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What is the Amazon Flywheel and How Can It Help Multichannel Sellers?

Image of Gareth Cuddy
Gareth Cuddy

It's no secret that Amazon rules the eCommerce world. They’ve not only changed the game for online selling, but they've also led the way in it. Their marketplace started as a small online bookstore and has grown to a multibillion-dollar entity.

A big part of this success was Jeff Bezos' relentless commitment to the customer experience. Online shoppers flock to the site because it’s easy to navigate, has low prices, and contains seemingly endless options. When was the last time you looked for something on Amazon and didn't find it? It doesn't happen often.

 

Multichannel sellers can apply this same "customer obsession" approach in their company model, especially by looking at the "Amazon flywheel model." Below, we'll introduce this concept and show how it can help improve your eCommerce sales.

 

What is the Amazon Flywheel Business Model?

Jeff Bezos and the rest of the Amazon team know that pleasing customers doesn't just happen. It requires planning and a repeatable strategy that you can implement time and time again.

 

That's why the Amazon flywheel has been pivotal for the marketplace's growth strategy.

 

The flywheel, also called "the virtuous cycle," is a framework Amazon developed to improve the customer experience consistently and generate more sales. In his book, "The Everything Store: Jeff Bezos and the Age of Amazon," Brad Stone explains it this way:

 

“Lower prices led to more customer visits. More customers increased the volume of sales and attracted more commission-paying third-party sellers to the site. That allowed Amazon to get more out of fixed costs like the fulfillment centers and the servers needed to run the website. This greater efficiency then enabled it to lower prices further. Feed any part of this flywheel, they reasoned, and it should accelerate the loop.”

 

The Self-Sustaining Flywheel

Amazon flywheel

The above image, which originated from Amazon, shows how the flywheel strategy builds on its own momentum and eventually sustains itself. The starting point, however, comes down to a lower cost structure.

 

If you can limit your costs, you can bring down your prices, leading to a more compelling customer experience. Those experiences drive organic traffic, which draws in more third-party sellers for a marketplace, widens their selection, and leads back to better experiences.

 

At the heart of all of this is giving customers want they want. Multichannel sellers can adopt this mindset to better fit into the Amazon flywheel as third-party sellers. Having your own "seller flywheel" can help you have greater success on the platform and drive up profits.

 

So how do you do build one?

 

Sell Great Products

Successful stores sell great products. Marketing and sales strategies can take you far, but customers will eventually discover if you offer little more than smoke and mirrors. The product has to speak for itself.

 

If you haven't developed a great product yet or are considering pivoting to a new offering, try these steps:

  • Find your niche and stick with it. Remember that you don't have to compete with everyone, everywhere. The more niche you get, the easier it will be for your brand to stand out. That's true for marketplaces as much as it is for products.
  • Do the research. Figure out what people do and don't want. Look at keyword search volume, competition, and other factors to gauge the level of saturation.
  • Make your product stand out. Don't try to blend in with the crowd. Find your edge and promote it.
  • Work with the right suppliers and manufacturers. You can start cutting your own costs early by finding the right people with whom to partner. You don't want to sacrifice quality for speed, but you do want to find the right balance between the two. This way, you can offer the lowest prices to your customers while still offering them a great product.

Prioritize Your Pricing Strategy

Amazon flywheel

Pricing is at the heart of any successful eCommerce brand. So your pricing strategy should be a bit more thoughtful than simply looking at competitors.

 

Some quick tips for optimizing your prices include:

  • Analyze data to find information on customers, supply and demand, sales, customer churn, and yes, your competitor's prices, too.
  • Get feedback from your customers to know exactly what they like and don't like about the buying process, user experience, loyalty programs, and other customer-centric items.
  • Set clear targets and goals that your pricing strategy can help you achieve.
  • Experiment with discounts, bundles, tiered pricing, and dynamic pricing.

You can also check out our post on price optimization to get a more in-depth guide to improving your pricing strategy.

 

Optimize Your Product Listings

Once you've got a killer product at a competitive price, you can start thinking about the product listing page.

 

Your product listings exist to inform your customers how amazing your products are in a way that compels them to buy. However, doing so in a winsome way requires a bit of finesse, so you don't come off too braggy or desperate.

 

Brands use all sorts of strategies to create high-converting product listings, including:

  • Incorporating high-quality images and visuals
  • Using accurate product descriptions
  • Providing social proof and reviews
  • Triggering persuasion

In addition to converting browsers to buyers, great product listings can help your search engine optimization within the marketplace. Amazon wants to recommend brands that they trust, and great content is a surefire way to build trust with both the marketplace and your customers at the same time.

 

Consider the Customer Experience

Modern consumers look for positive experiences from the brands they buy from more than just about anything. They’ve become accustomed to getting their products quickly and efficiently, so they don't have patience for brands that don't provide that.

Great experiences should run through your entire customer journey. Customers should:

  • Have an easy time navigating your product listing to find the information they need
  • Receive their shipments promptly
  • Enjoy the product itself
  • Have access to support and educational material if necessary
  • Get a chance to join loyalty programs and other customer retention and community-building initiatives

The more awesome experiences you provide for customers, the more likely they'll be to return. Plus, happy customers tend to tell others about experiences they enjoy. This word-of-mouth helps build more momentum for your brand to help carry it through the rest of the flywheel.

 

Maximize Efficiency

As a multichannel seller, you have plenty to manage. Incorporating the flywheel strategy can feel extra overwhelming, but having the right tools in place can help you get the most out of it while maximizing efficiency.

 

Platforms like StoreAutomator remove frustrating administrative burdens from your team so you can focus on more important matters. In one dashboard, you can:

  • Manage inventory
  • Monitor sales across multiple channels
  • Create and edit listings for all your sales channels
  • Manage product data
  • View extensive analytics
  • Set up an automatic Amazon Repricing tool

The flexible software provides a single source of truth for all your channels, allowing you to spend less time and money on easily avoidable tasks. The costs cut and extra hours gained can help get that initial force to move the flywheel in the right direction.

 

Prepare for the Long Run

The Amazon flywheel strategy relies on momentum, and momentum builds over time. Success doesn't come overnight. It didn't for Amazon, either, though, so you'll be in good company.

 

The initial force takes the most time and energy to get through, so don't get too discouraged if you don't see results right away. Play around. Experiment. Test things. Figure out what helps you build momentum, and then figure out how to repeat it.

 

Having the right tools in place can help you get the momentum started and empower you to sustain it. If you'd like to learn more about how StoreAutomator can help, book a free demo with one of our eCommerce experts. We'd love to see how we can partner together.


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