EP1: The Importance of Search Engine Optimization to Succeed on Amazon

This podcast is a learning and knowledge sharing hub for growing and established brands & retailers selling in and out of marketplaces, including Amazon. For this first episode, we’re gonna cover why the hell having a strong, elaborate Search Engine Optimization strategy is paramount for your success on Amazon. Hosted by Raphaël Menesclou, Head of Marketing and Othmane Sghir, CEO & Co-founder of DataHawk.

Episode Transcript

Raphael: Any consumer brand or retailer’s dream is to have that perfect mix between organic and paid traffic. 

Othmane: Whereas reaching organic dominance on Google Search results is extremely hard, notably for new and small consumer brands and retailers, especially those with a small product catalog, the story’s solely different from Amazon. 

Raphael: Meaning though that there’s still more than 90% of product page views stemming from organic search. 

Othmane: You also have more than 50% of product searches that are now starting on Amazon.

Raphael: Hey what’s up everybody. This is Raphael from DataHawk and welcome to the very first episode of Datahawk eCommerce podcast learning and knowledge, sharing help for growing established brands and retailers selling in and out of marketplaces including Amazon. This is going to be a place where we’ll be delivering great content for you that you can use right away for your eCommerce business. No fluff. Only interesting data, tips and insights from a software company that deals with millions of data points every day and serves some of the biggest names in the industry. For our first episodes, we’ll be focused on the retail giant that is Amazon. Every couple of weeks, we’ll dive into a topic that will help you increase your success as an Amazon merchant. Our guests will expand from DataHawk members to customers and other external guests from the industry and they are experts in their field. 

Raphael: For this first episode, we’re going to cover why the hell having a strong elaborate search engine optimization strategy is paramount for your success on Amazon, and I’m here with Othmane Sghir, CEO and cofounder of DataHawk.

Raphael: Othmane, bonjour.

Othmane: Bonjour Raphael.

Raphael: Maybe before diving in our discussion topic, we could quickly cover the obvious question of why Amazon?

Othmane: Yeah, definitely. And I think that the success of Amazon as an eCommerce platform is also naturally a driver of why a superior organic search performance is key to compete there. So in figures, we’re talking about a shopping destination with circa two hundred million monthly global visits. Hundreds of millions of prime members globally, including actually one hundred and five in the US zone, are an 82% US household penetration rate. An eCommerce market share of close to 50% in the US, a gross merchandise volume of more than three hundred billion dollars. That’s such a big figure actually that Amazon would rank as the fiftieth largest economy in the world if it were its own country. 

Othmane: So we’re also talking about a platform with tens of millions of products, close to one million active sellers in the US with at least one sale, hundreds of thousands of six figure sellers in the US, and tens of thousands of seven figure sellers in the US. There are also over a hundred and fifty thousand brands on Amazon that come alone, actually. So, uh, with all of this on mind, you probably shouldn’t miss out on not being on Amazon today. In parallel, it’s now also a platform where visibility for merchants is increasingly difficult and probably at an all-time high in terms of difficulty.

Raphael: That actually brings us to this episode topic. Uh, why should merchants operating on Amazon give search engine optimization major importance?

Othmane: Well, first of all, one should be cognizant of the paradigm shift that accelerated in the retail landscape over the past decade or so, which is the rise of the direct consumer movement and the plethora of digital native vertically integrated brands that popped up since Warby Parker probably in 2010. Their growth and success were made possible thanks to the availability of a place where they could showcase their products to consumers, which has been through Google, Facebook Instagram, and other social media platforms maybe.

Raphael: Right, and we’ve recently seen that in the S1 filing of prominent D2C brands, including Casper, where something like 73% of their 2019 gross profits was spent on sales and marketing.

Othmane: Correct, as also they’re in growth mode, actually. My point is that as in anything else in economics, with this rising demand for consumer attention and a limited media inventory, can a gradually sharp increase in cost per click and customer acquisition costs on those traditional platforms, which is now making it difficult for many of those brands to reach profitability while also having strong growth.

