Amazon OLS Stores

How our test store generated a 135.28% ROI in its first month

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We recently released the recording of our Amazon Stores clinic. You can listen to a recording of this clinic here:

Windows Media Audio:
http://meclabs.com/cgi-bin/pl/pl.cgi?caw

RealMedia:
http://meclabs.com/cgi-bin/pl/pl.cgi?car

Are the new Amazon OLS Stores a viable marketing tool? What is the difference between the (old) Amazon zShops and the (new) Amazon OLS Stores? What costs are involved with running a store on Amazon.com? How difficult is it to set one up?

This research brief will answer those questions and will offer seven key points to setting up a successful store on Amazon.com.

1. What is the potential of the new Amazon OLS Stores?

OLS stands for Offer Listing Service and is part of Amazon.com’s ProMerchant Program. OLS Stores are currently invite-only; however, we have spoken to a representative at Amazon who said that they will accept applications from our readers in certain categories. We have included information on how to apply at the end of this report.

To test the effectiveness of these new Amazon Stores, we set up a test site and measured the results over the first 31 days. Here are the results of that test:

Test Store – Orders for 31 Days (May 20 – June 19, 2004)
Orders 27
Total Revenue $1,998.20
Average Order $74.01
Profit Margin 40%
Profit $799.28
Amazon Monthly Fee $39.99
Amazon 15% Commission $299.73
Profit After Fees $459.56
Return On Investment 135.28%

 

What You Need To UNDERSTAND: After Amazon’s fees, our test store profited $459.56 on 27 sales, with an average order size of $74.01. The return on investment (ROI) for this test period was 135.28%.

Based on these initial results, it appears that the new Amazon Stores do represent a viable, profitable marketing medium. In order to help determine whether Amazon Stores are right for your business, we will discuss the costs (and potential profitability) of running an Amazon Store in Section 3 below.

2. How do the new Amazon Stores differ from the old ones?

We have created a side-by-side comparison chart showing the differences between the new Amazon OLS Stores and the older zShops.

Amazon Stores – Old vs. New
Old New
Online Store Front X X
$39.99 Merchant Pro Fee X X
List up to 40,000 products X X
Commission from 6-15% X X
Products shown in zShops section of Amazon X X
Products shown as an alternative to Amazon products Less Qualified X
Products shown in regular search results X
Products shown in “MarketPlace” Match Only X
Unique pages and content X
Better product presentation and storefront X
More exposure than standard zShop X

 

What You Need To UNDERSTAND: The new Amazon Stores feature a number of improvements over the old version. In the old stores, products are only shown in the “MarketPlace” if they are matched to Amazon’s products.

A few additional major differences include:

  1. With the original zShops, you can only find products by searching in the zShop section itself. Occasionally, zShop products are listed as a secondary offer to a product carried by Amazon.
  2. With the original zShops on Amazon’s “MarketPlace”, you will be able to list your products ONLY if your product matches up exactly with a product Amazon carries directly. Your offer is still a “secondary” offer.
  3. With the new OLS stores, your products are listed identical to and alongside Amazon’s products. If Amazon does not carry the product, it will be added to their database, listed in search results, and will use the content you provide on the product pages.
  4. The OLS store greatly improves your exposure on Amazon. It is similar to Amazon selling the product and your company becoming the fulfillment center.
Related:  How to Reduce Friction and Anxiety in a Checkout Process You Don’t Control

3. What are the costs involved with setting up an Amazon Store?

The costs involved in setting up your Amazon OLS Store are the same as a standard zShop. You must have a “Merchant Pro” account which lets you use a data feed to load your products. There is a fee of $39.99 per month for this level of service.

Additionally, there is a 6-15% commission per sale. While 15% sounds pretty steep, note that it does include the cost of merchant processing, which for most merchants runs about 3% (after charge-backs and service fees). This brings the maximum total commission down to 12%.

While not every merchant can afford to pay a 12% commission, those who can will find the greatest success if they are able to fill up their stores with as many products as possible.

