Business growth and product line expansion go hand in hand, which is why Amazon sellers look to add more products into their catalogs whenever they need a boost. New products are enticing and have the power to attract a totally different consumer sector than the one that’s already shopping on your store, and they can also remind your existing customers to come back and see what’s new.
The effectiveness of expansion leads many high volume sellers to try and scale too quickly, so it’s wise to implement these strategies—and those in our white paper—for maximum ROI. Also, be sure to optimize your back end operations before expanding so you don’t lose track of the data that’s crucial to your accounting process. Accounting automation software is the foolproof solution that saves time, eliminates human error, and lets businesses scale without additional resources.
Not All Growth On Amazon Is Good
There are two situations in which Amazon sellers see growth but are actually suffering losses:
- Unprofitable growth
- Growth where ROC < COC
Unprofitable growth happens when your revenue grows but your costs grow faster. If you see a revenue boost from your new products but forget to estimate the associated expenses, there is a net loss for you, the seller. Here, Amazon makes money, but you don’t. Consolidating your costs into QuickBooks with accounting automation software lets you see which products are profitable, so you can then remove the unprofitable products from your catalog.
When your profits grow but the return on capital (ROC) is less than the cost of capital (COC), your growth on Amazon is overall unproductive. In other words, the return on your investment just isn’t high enough to justify reinvesting money in your business. Instead, try one of the solutions in our white paper, The Large Amazon Seller’s Guide To Expanding Your Product Line.
These situations show why it’s crucial to track cash flow, rather than relying on revenue alone. As a seller, you want to be the one who wins.
Where To Invest In Growth
The essential factor for growth as an Amazon seller is to invest wherever you have a competitive advantage. By doing so, you secure a corner of the market and aren’t in the constant battle for lower prices and more customers.
Customer captivity is one advantage that creates loyalty because it’s difficult for consumers to switch from your product to a competitor’s. The cost of switching involves time, money, and breaking a habit. Usually, it’s not worth it to the customer.
Another common advantage is economies of scale, where your marginal costs are lower than your competitors’ and can let you grow because those fixed costs can be spread out across more products.
Need ideas for new products that can help your business grow? Don’t miss our white paper, which also lists more competitive advantages for large Amazon sellers.
Evaluating Your Catalog
Before expanding your product line, it’s in your best interest to evaluate your current catalog and determine what to cut, what to keep, and whether it’s worth it to expand at all.
For example, catalog bloat happens when sellers accumulate products in their catalog that are either losing money or have very low margins. Most don’t realize this because many of the costs don’t fall under Amazon’s fees or cost of goods sold. With Webgility and QuickBooks, you can manage Amazon FBA fees and track profitability at the SKU level, discontinuing products that are bloating your catalog.
Though there was once interest in your now-unprofitable products, consumer demand ebbs and flows between industries and offerings. Tools like Google Keyword Planner and Jungle Scout can help determine what is currently in demand or if there is any at all—both helpful to know before investing in expansion.
Aligning New Products
Now that you’ve evaluated your catalog and determined that you’re ready to expand your product line, it’s time to decide how you want to achieve that growth. There are a few ways that sellers boost profits by strategically choosing/adapting products that drive one or more of the following:
- Volume growth: Sell products that you enable you to sell more to your current customers.
- Share growth: Sell products that allow you take competitor’s customers.
- Market growth: Sell products that bring new customers into your category.
- Price growth: Increase your prices.
- Quantity growth: Increase the volume that you sell.
- Cost-cutting: Lower your production costs.
Navigating Based On Target Audience
As a large Amazon seller, your top two considerations are your target market and how to create value within it. This means your strategy should revolve around the current strengths of your business and the market you service, rather than expanding at random and trying to be all things to all people.
Expansion requires a calculated approach in terms of both product choices and back end operations. Online sellers have the most success when implementing automation because it takes the stress out of the ecommerce accounting process, bookkeeping, and inventory management to make scaling easy. See for yourself how Amazon seller accounting software is the key to expanding your product line by booking a demo today.
For further inspiration, ideas, and examples of the above strategies, be sure to download our white paper.