Rufus, Amazon’s recently launched, shopping-focused chatbot, is getting ads soon.
That’s according to a changelog published by Amazon this week (first spotted by AdWeek), which states that sponsored ads could soon start appearing in placements for Rufus users in the U.S. Ads will be shown based on Amazon search and conversational context, Amazon says, and Rufus may generate text to accompany existing ad copy in certain cases.
Image Credits:Amazon
“We continue to make enhancements to the Rufus experience, including improving brand and product discovery by introducing relevant sponsored ads that help customers discover selections related to their conversation with Rufus,” a spokesperson said.
The ads in Rufus test recalls Microsoft’s experiments inserting ads into Copilot, the chatbot in Bing and the company’s other properties, including Windows. AI being the costly endeavour that it is, it’s not exactly surprising that companies are looking for tried-and-true methods to generate a return on investment — or at least break even.
Not sure what to sell on Amazon? We’ve got you covered.
As the most popular ecommerce marketplace in the world, Amazon is a great place to open up shop. But if you want to make consistent sales and turn a profit, you’ll need to choose the right items to sell.
The goal is to find products with high margins, low competition, and plenty of demand.
And that’s precisely what we’re going to be helping you with in this post.
First, we’ll show you 7 ways to discover profitable products to sell on Amazon. Then, we’ll show you how to source products, and we’ll share some examples of trending products that are selling like hotcakes on Amazon right now.
And finally, we’ll wrap up with the answers to some of the FAQs that new Amazon sellers need to know.
7 ways to find profitable products
Below, we’ve shared 7 of our favourite methods for finding profitable products to sell on Amazon.
Note: Keep in mind that these are just ways to generate product ideas. You’ll need to crunch the numbers yourself in order to validate those ideas and determine whether or not a particular product could be profitable. For example, you’ll need to look at the average sale price of a given product, and then subtract your costs and selling fees from it to work out your profit margins.
1. Browse the Best Sellers list
Amazon’s Best Sellers list is the best place to start when you’re searching for products.
It shows you a ranking of the most popular products on the marketplace in different product categories, based on sales figures.
Start by opening up the web page, then select a department (niche/category). For example, if you want to sell health & beauty products, you might select the Beauty & Personal Care department.
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If you wanted, you could then select sub-categories within that department. For example, Skin Care > Face.
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You’ll be able to see the 100 top selling items within that department/category, which can help you find products that are guaranteed to be in demand in your niche.
Obviously, the only downside to this method is that while products on the best sellers list are in high demand, they also tend to have lots of competition. You’ll need a strong listing with competitive prices and great SEO optimization to compete.
Bonus tip: You can also see if a given product is ranking on any best-seller lists from the product listing. Just scroll down to the product information section of the page and look at the BSR (Best Seller Rating).
2. Check out Movers & Shakers
At the top of the Best Sellers page, you should see a tab that says Movers and Shakers
Click this, and you’ll see a list that shows you the biggest gainers in sales rank over the last 24 hours within any product department or category.
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This can be a really good way to spot trending items.
If something is featured on the Movers & Shakers list, there’s a good chance demand for that product is rising rapidly. If you move quickly, you can capitalize on that and make a ton of sales.
Bonus tip: If you’re focusing on trending products, make sure the rise in demand isn’t a ‘flash in the pan’ before you go all-in. Some products will trend upwards following a viral social media trend for a week, then suddenly plummet.
3. Use Product Opportunity Explorer
Product Opportunity Explorer is a free product research tool for Amazon sellers. It provides insights into what Amazon shoppers are searching for and purchasing.
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You can access Product Opportunity Explorer through Seller Central once you’ve logged in to your Amazon seller account.
From there, you can explore detailed reports for trending products in any niche, with data such as:
Search volume
Average units sold
Average price
Number of sellers
Seasonality
Customer reviews & ratings
Purchasing behaviour
You can use these metrics to analyse opportunities and assess the competition and demand.
4. Use a third-party Amazon research tool
Aside from the Product Opportunity Explorer, there are also a bunch of other third-party tools that can help you find profitable products to sell on Amazon.
For example, the AMZScout Chrome extension surfaces data to help you analyze opportunities as you browse the marketplaces.
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It can show you data on the number of sales, average sales prices, FBA fees, and the number of other sellers for each product in a niche.
Plus, it can also show you the net profit margin for that product, so you can easily pick out the most profitable items. And surface historical performance data, so you can see whether sales are trending up or down over time.
AMZScout is a paid platform but you can get some around 15 searches with their trial.
5. Look at what’s selling on other platforms
So far, we’ve looked at ways you can find profitable products by looking at what’s already being sold successfully on Amazon.
But another method is to look at what’s being sold on other online marketplaces/ecommerce platforms, like:
Ebay
Etsy
Shein
Temu
AliExpress
If you find a product that’s sold thousands of units on one of these platforms, there’s a good chance it will sell really well on Amazon too.
