Q&A: eCommerce Tips for the Beauty Industry

On June 10, we hosted a webinar, where Pacvue’s Melissa Burdick and Rina Yashayeva, VP of Marketplace Strategy at Stella Rising, came together to talk about how the beauty industry has changed, and what brands can do about it. After Melissa and Rina shared their insights on how beauty brands are adapting their Amazon eCommerce strategy, webinar attendees had the chance to ask their own questions. This provided a great view into the main concerns and challenges of advertisers in the beauty industry. These are some of the top questions asked with valuable answers provided by both Stella Rising and the Pacvue team.

1. How can luxury beauty brands grow & thrive on Amazon?

Stella Rising: It has never been easier to launch a beauty brand on Amazon; however, it has also never been harder to succeed due to the sheer amount of competition. First and foremost, you must build a brand OFF Amazon to garner awareness. It is important to understand your goals and determine the role that Amazon plays in the overall eCommerce strategy. Then, hire a dedicated resource - someone with Amazon expertise to navigate Amazon’s unique set of systems and jargon; invest in content; and become very familiar with your competition and ask yourself what makes you different? Lastly, but most importantly, be prepared to spend. Make sure you have an appropriate advertising budget. A brand cannot succeed on Amazon if they let Amazon become an afterthought. Rather, a strong advertising strategy is needed to scale the business. The brands that thrive on Amazon are the ones that prioritize Amazon to be just as important as any other channel or retailer.

2. How should brands think about 1P vs. 3P? What are the benefits of each?

Stella Rising: Both the Vendor and Seller model have its pros and cons. First-Party (1P) brands or Vendors have a direct, wholesale relationship in which Amazon buys the inventory directly from the brand and fulfills to the consumer. The pros are that Amazon takes care of the fulfillment, shipping, and customer service. Cons include high accrual fees, lack of control of inventory and price-matching. This method has dramatically shifted in the past 2-3 years, and today is generally reserved for brands that are significant in annual revenue, with some exceptions. Third-Party (3P), on the other hand, or Sellers, are brands that sell in a self-service manner. They send product to Amazon’s warehouse, pay storage fees, and then Amazon fulfills to the consumer. The brand has greater control over pricing and inventory, and there are lower margins than in 1P. Amazon Beauty adds a layer of complexity as there are several different ways to sell, including Mass Beauty, Indie Beauty, Luxury/Premium  Beauty, Professional Beauty, and in each of these, there are 1P and 3P options. One is not necessarily better than the other; it depends on the brand’s budgets and goals. For the brands that are new to Amazon and just launching – FBA (Fulfilled by Amazon) is usually the most effective strategy.

3. How do you track down an Amazon Vendor Manager?

Stella Rising: The simple and straightforward answer is: you don’t. Amazon encourages a Hands Off the Wheel mentality, pushing brands to become self-service, especially those under several million dollars in revenue. Instead, hire an agency who has the relationships already built within Amazon and leverage their expertise.

4. Have you seen success with selling variety packs? How about multi-packs?

Stella Rising: Yes, we have seen success with both. Variety packs work well for Grocery or CPG brands that sell several different flavors or types of a product and work best when the variety consists of Best Sellers. Multi-packs are a smart solution for low-ASP (average selling price) ASINs, a common problem in Mass Beauty or Grocery. Depending on the type of product, a 3-pack, 6-pack, 12-pack, or 24-pack can be the solution to profitability. The pack size will depend on the product itself, as well as the fees associates with selling it on Amazon. A brand should put together a cost analysis to determine the best pack size.

5. I represent a small beauty brand on Amazon, and with advertising being SO competitive, what would your recommendation be around ad dollars?

Stella Rising: Sponsored Ads are critical to growing your brand presence on Amazon. The benefit of Amazon’s search advertising is that it is a real-time bidding environment without a minimum spend, and therefore you can spend as much or as little as your budget allows. Even a test of a few thousand dollars a month can provide a baseline of performance, which will help you determine your advertising budget for future months. Amazon DSP (Demand Side Platform) is a type of programmatic display advertising that uses Amazon’s shopper data and insights to reach consumers. You may retarget Amazon shoppers that have engaged with your brand’s products and cross-sell existing customers, or prospect by reaching new consumers. As DSP targets audiences rather than search terms, it is more of an upper-funnel tactic and oftentimes requires larger budgets than search. Depending on the brand’s unique goals, we suggest starting off with Sponsored Ads and layering on DSP should budgets allow.

Pacvue: If CPCs are inflating to a point that no longer makes sense, reducing spend on lower performing keywords and shifting that budget to DSP to test performance there could be fruitful.

6. What’s a defense / offense split in terms of percentage of advertising budget?

Stella Rising: At Stella Rising, our advertising strategy is to capture Brand demand in full (defense) before implementing Non-Brand (offense). Targeting Brand terms allows you to reach your most qualified audience – shoppers who are already looking for your brand, and therefore are more likely to convert. These campaigns result in the highest levels of conversions and return on ad spend (ROAS). Brand demand is limited, as it is created by the brand’s awareness on and off-Amazon, and therefore we suggest maxing out these campaigns first. If there is budget remaining after fully capturing Brand demand, we suggest allocating the remainder of your funds to Non-Brand. These campaigns have a much larger reach, however will convert at a lower rate, and therefore it is important to set advertising goals to determine profitability while spending.

Pacvue: The appropriate defense / offense split depends on your market share and the lifetime value of a customer. With a higher CLTV, defense is more important. Always lean the majority towards non-branded, while remaining agnostic between competitor and category terms. While there is no one size fits all approach, Pacvue recommends 20%-30% on Branded terms to play defense and 70%-80% on Auto/Category/Competitor terms to play offense.

7. How do you feel about pausing ads during peak hours to minimize CPC and increase ROAS?

Pacvue: We don't recommend pausing during peak hours, since that's when you have your best chance of getting in front of new customers and converting a sale (and potentially a new lifetime customer). Peak hours are peak because that's when people are buying. Follow the times with higher conversion, not just less competition. Use the real-time sales 24-hour data to test times out. If CPCs and efficiency are an issue, consider adjusting time-of-day bids using day-parting to significantly lower your bids for the first 2-5 hours of the day. If that doesn't work, pause campaigns altogether during those same hours to save budget and let your competitors exhaust theirs more quickly. In general, pausing during peak hours would definitely hurt sales and especially share for a brand long term.

8. In what ways can a brand continue to engage with consumers who have purchased their products through Amazon and possibly drive consumers to the brand site?

Stella Rising: Some brands use Amazon as an acquisition channel, to retain consumers on their own Direct-to-Consumer (DTC) site. One way to do this is by offering unique or limited assortment, or different case packs on Amazon, that may differ from the brand’s best-selling or core products. Therefore, once the consumer engages with the brand on Amazon, they can turn to the DTC site for the full assortment.

Special thanks to Rina and the team at Stella Rising for providing these insights. Please contact Stella Rising if you have any additional questions.

Let's talk about how they work, who is eligible and how brands can begin leveraging this important new advertising channel.
by 
Zachary Zaerr

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