Raphael: So, any consumer brand or retailer’s dream is to have that perfect mix between organic and paid traffic, ideally in favor of higher organic traffic weight, right?

Othmane: Exactly. Now, whereas reaching organic dominance on Google search results is extremely hard, notably for new and small consumer brands and retailers, especially for those with a small product catalog, the story is solely different from Amazon.

So, for starters, you have somewhere around 10 organic search results per page on Google versus between 24 tp 48 or even 60 on Amazon. You also have more than 50% of product searches that are now starting on Amazon, so more than on Google. And I think the studies have even shown that this figure goes up to 75% for prime members which totally makes sense and is huge when you come to think of it. Plus, to some extent, you may argue that searches on Google are more top-of-the-funnel than on Amazon, where you’re really ready to buy.

Raphael: Yeah. In figures, some versions report conversion rates three to five times higher on Amazon as compared to their own operated eCommerce properties, if not more.

Othmane: Yeah absolutely. And given everything we’ve mentioned, you have to reach organic dominance on Amazon and have a well-oiled SEO strategy there. The odds are much higher (()) on Amazon than on Google SEO-wise. And your bottom line is going to be grateful.

Raphael: We mentioned the example of Casper. They’re actually selling on Amazon and doing great there. Many other brands in this sleep space are actually killing it there, including D2C pure players like (()) or others like (()). So why everything we mentioned is quite obvious to most of our listeners and gives background and broader context to Amazon, this is not an Amazon discussion. 

Raphael: Let’s get back to talking about Amazon specifically. Isn’t actually competition on Amazon already at all-time highs, and how does that affect merchants’ SEO strategies there?

Othmane: Well, you’re damn right. Competition is at record highs on Amazon, and that’s exactly why it’s paramount to have a superior organic performance there.

Raphael: And that’s all more the case as competition from Chinese sellers rose dramatically over the past 5 years or so. As Amazon started courting Chinese manufacturers, totaling over 40% of the total Amazon sellers base globally in just 3 years or so, the figure is now close to 50% in the US. It’s amazing.

Othmane: Yeah, and more competition means also more sellers competing for organic search results, but also for (), resulting in higher CPCs and squeezed contribution margins for merchants. So, let’s get back a minute to sharing figures, alright? When you look back at the pre-2016 period, I think the minimum recommendation from Amazon to be competitive in sponsored products was something around ten cents I think. And today, that figure is rather around one dollar. So, we’re talking about a 10x increase. You have an interesting study from JumpShot, I think, that highlights the fact that the share of Amazon product page views came from sponsored ads, increased from 3 percent in early 2017 to close to 8 percent by mid-2018 so that’s almost a three-fold increase.

Raphael: Sure, meaning though that there’s still more than 90 percent of product page views stemming from organic search.

Othmane: Exactly, so it’s still an SEO game, now more than ever, probably. And it always will remain so, I think. So, to talk about figures again, you have sixteen, twenty-four, or forty-eight purely organic search results per search query on Amazon, depending on the layout picked by Amazon’s algorithm. Then you have six to ten, sometimes fifteen additional slots allocated for other special results such as editorial recommendations, best-rated products, cheaper alternatives, customers who shopped Amazon’s Choice before, and other slots. Let’s call them cards. Which, by the way, is relatively recent for most of them and has increased competition and squeezed margins a bit further.

Othmane: So, on the forty-eight organic slots layout, which is the most common one currently, you have somewhere around twelve sponsored products. So that’s sixty total results and up to seventy with the cards. Now, assuming there are 10 of course. So, that means there are twenty percent sponsored results, or seventeen percent including cards, which take up to fourteen percent of the total results. So, in summary, this still leaves up to eighty percent of results for organic slots, or sixty-eight percent when you include cards. And I don’t see Amazon squeezing that figure any further actually.

Raphael: That’s very interesting, and I guess that getting on that special cards slot isn’t a piece of cake, especially for the editorial recommendation results. Alright so, despite the fact that there’s still a great opportunity to appear in organic results, those sponsored results and card slots are probably hindering the odds of getting clicks to your product page organically.