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Even better, if that product isn’t listed for sale anywhere on Amazon, it could be a fantastic gap in the market for you to fill. Products with zero competition on Amazon but proven demand on other platforms are golden opportunities.
6. Conduct keyword research to find a gap in the market
Another way to find profitable products with low competition is to do careful keyword research.
One way to go about this is to use the autofill method.
Start by typing a broad product search query into Amazon, e.g. ‘wireless headphones’. Then, add a modifier word, e.g. ‘for’, ‘with’, or ‘without’:
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You should see a bunch of pre-populated search suggestions full of long-string keywords. If something appears in these search suggestions, it’s a strong indicator that shoppers have searched for it before. In other words, it tells us there’s probably demand for it.
But because these long-string keywords tend to be for very specific products, there also tends to be low competition for them.
Try searching for different keywords that appear in the search suggestions after you use this method. Then, see if any other sellers have already created listings targeting those keywords.
If none have (or only a few have), this could be your gap in the market.
Bonus tip: There are tools out there that can help you to do keyword research more effectively. For example, some tools will show you the monthly search volume (a good metric to measure demand) and competition for each query. See our roundup of the best keyword research tools of the year.
7. Research the competition
Another easy way to find profitable products is to simply copy other successful sellers.
Start by choosing a niche, then look for the most successful Amazon sellers within that niche. These will usually be those rankings at the top of the page for popular products.
Click Visit the store to see what else they’re selling, and reverse engineer their strategy.
Don’t just make a carbon copy clone of their store, but look at which products they’re having the most success with and start there.
Bonus tip: Look at their customer reviews to see how you can differentiate your products/store to make them even better.
5 trending Amazon products to sell this year
The best way to figure out what to sell on Amazon is to use the methods above to research the market and find profitable products on your own.
However, in case that all seems like a lot of work, we’re also going to be sharing some specific recommendations of the best products to sell on Amazon this year. Here we go.
1. Alternative pet food
Pet food and pet supplies generally are great areas to focus on, as these product categories have a relatively low number of listings compared to their search volume, and profit margins are high.
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For example, ‘cat food’ has a monthly search volume of 150,000, but there were only 3,000 ‘cat food’ products listed on Amazon as of our latest analysis of the data, so there should be plenty of room for new sellers.
To differentiate yourself from the competition, it might be worth focusing on new kinds of ‘alternative’ pet foods that appeal to the growing niche market segment of health-conscious pet owners.
For example, searches for ‘raw dog food’ have been trending upwards, per Google Trends data.
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Likewise, searches for ‘vegan dog food’ are up considerably compared to a decade ago.
2. Wireless chargers
Wireless chargers are another great product for new Amazon sellers to sell.
They’re high in demand right now, with a monthly search volume of over 200,000. And there’s still a relatively low number of listings to compete with (around 1,000 at the time of our latest analysis).
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Plus, wireless chargers should be relatively easy to source. You should be able to get them for less than a dollar a piece if you buy in bulk from wholesalers on sites like Alibaba. And the average sale price on Amazon is $33.07, so profit margins are fantastic.
3. Bluetooth speakers
This is another product in the tech category that’s always in demand, with a monthly search volume of over 330,000.
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There are over 4,000 listings on Amazon for Bluetooth speakers, which isn’t too competitive. And you can help differentiate yourself from the competition by focusing on a specific section of the market.
For example, you might focus specifically on waterproof, portable, or outdoor Bluetooth speakers.
The average annual revenue that each Amazon listing for a Bluetooth speaker earns is around $243,000.
4. Korean skincare
Beauty & skincare products are some of the best products to sell on Amazon as they offer decent margins and are in high demand, but because the space is competitive, it helps to niche down.
As such, you might want to focus on ‘Korean skincare’. If we look at the Google trends data, it’s clear this is a segment of the market that’s really taking off.
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Monthly searches have been trending upwards sharply over the last couple of years as Western consumers become increasingly interested in Korean culture, making now the perfect time to sell Korean skincare products before it gets too competitive.
5. Scented candles
There are tons of scented candles on Etsy. But on Amazon, there isn’t as much competition as you might think.
There were around 10k listings as of our latest analysis, and the average revenue of each listing was over $52,000—that’s huge.
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Plus, it’s fairly easy to start selling scented candles as they’re relatively inexpensive to buy and widely available from suppliers. You could even make your own if you were so inclined.
Again, it’ll help to niche down and focus on a specific type of scented candle. For example, wood-wick candles, or candles made with soy wax.
How to source products to sell on Amazon
So you’ve found some products you want to sell on Amazon—but how do you actually get them?
Well, you have a few different options. Let’s take a look at each of them
Drop shipping
One way to source products to sell on Amazon is to work with a drop shipping supplier.
