, place the qualifying product into their shopping cart within the application and check out on their mobile devices or PC's within 24 hours.

According to a recent pricing study by Goldman Sachs, Amazon’s prices for consumer electronics are 7.3% lower than the average price for the same product at big box retailers like Wal-Mart, Target, and Best Buy suggesting that consumers have an additional incentive to try to claim the promotional discount being offered this weekend.

With QR and Bar Code price comparison tools becoming more and more mainstream, it should be interesting to see if and how traditional retailers respond to the specter of thousands of consumers, armed with smartphones, dead set on getting the best deal on their small and big ticket purchases.

Late last week Amazon announced fee changes for their Fulfillment by Amazon (FBA) program that will take effect on February 1, 2012. For those unacquainted, Fulfillment by Amazon is an Amazon program where merchants store inventory in Amazon's fulfillment centers and allow Amazon to directly pack ship, and provide customer service for products sold on the Amazon Marketplace and other channels.
Summary of fee changes effective February 1, 2012

Pick & Pack Fee

• $1.00 for all Standard-Size Media and Non-Media Units priced under $25.00
• $6.00 for all Oversize Units.

Weight Handling Fee: $0.37 per pound based on the Outbound Shipping Weight.

Outbound Shipping Weight Calculation:

• Dimensional Weight: Following industry practices, for all Units with a volume greater than 5,184 cubic inches (based on length x width x height), we will use the Dimensional Weight if the Dimensional Weight is greater than the Unit weight. The Dimensional Weight is the volume of the Unit divided by 166.
• Packaging Weight: The packaging weight (box and packing materials) will be 2 oz for Standard-Size Media, 4 oz for Standard-Size Non-Media and 1 lb for Oversize products.
• Rounding: The weight value of the Unit (either Dimensional Weight or Unit weight) plus the Packaging Weight will be rounded up to the nearest whole pound.

Check out Amazon for more information about the new FBA structure