KEY POINT: Since Yahoo! Stores switched from a commission-based service to a pay-per-click service, Amazon is one of the only performance-based marketing options left for online marketers (besides setting up an affiliate program). If your profit exceeds the 12% commission and the $40/month fee, you will be able to crank up your Amazon volume with a positive ROI on every sale.

4. How difficult is it to set up an Amazon Store?

The set-up of the new Amazon OLS Store is MUCH more complex than the original zShops. For store owners with more than a handful of products, setting up a text-file data feed has become more difficult. Amazon now creates custom pages for your products (including your own content), so the data file is much more robust and thus more difficult to put together.

The last Amazon zShop data feed we built for a partner was a very basic 12 column spreadsheet. The new Amazon OLS Store feed has 68 or more possible columns.

Some of our partners were able to export their Yahoo! Store databases with an online export tool (or by parsing the XML export from Yahoo!) to build the original zShop. But these new stores require additional information that would be very difficult if not impossible to automate.

Amazon has provided detailed instructions on how to set up a text-file data feed here:

http://meclabs.com/cgi-bin/pl/pl.cgi?sai

We have provided an example data feed file below. This particular example illustrates the fields required for a store in the “General Electronics” category. It has 253 different fields of data! You can download the example file here:

Related:  How to Reduce Friction and Anxiety in a Checkout Process You Don’t Control

http://meclabs.com/AmazonStoresExample.xls

5. What are the seven most important points to keep in mind when setting up an Amazon Store?

  1. Pay close attention to your profit margin.
  2. Schedule a minimum of two weeks to build your data feed and customize your store before it officially launches.
  3. Keep the Amazon support email address and phone number near at hand because you will have questions.
  4. With all Amazon stores, prepare to process the orders manually unless you have development resources available for automation.
  5. All products must include pictures or they will not be listed.
  6. Include as much content as possible to improve relevance for your products in the Amazon search results.
  7. Expect an improvement in conversion once you establish a positive rating. Customers who have purchased products are the only ones who can rate your stores, so top-notch customer service is essential.

To get started selling products on Amazon.com, see:

http://www.amazon.com/exec/obidos/tg/browse/-/3472391/

The OLS stores are currently “invite only”, but they have agreed to allow MEC members to apply directly. You must include the following information on your email application: name, phone number, email address, company name, and company URL.

Additionally, you must meet the following five criteria:

  1. You must already have a fully functional website.
  2. You must have your own inventory (no drop-shippers).
  3. You must have a clear understanding of e-commerce.
  4. You must be able to manage your OLS Store on your own.
  5. Your store must fit into one of the following categories:Consumer Electronics
    Digital Cameras
    Computers
    Software
    Home and Garden
    Sporting Goods
    Apparel
    Health and Personal Care
    Watches
    Tools/Hardware

If you meet all of these criteria, please email us this information with “Amazon OLS Store Application” in the subject field and we will forward your information to Amazon.

Related MEC Reports:

As part of our research on this topic, we have prepared a review of the best Internet resources on this topic.

Rating System

These sites were rated for usefulness and clarity, but alas, the rating is purely subjective.

* = Decent ** = Good *** = Excellent **** = Indispensable

Selling at Amazon.com ***
http://www.amazon.com/exec/obidos/tg/browse/-/1161232/

Amazon Pro Merchant Services ***
http://www.amazon.com/exec/obidos/tg/browse/-/1161306/

Pro Merchant Quick Start Guide ***
http://www.amazon.com/exec/obidos/tg/browse/-/3472391/

Early Word on Amazon Stores **
http://www.nytimes.com/2003/12/22/technology/22ecom.html

Amazon Testing “Plogs” **
http://www.clickz.com/news/article.php/3362941

Amazon Unwraps A9 Search Portal **
http://www.clickz.com/news/article.php/3340581

A9 Blends the Best of Google and Amazon **
http://www.clickz.com/experts/search/opt/article.php/3344881

About this Brief

Credits:

Editor — Flint McGlaughlin

Writer — Brian Alt

Contributor — Jimmy Ellis

HTML Designer — Cliff Rainer

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