With drop shipping, you don’t have to buy any stock upfront, and you don’t have to worry about shipping/fulfilment.
All you have to do is pick the products you want to sell and add them to your Amazon store. When a customer places an order with you, you place the order with your drop shipping supplier and enter the customer’s details for fulfilment. Your supplier ships the product directly to the customer for you.
The great thing about this method is it’s super easy to get started with, and almost completely risk-free as you don’t pay for anything until your customer has already paid you.
To get started, you’ll need to sign up for a dropshipping platform. We’d recommend Spocket—it gives you access to thousands of products from drop shipping suppliers in the EU and US.
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Then, you can import products to your Amazon store and start selling. If you’d rather source products for drop shipping manually, you can browse AliExpress for tens of thousands of products suitable for drop shipping from suppliers in China.
Print on demand
Print on demand is another risk-free way of sourcing products without having to purchase any stock upfront, much like drop shipping.
There are lots of print on demand sites that provide a catalogue of blank, white-label products for sellers to customize. You can upload your own original designs to these products to create custom merchandise, then sell that merch through your Amazon store.
When you make a sale, the order gets sent through to the print on demand site. They produce the order and ship it straight to the customer, and you only pay for what you sell.
We’d recommend using Gelato as it has a huge catalogue of print on demand products for you to choose from including apparel, phone cases, wall art, mugs, phone cases, and more.
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Note: Gelato doesn’t offer direct Amazon integration, but it’s possible to send the orders you receive on your Amazon store to Gelato via Shopify.
Wholesale
Another way to get products to sell on Amazon is to buy them from wholesalers.
This tends to offer better margins than drop shipping but it’s also more hands-on. So, you’ll have to handle inventory management and order fulfilment yourself.
You can find wholesale suppliers on sites like Alibaba. You’ll usually need to buy their products in bulk to access wholesale prices, as most wholesale suppliers have minimum order quantities.
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Obviously, you’ll also need somewhere to store your inventory. If you don’t have a warehouse space of your own, you can use Amazon’s FBA (fulfilled by Amazon) service.
With FBA, you source the products from suppliers but Amazon stores them for you and handles shipping, customer service, and returns.
You’ll need to factor in the cost of FBA when determining your selling price.
Private label
Another way to source products is to work with a private-label manufacturer.
With private label manufacturing, you outsource the production of the products you sell to a third-party manufacturer but sell them under your own brand. It’s a little like print on demand but you have more control over your supply chain and the production process.
Depending on the manufacturer you work with, you may be able to direct them in terms of things like the materials and ingredients used, the size, colour, and length, the production rate, etc.
You’ll also have full control over things like packaging and branding.
To find a private label manufacturer, you can look in your local area, speak to other retailers that stock similar products to find out who they work with, or search online.
Bonus tip: Depending on how much money you have available to invest, you might even want to work with a private-label manufacturer to produce a completely new product of your invention. Check out our guide on how to come up with new product ideas for advice on getting started.
Retail arbitrage
With retail arbitrage, you buy products from other retailers (rather than suppliers) and then resell them on Amazon at a mark-up for a profit.
An example might be buying a $10 product from Walmart and then listing it for sale at $40 on your Amazon store.
If you want to go down the retail arbitrage route, some good places to source products include flea markets, garage sales, off-price stores (i.e. T.J. Maxx), charity shops, etc.
DIY ecommerce
One final way to get products to sell on Amazon is to make them yourself from scratch.
This is perfect for products that can be hand-made, like soaps, candles, bath bombs, jewellery, etc. But obviously, it’s not going to be suitable for products that require a more complex manufacturing process.
According to a recent survey, the large majority of Amazon sellers make at least $1,000 per month in online sales. What’s more, the top 26% of sellers make over $25,000 per month in sales.
Can you sell stuff directly to Amazon?
Wholesalers can sell directly to Amazon through the Amazon Vendor Central program. However, it’s invite-only, so you’d have to have an existing relationship with Amazon in order to become a first-party seller.
Other than that, regular merchants can sell their products on Amazon, but not directly to Amazon.
What percent does Amazon take from sellers?
It depends on the category of the product sold. Amazon can charge anywhere from 8% to 45% of each sale in referral fees, depending on the product category (but often, it’ll be around 15%). In addition, there may be other fees such as listing fees, closing fees, etc.
If you’d rather not have to deal with Amazon’s referral fees, and you want to keep all of your profit for yourself, it might be a better idea to start selling products through your own online store instead.
You’ll need an ecommerce platform to build your store and start selling online. Check out our roundup of the 11 best ecommerce platforms to explore your options. Then, take a look at our data-driven roundup of the best products to sell online for ideas on what to sell through it.
Final thoughts
That concludes our in-depth guide to what to sell on Amazon.
