what is amazon’s crap list and how to avoid it
TRANSCRIPT
Amazon has eCommerce’s most advanced strategies and algorithms to
ensure its profitability. While every product available on Amazon gets
ranked based on a number of shopper-related factors, the most important
metric a seller must consider is profitability; both Amazon’s and its own. The
slimmer the margin (or more negative, as the case may be) on any given
item, the less interested Amazon is in selling it. Amazon’s process for
measuring profitability is known as CRaP, or “Can’t Realize a Profit”.
What is Amazon’s CRaP List and How to Avoid ItBy Rob White, Account Executive at One Click Retail
In dealing with items that are approaching or
on the CRaP list, Amazon does one of two
things: 1) Redirect Customers to More Profitable Items
OR2) Use Less Profitable Items as Loss Leaders
For items approaching the CRaP list, a program (known as Pegasus)
places a widget at the top of the product’s detail page directing
shoppers to other products more profitable for Amazon, with headings
like “Lower priced items to consider” or “What do customers buy after
viewing this item?”
1) Redirect Customers to More Profitable Items
The most unprofitable items will eventually be discontinued, but for
many products on the CRaP list Amazon has a few strategies for turning
that loss into a gain:
EFP: Exclusively For Prime
Add-On Items
Subscribe & Save
2) Use Less Profitable Items as Loss Leaders
EFP: Exclusively For Prime
Amazon’s algorithms automatically add individual items to, or remove items from,
the EFP list based on weekly measurements of the item’s profitability. By making
marginally unprofitable items exclusive to members of Amazon Prime, some of the
loss is made up by membership fees, more frequent purchases, and larger single
orders. Because only Prime members have access to these products, EFP items
experience a 12% average decrease in sales. A similar (but voluntary) designation
for items is Prime Pantry, which can be set up by the manufacturer to improve the
profitability of low-price items.
Add-On Items
Low-profit items with a price point under $10 may be given Add-On
status, meaning only customers with a shopping cart over $25 may
purchase the item. This allows Amazon to make up for the loss by
spreading out the shipping cost among more items.
Subscribe & Save
Amazon’s Subscribe & Save promotion offers a 5% discount on
qualifying items when customers commit to purchasing the same
product on a recurring basis. This allows Amazon to save in two ways:
(1) by improving forecasting and lowering warehousing costs; and (2)
by adding more items to the box, spreading shipping costs across more
items. To help incentivize this behavior, Amazon offers a 15% discount
to customers with 5 or more subscriptions.
How do I Keep My Products from CRaPing Out?
To keep your products off of the CRaP list, there are 3
important things you can do:
Maintain a High Average Sales Price (ASP)
Offset the Product Cost
Lower Outbound Shipping Costs
Amazon uses an algorithm to set prices, and here are a few tactics you can use to keep your ASP high:
• Bundle items to increase the overall profitability while lowering the price per item.
• Set a Minimum Advertised Price (MAP) so, when the Amazon price is lower than the MAP, it will prevent
the price from being shown until the customer takes further action. Note – this is quite difficult to obtain
with Amazon and often results in multiple month stand-offs with the goliath retailer.
• Double check your listings to ensure that they are mapped to the correct items by Amazon’s pricing
algorithm.
• Produce custom eCommerce packs that cannot be matched. This isn’t simply a different unit count;
rather, a specialty pack with different flavors, items, etc. included.
1) Maintain a High Average Sales Price (ASP)
Amazon’s profitability metrics are based on many factors so it’s possible
for a product to remain profitable even if its cost is higher than its
selling price. How? You can offset the product cost by increasing your
budget in Buyer Merchandising, Amazon Marketing Services (AMS)
and/or Amazon Media Group (AMG). Accruals and other co-op
agreements obviously can also influence this.
2) Offset the Product Cost
Outbound shipping is one of Amazon’s biggest expenses. Remember – every dollar saved is one less dollar you
have to spend to get to profitability. Recommendations include:
• Provide ready-to-ship packaging and participate in Amazon’s frustration-free packaging when it makes financial sense. This
also lowers Amazon’s fulfillment center (FC) costs.
• Work with your In-Stock Manager (ISM) to ensure that your products are received and stocked correctly in the FC.
• Utilize Amazon’s mutually beneficial programs. Subscribe & Save lowers shipping fees by allowing Amazon to ship items
ahead of time at a slower shipping speed. The Vendor Flex program, where a section of your warehouse space is operated
as a miniature FC for your items, can reduce Amazon’s FC costs and increase the profitability of your items.
• Optimize your FC locations to fit closer to where customers are ordering can reduce “zones” of shipping – again, Amazon’s
largest P&L cost.
3) Lower Outbound Shipping Costs
Avoiding the CRaP list is an all-around win for you, Amazon and the
shopper: your product cost is high enough to make a profit, low enough
for Amazon to make a profit, and the retail price is in line with what the
shopper is willing to pay.
To get the latest and most accurate industry insights and reports, check out our weekly articles at
www.oneclickretail.com/insights, and follow us on Twitter and LinkedIn.
Final Thoughts
One Click Retail (OCR) is a market leader in eCommerce data measurement, sales analytics and search optimization for brand manufacturers in North America, Europe and Asia. Thanks to our proprietary sales calculations that are 98.5% accurate down to the SKU level, OCR’s accuracy is unrivaled in the marketplace. The OCR Product Suite provides 1st and 3rd party business intelligence across the 30 largest retailers such as Amazon, Walmart, Target, Staples and Home Depot. The world’s top brands, such as Procter & Gamble, Panasonic, Nestle, Hamilton Beach and HP, rely on OCR insights to drive sales and profitability across eCommerce.
Founded in 2013 by eCommerce experts from Amazon, Walmart, Target, Overstock and other leading retailers, OCR was acquired in 2016 by Ascential plc (LSE: ASCL.L), a UK-based international B2B media company with a focused portfolio of market-leading events and information services products.
To learn more about how OCR can provide your brand with the competitive edge in today’s ecommerce marketplace, visit www.oneclickretail.com.
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