Does COVID-19 change Amazon PPC?
The short answer is yes — you need to update your Amazon PPC strategy to match current events. But what this specifically means for you is a lot more complicated. It also has to be pointed out that the intricacies of PPC optimization likely aren’t your biggest problem right now. And if they are, you might be in a stable enough position that COVID-19 won’t actually require a large change in how you advertise on Amazon.
With that said, a solid Amazon strategy could help your business adapt and thrive. There is little doubt that lockdowns and social distancing will elevate the central importance of ecommerce to retail. Integrally connected to global supply chains and consumer spending, Sellers on Amazon will face both challenges and opportunities in the coming months: some brought on by COVID-19, and some by Amazon’s reaction to it.
In this article, we are going to explain all of this and more — helping you analyse how much energy you should place on Amazon PPC, and how to modify your strategy to see the best results in the era of social distancing.
Supply chain, inventory and fulfillment
The number one thing to focus on is your supply chain, your ability to fulfill orders and the inventory you have on hand. There is no point in having a PPC strategy if you're going to run out of stock or you can't get goods to your warehouse or your Amazon warehouse.
With global supply chains in flux, your specific supplies, your industry and contingency plans will all create a different situation on the ground that you will have to accommodate. Your relationship with Amazon also makes a difference.
FBA and ‘essential’ goods
The single biggest change to the Amazon ecosystem has been the transfer of FBA logistical priorities to ‘essential’ goods, and the effective breakdown of Amazon’s shipping monopoly on their platform. As you likely know, Amazon froze the delivery of ‘non-essential’ goods through the FBA network. In Amazon US and EU marketplaces, this was originally set to end on April 5. However, it was only as of April 13 that Amazon began allowing third-party Sellers to ship some non-essential items to its warehouses, and it’s unclear when FBA will get fully up and running again.
For FBA Sellers, this has created significant uncertainty and economic hardship. For Sellers already set up to fulfill their own orders (FBM), it has created significant opportunities. Under normal circumstances, the speed of FBA orders means Prime eligible FBA Sellers dominate the Buy Box. This is currently not true.
Ultimately, the situation will be very different for Sellers who have a large inventory, a solid supply chain and are selling products in essential categories; compared to those using FBA for products currently considered non-essential.
Types of goods
Even without FBA consideration, changes to shopping patterns caused by economic pressure and general market uncertainty have reduced discretionary consumer spending. With the exception of certain goods (like bread makers and fitness items), more money is being spent on essential goods such as food, medical supplies, and childcare, at the expense of luxury items.
You can look at these patterns generally, but you should ideally focus on the specific data you can gather about your existing product portfolio. Then use that information to focus your PPC spend on the products you have for which there is still demand.
Focusing your PPC accordingly
You need to make sure that you focus your ad spend on items that you have in stock, can fulfill and have shipping times that are faster than your competition. There's an argument to actually put spend behind those ASINs with the shortest shipping time. These products are most likely to win the Buy Box, particularly in the current situation.
Essential product PPC
For FBA Sellers, you are going to need to focus on your ‘essential’ product lines. Categories for essential goods include:
- Health & Household
- Beauty & Personal Care (including personal care appliances)
- Industrial & Scientific
- Pet Supplies
There is the caveat that not all products in these categories qualify as essential.
So, if you have them, you should focus on reallocating your budget towards more essential products in your catalog. If your competition is having fulfillment issues or is scaling back PPC, CPCs might drop. However, you could equally expect to see higher ACoS as competitors bid more aggressively to make up for reduced revenue in non-essential categories and capture the increased demand for essential items. Again, it’s critical to look at the specific changes happening within your market.
The issue for essential categories is to ensure you don’t burn through your inventory and risk running out of stock. Traditionally, to avoid this, you could have increased prices to stem demand. However, be careful of this tactic, as it could be construed as price gouging — which brings serious consequences.
For FBM merchants selling non-essential products, focus on high converting search terms. It would also be worthwhile to focus on targeting competitors' products, especially the ones that have a longer lead time than your product.
Even if you are able to sell non-essential goods, you should expect to see a decrease in conversion rate compared to essential goods, Especially as the increase in delivery dates seems to be leading to more shopping baskets being abandoned. Focus on high converting keywords/search terms for these non-essential goods to improve ROAS/ACoS.
The importance of brand
During market disruption, it’s easy to cut off ad spend unless there is a direct correlation to revenue. Everyone’s situation is different, and if survival of the business is threatened then no cost-cutting measure should be off-limits. But if you have the scope, it’s worth looking at higher funnel PPC activities to build awareness of your brand for when normality returns.
The reality is that if your competition is taking a shorter-term view, now is a great time to try and increase market share and brand awareness — if you have the cash flow. Depending on your industry, bid price and cost per click for Sponsored Brand or Sponsored Display ads could be very reasonable. Of course, don’t advertise products you can’t sell — but boosting the brand at minimal cost could pay in the long run.
Brand ‘perception’ is another reason to be wary of increasing prices, or advertising products that you cannot fulfill. Beyond short-term consequences like wasting ad revenue or having your Amazon account suspended for price gouging, you can disappoint customers. On the other hand, if you keep prices low, you are the brand that came through when your customers needed you. People remember those things.
Look out for opportunities
As mentioned, competitors may take a different path to you, and that should create opportunities. Look for competitor products that have longer delivery dates than yours. Look for competitors that are out of stock on certain lines and may be having supply chain problems.
Also, investigate who is now buying from you and whether the persona of those buyers have changed (analytics software is useful for this — but only if you have enough pre-and post-’Corona’ data).
While it’s always important to review and optimise your listings, the major changes occurring around us makes this crucial. If your buyers have changed in demographics or region, ensure you change your product descriptions, and the language used to match your new customer base.
Watch your costs
Generally, with your PPC campaigns, double-down on your profitable search terms and items. If you need major cuts, scale back/get rid of search term research campaigns and consider dumping ads that are higher up the funnel.
Also, look for anomalies in your matching reports, especially for broad match criteria. It’s possible that with such a sharp kick to the system, Amazon algorithms will be matching some peculiar and irrelevant search terms. Those are unnecessary costs that you don’t want to incur.
Control what you can
The most important factor for your PPC strategy is whether you retain visibility and control over your inventory. If you align your PPC approach to what you have available and what you can deliver to customers — you have done well.
This is a global crisis, happening in different time frames in different regions. Watch how different countries react as the virus recedes. Just as it came as a wave, COVID-19 will recede at different rates. Countries that recover earlier will give you an opportunity to see what might happen in your most important geographies during recovery.
And don’t forget — things will eventually get better. McKinsey research following the 2008/2009 slump associated larger marketing investments at that time with long-term resilience — growing revenue and market share. For those Amazon Sellers facing the full force of the lockdown, this may seem like a pipedream. Only you know the specifics of what’s right for your business, but it’s important to keep the future in mind. Things will get better, you only need to wait out the storm.