Hopefully, you now know how to find profitable products to sell online, and how to source them.
Just remember: It’s not all about what you sell. The success of your store will also largely depend on things like your pricing, positioning, marketing strategy, SEO, etc.
Aside from managing editorial here at Blogging Wizard, Nicola runs Your Creative Aura where she teaches people how to write music. Nicola has the rare ability to take inspiration from the most mundane objects and turn it into catchy, and memorable lyrics. And, she is rather fond of penguins.
Here we go again, folks. First it was Amazon Fire TV, with a large (and apparently unescapable) ad that invaded the home screen. And Chromecast with Google TV reportedly is starting to do the same sort of thing, at least if a singular post on Reddit is any indication.
I haven’t been able to replicate the experience on my Chromecast with Google TV. That might or might not be indicative of anything. For one, I don’t use the Chromecast as my usual device of choice (though it does end up in my gear bag on most trips). For another, I run a Pi-hole ad-blocker on my entire home network — and still very much think it’s a thing you should use if you have any sort of connected TV or streaming device. Finally, and more likely, this new home screen ad hasn’t seen a widespread rollout just yet.
In any event, nobody should be surprised by this turn of events, even if we don’t like it. Google’s job is to make money. And it does so by selling advertising. Same goes for Amazon Fire TV. Same goes for Roku. And you can absolutely make the argument that Amazon, Google, and Roku are now advertising companies first, and anything else second.
Google, for its part, just announced $9.2 billion in revenue from YouTube advertising in the fourth quarter of 2023 (up from $7.9 billion in the fourth quarter of 2022.) “We’re pleased with the NFL Sunday Ticket signups in our first season,” Philipp Schindler, Google senior vice president and chief business officer, said during the earnings call.
But it was advertising — not pure subscription numbers — that stood out in the mention of YouTube TV and NFL Sunday Ticket. By literally cornering the market on out-of-market Sunday NFL games, Google is able to sell that many more ads. Lucrative ones, no doubt.
“Advertisers can buy from an NFL lineup as part of our YouTube Select portfolio,” Schindler continued. “And this actually allows advertisers to reach football fans across YouTube’s pretty unique breadth of NFL content, independently of whether you are viewing live NFL games or on YouTube TV or Primetime Channels or watching NFL highlights or postgame commentary on YouTube channels.”
Roku makes things even more clear. It made $787 million in revenue on advertising in the third quarter of 2023, but only $125 million on hardware. It’s an advertising company first. Everything else second.
Which brings us to the obvious question: Is there a streaming device you can buy that won’t bombard you with advertising? The answer is “yes,” and it also happens to be the streaming box that we think is the best you can buy — Apple TV 4K.
The Apple TV 4K home screen is boring. But it also doesn’t have advertising.Phil Nickinson / Digital Trends
You’re still going to get a lot out of Apple TV 4K even if you’re not in the Apple ecosystem. (I used it for years while I was still on Android phones.) In addition to hardware and software that practically lasts forever, you get a home screen that does not contain any display advertising. Not all ads are created equal, and display ads are the sort we’re talking about here. You’ll see the occasional (somewhat annoying) notification for a hot new show or movie on Apple TV. And you’ll eventually see a notification for a sporting event while you’re watching said game. It happens. And I still chuckle anytime it tells me to hop over to a “close” soccer match. They’re almost all close.
But Apple TV 4K does not have display ads. You won’t be tempted by a crispy chicken wrap. Or any other wrap. And definitely not any chicken. You’ll not see a home screen with much more than row upon row of app icons. The top row will give a couple show previews, but that’s hardly the same thing as a display ad.
That could one day change. Never say never, especially when potential revenue is concerned. But Apple, generally speaking, isn’t a company to sully its products with display ads, whether it’s on home screens or hardware. You’ll not find an ad attacking you from within the notifications of an iPhone, nor will you find a sticker affixed to the body of a MacBook letting the world know whose processor is inside. (Not even when Apple was still using Intel chips.)
For now, though? If you want the cleanest, ad-free user experience, there’s only one option. It’s not Google TV. It’s not Fire TV. It’s not Roku. And it’s none of the built-in TV operating systems.
These three tips can help you move products outside of this online retailer as well.
Amazon is a behemoth of a marketplace that every e-commerce merchant should be on, or at least consider. However, with competition so fierce, it can be all too easy to fade into the background.
Follow these three practical steps to get more sales on and off of Amazon.
Address issues proactively
Pay attention to product reviews and feedback. If a particular issue or concern is recurring, address it at the source, be it product design or shipment packaging.
Then, when a customer has a negative experience, apologize sincerely and offer solutions, which could be a refund, replacement, or a discount on future purchases.
Offer additional value
If your product requires assembly or specific instructions, consider creating easy-to-understand online guides or video tutorials. Link to these resources in your product listings or follow-up emails.
