What is a good conversion rate on Amazon? What percentage of sales should I be spending on advertising? And what kind of click-through rate can I expect on my ads on Amazon?
Many of the nearly 2 million brands selling on Amazon.com Inc.’s online marketplaces around the world no doubt ask themselves these questions about performance. And now there’s a report that provides them benchmarks on 18 key performance metrics.
The report comes from Fortunet Partners Ltd., an investment bank that specializes in deals involving Amazon sellers and other ecommerce companies. Fortunet says its report, “Benchmark Guide for Amazon Private Label,” reflects data it’s obtained through its engagement with more than 150 Amazon-focused merchants in the United States, United Kingdom and Europe.
Fortunet assists Amazon sellers, direct-to-consumer brands and ecommerce technology providers in selling their businesses, and this guide focuses on how each of the 18 metrics impacts how potential buyers view an Amazon brand.
The Fortunet report divides the metrics into four categories: Amazon advertising, market and business performance, sales and financial, and operational complexity. For each of the 18 data points, it provides high to low scores and, in most cases, advice on how a seller can improve its performance.
Here is a brief summary of Fortunet’s assessment of the most important Amazon marketplace operational complexity metrics.
Operational complexity metrics
Number of parent listings
Number of main listings of products that can have variations, such as for color, size and style. More parent listings suggests a broader product range and potential to reach many customer segments as well as cross-selling opportunities. But it can also indicate that a business is complex, which can lower valuation.
- Benchmark: High >100, Mid-range 25-50, Low <10
Number of ASINs
The number of ASINs (Amazon Standard Identification Numbers) represents the number of unique products in a seller’s catalog. Each variant of a parent ASIN, such as different colors, has its own ASIN. Buyers use this metric to assess the size and potential market reach of a product portfolio. Buyers typically prefer a moderate number of ASINs, which offers opportunities for cross-selling and market expansion while reducing the risk of a limited product lineup. But many ASINs can increase operational complexity.
- Benchmark: High >200, Mid-range 50-100, Low <20
Number of suppliers
More suppliers offer flexibility, reduce reliance on a single vendor and enable price negotiations. Redundancy can avoid supply chain disruptions, but it complicates operations. Beyond the number of suppliers, long-term positive supplier relationships are vital.
- Benchmark: High >15, Mid-range 6-9, Low <3
Number of Amazon markets
Merchants can sell on 16 Amazon marketplaces worldwide and a robust presence on these shopping sites suggests a broader customer reach and potential for international expansion. Some buyers prefer sellers active on multiple marketplaces as a way to minimize over-reliance on a single market. Others prefer a more focused approach, as operating across multiple marketplaces requires human and capital resources. Buyers evaluate the distribution of sales and profits across marketplaces.
- Benchmark: High >8, Mid-range 4-5, Low <3
Multichannel business operation
How many online channels a brand sells through. Some buyers view companies that sell through many channels as offering multiple ways to grow without depending on a single sales channel. However, multichannel businesses can be difficult to manage. A successful multichannel business should attract a higher multiple of revenue or profit than an Amazon-only brand.
- Benchmark: High >10, Mid-range 5-6, Low <3
- Fortunet’s view: When considering expansion into additional online or offline channels, evaluate whether your products are a suitable fit for those channels and whether you have the expertise and team bandwidth for expansion, as well as the required working capital and logistical capabilities.
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