Othmane: Absolutely. You also need to keep in mind, that sponsored brands, the top of the fold better like advertising slots we treat products. That’s like one-third of the page that’s just gone. And very often, it’ll be followed by two sponsored products’ results, then boom – they may leave a single organic result at the top of the fold, or even none. Can you imagine?

Raphael: It’s crazy.

Othmane: Just go to Amazon for a second and search for headphones for instance to see what I’m talking about. Now when you know about the huge impact that search result rankings can have on click-through rates, you naturally should get paranoid about occupying the top positions.

Raphael: Yeah. Seventy percent of product purchases are said to be made on the first page of search results of a keyword, while seventy percent of clicks can go to the first three products.

Othmane: Actually, anywhere from fifteen to fifty percent of all clicks for a non-branded search can go to the first product. It’s huge. I think a good parallel can be known with popular studies run on google search results where you see an average click-through rate of thirty percent for the first result, fifteen percent for the second, ten percent for the third, sixty, six percent, sorry, for the fourth and four percent for the fifth and so forth. So, it interestingly follows a zip slot where the end result gets one divided band by end of what the first result got.

Raphael:  So far we discussed increasing competition and shrinking organic slots and search results in favor of more paid slots as two key drivers for squeezing profit margins for brands and retailers operating on Amazon. But there’s a third factor that pertains to the cost of selling on Amazon, right?

Othmane: Correct. So, fulfillment fees, for instance, for third-party sellers are increasing by an average of three percent in February 2020. Search fees increase as high as sixty percent over the past six years, when you look at the example of large standard-size items, and referral fees are at around fifteen percent in most categories and increased to seventeen percent for clothing and accessories. So, in other words, the cost of doing business on Amazon is at all-time highs. We’re talking about probably a minimum of twenty percent to thirty percent of a product’s price that goes to Amazon in most cases. And that doesn’t even factor in advertising costs, right?

This should probably account for around say ten percent on a blended basis, and that’s if you’re doing quite well. So, this means a minimum of thirty to forty percent would usually be paid to Amazon to sell there. If there’s one thing where merchants can make the most savings and optimize their margins the quickest, it’s probably on the advertising front. And that’s by either pushing for more organic sales thanks to better SEO performance, or a better return on ads spent, and of course ideally both.

Raphael: Mm. Right. Uh speaking of advertising, maybe the last word on the unique relationship between advertising efforts and organic results on Amazon?

Othmane: Yeah, I think that actually should be an entire episode on our podcast because it’s an exciting topic. But in short, running ads on Amazon, especially sponsored product ads., not only allows you to drive paid sales to your products, but it also helps you rank better in the organic search results as you send a bunch of signals to Amazon’s algorithm telling it how your products are great and relevant for phrase matches of the search result that generated paid sales. Also, as you increase your daily sales velocity through ads, you get the Amazon algorithm flywheel spinning in your favor and gaining increased organic visibility in multiple ways. That’s so unique and different from how it works on other search-driven search engines such as Google, right?

Raphael: To wrap up our discussion, maybe would you have a bit of short advice for our listeners?

Othmane: Sure. So, um, first, I think as we said, be on Amazon, right? Be on Amazon to the extent that’s a fit with your brand image and strategy. And think long before you argue otherwise as third-party sellers may still distribute your products there. Uh. Hello, Nike. Second, invest in your search engine optimization strategy and work on optimizing your listings on organic keyword rankings. And third, be data-driven and understand how your ad efforts are also impacting your organic performance. Go get yourself an Amazon analytics and optimization software if you’re not already using one. And, of course, and for the self-promo bit, check out DataHawk. Our software actually helps many data-driven organizations better pile up their eCommerce business on Amazon.

Raphael: Awesome. Thanks, Othmane, and thank you, everyone, for listening to the very first episode of the DataHawk eCommerce podcast, and we’ll see you very soon. Bye-bye.

Othmane: Bye. See you soon.