Another way to add value is to reward loyal customers with exclusive discounts or early access to new product launches.
2. Build brand loyalty
Building brand loyalty can be difficult when a marketplace has so many options and sellers to choose from. However, you can help promote customer loyalty by being strategic in your packaging and investing in your brand presence on social media.
Personalized touch
Consider including a personalized thank you note in your product packaging. While this is logistically more challenging with FBA, you can achieve it with some planning.
After purchase, you can also send a follow-up email checking in on the customer’s experience and offering assistance if needed.
Build an off-Amazon presence
Engage with customers on social media platforms like Instagram, Facebook, or Pinterest. Share behind-the-scenes content, gather feedback, and announce promotions. You could also create a brand website and encourage Amazon customers to sign up for newsletters. This allows you to communicate directly with your customer base and foster loyalty.
Providing stellar customer service can significantly enhance brand perception. Additionally, acquiring a new customer is often more expensive than retaining an existing one. By focusing on building trust, loyalty, and offering unparalleled support, Amazon FBA sellers can ensure long-term success.
Use an experienced FBA prep partner to ensure your product packaging complies with Amazon guidelines. Companies such as mine, MyFBAPrep, can help you strategize your unique packaging, source materials, put everything together, and send shipments into Amazon for you.
3. Enhance customer engagement and reviews
Amazon’s marketplace is competitive, and often the difference between a closed sale and a missed opportunity can be your product’s reviews and how you engage with customers. As such, you should actively solicit reviews.
Use Amazon’s automated email system
Amazon’s system can ask customers for reviews after they’ve received and spent time with their purchase. A gentle and neutral reminder can sometimes nudge satisfied buyers to leave positive feedback. Then, show appreciation for positive reviews with a brief thank you to foster goodwill and loyalty.
However, if someone leaves a negative review, promptly address their concerns. A professional and courteous response can sometimes turn a dissatisfied customer into a loyal one.
Brush up on Amazon’s review policies before you request reviews. Importantly, reviews must be honest and authentic, and you cannot incentivize positive reviews.
Handle returns gracefully
One of the advantages of Amazon FBA is its streamlined return process. Ensure customers know how easy it is to return products if they’re dissatisfied.
When a product is returned, try to ascertain the reason. This feedback can be invaluable for product improvements.
While a quality product and optimized listing are critical, how you engage with customers can make or break your brand’s reputation on Amazon. Positive interactions and reviews boost immediate sales and drive long-term success by building trust and credibility on the marketplace.
By prioritizing your customers and building loyalty, you can enjoy more sales and engagement both on and off Amazon. Having consistent customers, and providing a reliably good customer experience will help build your brand’s reputation.
As Amazon becomes the latest platform to push an ad-supported tier, TV writers greet this retro model with frustration and, in some cases, disdain: “I thought ‘Nine Perfect Strangers’ with commercials was horrible,” says David E. Kelley of his Hulu show with breaks.
Prime Video subscribers who visited the platform were greeted with a new prompt: “Movies and TV shows included with Prime now have limited ads. You can upgrade to be ad free for $2.99 a month.”
After a swift click on “not now,” this viewer cued up one of the more successful titles currently gracing Amazon’s roster — the second season of beefcake vigilante drama Reacher. Interruptions, which included a spot for another series (Hudson & Rex, starring a German Shepherd detective) and a reminder from the folks at Intuit TurboTax that filing season has commenced, were indeed limited. But in an era where more and more viewers are culturally conditioned to be repulsed by ads on any broadcast but the Super Bowl, even limited spots are conspicuous.
“We fought so hard to get rid of commercials,” says Alan Poul, executive producer and director of Max original Tokyo Vice, which returns for a second season Feb. 8. “It was one of the biggest steps in bringing the worlds of TV and film closer together, in getting that higher level of artist to participate. It was such a seminal gain, and now it’s reversing.”
If you’re not willing or able to part with an extra $2.99, $6 (Disney+ and Max), $8.50 (Netflix) or $10 (Hulu) to go ad-free, commercials are the new (old) normal. Paramount expands its own ad-supported tier internationally later in 2024 — and though no official plans have been announced, recent hires at Apple TV+ suggest the tech behemoth will eventually introduce ads as well. Subscriber frustrations, especially in a climate of unabated inflation, are a given. Feelings in the creative community, which vary from indifference to outrage, largely depend on where and how one works.
For Poul, whose stateside platform is still expanding its global reach, Tokyo Vice has to be made in a way that allows it to be sold to multiple platforms in other territories. Some of those have advertising and others don’t. And while act breaks — those are moments of deliberate transition in scripts that double as natural windows for commercials — aren’t written in to accommodate the potential for ads, Poul says such breaks are discussed with editors in postproduction.
