Amazon Coaches Merchants To Sell Smarter

December 21, 2015, 7:10 PM UTC
Photograph by Getty Images

Like many smartphone owners, Chris Boerner, a Seattle-based marketing executive who sells a line of pill holders, checks her phone far more frequently than she should. But she isn’t using it to post on Facebook or to text friends.

Instead, Boerner is addicted to a new app that e-commerce giant Amazon debuted quietly in August for merchants who sell on its marketplace. The app lets Boerner and other sellers get real time information about their inventory and sales along with suggestions about pricing and when to restock.

Selling Coach, which is part of Seller mobile app, is one of a number of new features that Amazon (AMZN) has rolled out over the past few months to merchants who sell in its marketplace, Amazon told Fortune exclusively. The goals of these tools is to give sellers more information to help them increase their sales.

Amazon, of course, sells and stocks its own goods. But merchants also flock to Amazon’s marketplace to sell their own products. Outside sellers now account for over 45% of total number of items sold on Amazon, a 5% increase since January, said the company.

When Boerner first decided to sell a line of pill holders for organizing medications in 2013, she was able to set up a business and an online storefront in a matter of hours. But actually drawing Internet traffic to the site beyond friends and family was a more formidable challenge.

“I was so proud of what I had developed and I thought I was going to sell out of pill holders in a matter of hours,” Boerner said. “That didn’t happen.”

Boerner researched her options and decided to sign up for e-commerce giant Amazon’s fulfillment program for merchants. As part of the program, Boerner ships her pill holders to an Amazon warehouse, and Amazon takes care of the rest including packaging the items, processing customer payments, and shipping. Of course, Boerner must pay Amazon anywhere from $1.50 to $100 per order, depending on size and weight, for the service — plus a standard fee.

The fulfillment program, which originally debuted in 2006, executive chairman, has seen a growth spurt in the past two years. The number of sellers using the service grew 65% from 2014 to 2015, according to Amazon. While the company declined to reveal how many merchants are signed up, ChannelAdvisor, a software maker for e-commerce, estimated that 30 million of 300 million items sold on Amazon’s marketplace are from third-party merchants enrolled in Amazon’s fulfillment program

The allure for many outside merchants is to be able to sell to Amazon’s estimated 50 million Prime members, who pay $99 annually to get anything from toilet paper to diapers to books delivered to them in two days or less, explained Scot Wingo, ex of ChannelAdvisor. Merchants are eligible to be part of Prime delivery only if they are enrolled in the fulfillment program, also known as FBA.

“FBA offers the ability to sell to the Prime customer base, which has been growing fast,” said Mark Mitchke, the vice president of fulfillment at Amazon. “For Prime members, they don’t see a difference between a third-party seller and Amazon, and customers appreciate the convenience.”

It’s no secret that Amazon believes its competitive advantage is in getting products to its customers faster than other retailers. The company recently revealed that it is exploring using drones to deliver packages to shoppers in 30 minutes (assuming the project ever gets off the ground), and is also deploying thousands of Amazon-branded trucks to make deliveries. In turn, more customers are seeking faster shipping, especially around the holidays. “Most buyers now expect things to be delivered within two days,” said Mitchke.

Amazon also tweaked product listing pages in September for all outside sellers so that they could show potential customers the estimated shipping time rather than only doing so at checkout. The goal is to better entice shoppers to buy items for sale.

Although Prime delivery is currently restricted to FBA sellers, Wingo says that Amazon is also testing a service called “merchant fulfilled Prime eligible.” Amazon is working with a set of larger merchants that already have warehouses across the U.S. and are able to deliver within the Prime two-day window. Because these merchants don’t need fulfillment services, they don’t need to use FBA, explained Wingo. But they do get access to Amazon’s negotiated shipping prices with companies like UPS, which are much lower than standard rates.

“This saves Amazon the cost of creating more fulfillment centers, while still adding more products available for Prime,” said Wingo.

Fulfillment is costly for Amazon. In the third quarter, Amazon’s shipping expenses increased 22% to $3.2 billion.

Amazon isn’t the only retailer that works with third part merchants. Amazon rival Walmart (WMT) now offers the ability for third-party merchants to sell on its online store. Merchants can also sell through eBay, although eBay (EBAY) doesn’t offer fulfillment services.

Earlier this year, Amazon introduced a new program called Exclusives, which incentivizes merchants to only sell on Amazon in exchange for promotions in Amazon search and help with merchandising. Boerner said she was about to create an online store with a “large, well-known retailer,” but at the last minute, she chose to join Amazon’s Exclusive partner program. “It was the biggest turning point for my business,” she said. “Sales have gone up 80% since because of the promotion.”

Amazon’s Mitchke said even larger sellers can benefit from some of the features Amazon offers sellers, especially when it comes to international sales. TechArmor, an Amazon merchant that sells screen protectors for mobile phones, iPads, and computers, says that Amazon has been instrumental in helping it enter markets like Mexico and India.

“Amazon allowed us to sell to markets we could never have entered by ourselves,” said founder Eric Tong. TechArmor sold 3 million products through Amazon this year, representing nearly $30 million in sales (minus Amazon’s fees of course). This year, nearly 20% of those sales will come from international markets, Tong said.

Amazon also premiered a new tool in September for sellers that translates their product pages for shoppers overseas. Amazon will also provide online and phone customer service for sellers in local languages.

Mitchke says that the company is also adding new data-focused features for sellers. A new inventory control panel that debuted in May on Seller Coach gives sellers data about how quickly certain items are selling, and points out which items aren’t selling as well. Amazon also tells sellers through the app when they could increase or lower prices, based on data of similar items sold throughout the site. The company provides recommendations on how to improve listings in order to generate more sales. For example, sellers can chose to automatically re-price products in real time to make sure their prices are competitive with similar products sold on Amazon.

For Amazon, launching new tools makes selling on Amazon stickier. Merchants are less likely to head to Walmart, or even create their own sites if they find more value from Amazon’s services.

“Amazon is really focused on what I call the fundamentals: selection, assortment, value, convenience and trust,” explained Wingo. “To provide those fundamentals to buyers, since 46% of the volume is from third-party sellers, Amazon is always improving the seller tools to encourage sellers to put up more product.”

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