Many scribes still pen scripts with those broadcast-friendly act breaks in mind. One of them, Terry Matalas, operated under the assumption that Star Trek: Picard might eventually find its way to a platform with an ad-supported tier while working on the series. When Paramount+ expands ads in a few months, his instincts will have been proven right. “I’d just hope showrunners have a say where the ads are,” says Matalas, “and that [episodes] don’t just break in the middle.”
The absence of any discussion around ad placement, for the creatives who spoke for this story, appears to be the norm — and a real sticking point for several. When filmmaker Lulu Wang spoke with THR in January, she was still unsure where advertising would be placed on her pricey Prime Video drama Expats. Adopting a weekly rollout, with the first two episodes having premiered before the introduction of the advertising tier and the back four dropping in this new era, Wang says she didn’t find out about the possibility of advertising until filming had wrapped. (Amazon publicly announced the plans in September 2023, solidifying the tier’s start date and price point in December.)
“I’m very angry about that,” said Wang. “If I had known, I would’ve created in a different way because it’s not a show that has cliff-hangers or commercial breaks to make sure people come back.”
David E. Kelley, the onetime broadcast golden boy who gave audiences Picket Fences, Chicago Hope and Ally McBeal before pivoting to premiere outlets like HBO (Big Little Lies) and Netflix (The Lincoln Lawyer), seems similarly disenchanted. In 2021, he released the first season of Nicole Kidman collaboration NinePerfect Strangers on Hulu. Depending on the viewers’ subscription plan, they got, by his estimation, two different shows.
“Sometimes it upends the piece,” says Kelley. “I thought Nine Perfect Strangers with commercials was horrible. We sold it as a one-hour show, and it was served like a pie — but it was pudding. You can’t cut pudding into slices, and that’s exactly what was done.”
Not everyone feels as strongly. When Wednesday creators Alfred Gough and Miles Millar delivered their Jenna Ortega drama to Netflix, the dominant streamer’s most watched English-language original to date, the pair baked natural moments for ad breaks into the episodes they delivered — more out of habit than anything. “’Propulsive,’ that’s the word you hear most in streaming … how to hook people and bring them back,” says Gough. “So while there are no act breaks in scripts like there used to be, the form is there. We’re not doing it because of any mandate from Netflix or [producers] MGM.”
Wednesday’s second season is being written in a similar fashion. And while Millar says there’s been no dialogue with executives about where to slot in said ads, it’s also not a concern: “If they asked us where act breaks go, we would tell them, but it’s pretty obvious.”
Francesca Sloane, co-creator and showrunner of Amazon Prime’s Mr. & Mrs. Smith, is in a similar boat to Wang. She learned about the ad-supported tier during postproduction and, come Feb. 2, has the first marquee series to launch under the new subscription model. She says they did not make any changes for where ads might go.
“I’ve written on other shows in the past where this question has come up,” says Sloane, who previously worked on Atlanta, Fargo and Seven Seconds. “Nine times out of 10, you just try to write the story without thinking about any breaks and then hope that it doesn’t create too big of a disruption.”
Whether they’re thinking about it or not, TV makers and viewers are running out of strictly commercial-free platforms. And those streamers that have already made the jump are doubling down. Netflix, which recently cited that 40 percent of all new signups opt for ads, announced the “retirement” of its least expensive commercial-free tier in the coming second quarter. Advertising, after all, isn’t just an additional revenue stream. It’s a way appease Wall Street with subscriber growth, and cheaper plans will always be appealing to a large portion of consumers. “The reality is that most consumers buy cheaper tiers,” says Kelley, “which is almost worse than broadcast. Then, you could at least TiVo your way through the breaks.”
This wholesale transition from the original promise of streaming would perhaps be rankling more writers and producers, were it not coming at a time of deep-seated frustrations with the entire ecosystem. The resolutions of the 2023 strikes offered gains and new assurances, yes, but Hollywood returned to work beleaguered by tighter budgets, mass cancellations and fewer green lights. Making TV without the concern of commercial breaks, like many perks of the past decade’s now-defunct TV boom, is a thing of the past.
“Losing commercials was one of the biggest steps in making TV more cinematic,” says Poul. “I’m happy to pay a couple extra bucks to not have them, but I know that’s not a luxury that is available to everybody.”
These are among the brands known as “loyalty juggernauts.”
Levi Strauss, Nike, T.J. Maxx, Walmart, Dollar Tree, TikTok, Costco, Sephora, Zappos and Amazon led in their respective categories in an index measuring loyalty and customer engagement.
According to the 27th annual Customer Loyalty Engagement Index, those are some of the brands that are “‘loyalty juggernauts” — brands of such overwhelming economic force that their ability to meet expectations makes them far more powerful than universal awareness alone,” said Robert Passikoff, founder and president of Brand Keys, the New York-based brand engagement and customer loyalty research consultancy. The index examined customers’ relationships with 1,200 brands in 114 categories. Some 95,607 consumers, ages 16 to 65, were surveyed.
For example, Levi’s won in the apparel category (91 percent); Nike won in athletic shoes (89 percent); T.J. Maxx was in the top position in department stores (79 percent); Walmart won in discount (82 percent); Zappos won in online shoes (90 percent); Costco won in price clubs (89 percent), and Amazon came in first place online (96 percent). The percentages indicate their ability to meet expectations consumers hold for the ideal (100 percent) in their category.
“This loyalty paradigm has changed dramatically since the ‘Cola Wars’ of the ’70s,” said Passikoff. “Today, loyalty — and consumer choice — don’t come down to one-or-the-other option. Today’s loyalty bottom line comes down to consumers’ deepest expectations, and how they feel which brand measures up best. Customer behavior and brand loyalty are now almost entirely governed by emotional values related to expectations and expectations grow constantly.”
Passikoff noted a few economic facts that substantiate the cost-and-effort effectiveness of brand loyalty strategies. For example, it costs 16 times more to recruit a new customer than keep an existing one. A 5 percent increase in loyalty lifts lifetime profits per customer by as much as 78 percent, and a 5 percent loyalty increase is equal to a 12 to 21 percent across-the-board cost-reduction program.
He noted that being a loyalty juggernaut moves brands beyond primacy of product, distribution, ad budgets, even pricing. Being a loyalty juggernaut essentially commands category leadership. “The ability to meeting those very high consumer expectations better than the competition acts like the ‘super glue’ of loyalty,” he said. “Brands create a virtually unbreakable bond with customers.”
Feature Image Credit: SOPA IMAGES/LIGHTROCKET VIA GETTY IMAGES
Last year, Amazon CEO Andy Jassy said that every business division at the company was experimenting with AI. Today, Amazon has announced its most ambitious AI product yet: a chatbot named Rufus to assist with your online shopping.
Imagine ChatGPT, but one that knows every detail about all the products in Amazon’s vast catalog. Plus, it is also connected to the web, which means it can pull information from the internet to answer your questions. For example, if you plan to buy a microSD card, Rufus can tell you which speed class is the best for your photography needs.
Amazon says you can type all your questions in the search box, and Rufus will handle the rest. The generative AI chatbot is trained on “product catalogue, customer reviews, community Q&As, and information from across the web.”
In a nutshell, Amazon wants to decouple the hassle of looking up articles on the web before you make up your mind and then arrive on Amazon to put an item in your cart. Another benefit of Rufus is that instead of reading through a product page for a certain tiny detail, you can ask the question directly and get the appropriate responses.
An AI nudge to informed shopping
Amazon
Amazon says Rufus is capable of answering generic queries such as “What to look for before buying a pair of running shoes” or simply telling it, “I need to deck up my workstation,” and it will automatically recommend the relevant products. In a nutshell, it’s a web-crawling recommendation machine that will also answer your questions, product-specific or otherwise.
“Customers can expand the chat dialog box to see answers to their questions, tap on suggested questions, and ask follow-up questions in the chat dialog box,” says the company’s official blog post.
For queries such as “Is this phone case reliable,” the AI bot will summarize an answer based on product reviews, Q&As, and information on the product page. At the end of the day, it’s all about making informed purchasing decisions with some help from an AI chatbot.
Amazon
Rufus is currently limited to a small selection of Amazon mobile app users in the U.S. as part of a beta test. However, this is an early version of the product, and Amazon also warns that Rufus “won’t always get it exactly right.” In the coming weeks, the AI chatbot will be made available to a broader set of users in its home market.
Rufus seems to be one of the more thoughtful and practical implementations of generative AI I’ve seen recently, and far away from the hype machinery built around the tech with hidden caveats. Plus, it seems to be free, without any Prime mandates.
The content-to-commerce strategy for ecommerce businesses is a relatively recent model, but I see it shaking up the industry in a big way.
Direct-to-consumer (D2C) businesses that lean heavily on fulfilment by Amazon (FBA) aggregators, in particular, could benefit big time from the model. Let me explain why.
How does it work?
The idea with this new model is that you own both access to the customers – i.e. the content – and the products to monetize it.
In typical D2C ecommerce, you own some brands that you sell on a combination of platforms, such as your own site, social channels and marketplaces. FBA aggregators like Branded and Thrasio are highly dependent on marketplaces.
Typically, though, their longer-term goal is to increase the ratio of products sold on their own channels and reduce reliance on Amazon. However, it’s difficult to do this profitably because customer acquisition costs (CAC) are too high with direct acquisition marketing.
Part of the problem is how these companies don’t have this kind of competency, so they need to learn it. D2C companies typically need to drive CAC down by getting better at content marketing and social media as well as building a community of users, among other skills.
With the content-to-commerce model, they solve this from the beginning by owning the customer channel/communities – media assets, access to influencers, and more – from the jump.
The Good Glamm Group
The Good Glamm Group is one of the first large content-to-commerce companies and is considered a pioneer by many in the industry. The firm has raised more than US$250 million to date and its last valuation was over US$1 billion.
Darpan Sanghvi founded the company – then known as a D2C business called MyGlamm – in 2017. But its CAC was too high, so the company experimented with content and acquired POPxo, an influencer marketing platform, in 2020.
The Good Glamm Group is structured into three core units:
Good Brands: Includes D2C beauty and personal care brands like MyGlamm, Organic Harvest, etc.
Good Media: Includes digital media brands that generate more than 4 billion monthly impressions and have over 2 million unique users
Good Creator Co: Includes influencer platform with more than 250,000 creators
In the past couple of years, the company has acquired 12 brands, which I believe puts it close to the aggregator model. The synergies and scale advantages that it aims to give to these brands are almost identical to the approach of aggregator firms.
Photo credit: Good Glamm Group
Good Glamm has also acquired digital media firms like Tweak Media, which has 6 million monthly active users and 15 million monthly impressions. It is now part of Good Media, joining other media assets in the group such as ScoopWhoop.
Form communities via content
Half a year ago, I came to the conclusion that D2C ecommerce brands should begin with content/community first. It means they should use content to build a community of followers via social media and then build brands that would resonate with their followers.
Why? Because this addresses the high CAC problems companies face later when using paid channels. It also prevents overreliance on marketplaces.
Influencers and media assets have the opposite problem. They have users and impressions, but the channels that they have to monetize – e.g. influencer platforms like Grin – often take a big cut. It makes sense for them to do away with an intermediary and deal directly with brands, particularly when they can collaborate with a specific set of brands.
Why aggregators will evolve toward this model
I’ve worked with two different FBA aggregators – Branded and Rainforest Life – over the past couple of years, so I have a decent sense of how they think and operate.
Their long-term goal is to build strong brands and a loyal community of users to wean themselves off the Amazon needle. As these FBA aggregators grow, they invest in more sophisticated marketing teams that can work with influencers and gain virality on social media.
But those efforts typically take time to improve, and they’ve already acquired a bunch of D2C brands with significant sales volumes in the meantime. Their content strategy is playing catch-up to make D2C channels such as Shopify and social selling more relevant than their Amazon sales.
This is why I think we’ll soon see large FBA aggregators like Thrasio move toward the content-to-commerce model in the coming years. It just makes too much sense.
Feature Image Credit: Amazon
By Ken Leaver
An American ex-strategy consultant that found himself in Lazada in 2014 and just loved the region so much he decided to stay. Now I call myself a ‘product guy’ and freelance while living in Bangkok.
MercadoLibre could have a multibillion-dollar profit stream on its hands.
Plenty of companies like to compare themselves to Amazon (AMZN 2.99%), and sometimes the comparisons are apt. Take MercadoLibre (MELI 5.72%), for example.
The leading Latin American e-commerce company operates with a similar playbook to Amazon’s, often with great success. Like Amazon, MercadoLibre operates both a first-party e-commerce business and a third-party marketplace, meaning the company sells its own products and allows other vendors to sell on its platform.
It also layers other complementary businesses on top of that, most notably Mercado Pago, its digital payments platform, which also reaches brick-and-mortar businesses through its point-of-sale machines. And like Amazon, it has its own logistics operation, Mercado Envios, as well as a lending arm, Mercado Credito, and even an asset management business, Mercado Fondo.
MercadoLibre has quietly launched a new Amazon-like business, advertising, and the early results are promising.
Bring on the ads
In its third-quarter earnings report, management said that MercadoLibre’s ads business reached 1.3% of gross merchandise volume (GMV), up from 0.9% in the quarter a year ago. Considering that GMV grew 31.5% to $8.6 billion in the quarter, that means that ad revenue nearly doubled in the quarter, reaching $112 million. That might sound insignificant, but it’s more than 4% of MercadoLibre’s third-quarter revenue.
Management also said that it’s accelerating its investments in advertising, moving more engineers to that segment to improve the product with better automation and personalization. And it expects those investments to increase ad sales and profitability. Growth in the ads business also helped improve its e-commerce take rate and its overall profitability as operating margin reached 11% in the quarter.
On the earnings call, chief financial officer (CFO) Pedro Arnt said that it rolled out many of the new ad tools at the end of the month, implying that growth in the ads business should accelerate in the fourth quarter.
Arnt also explained the appeal of advertising, saying, “I think what we see in the third quarter is just the natural evolution of an advertising business that there’s very strong demand for despite the macro backdrop given where we play along the conversion funnel.” The conversion funnel is an e-commerce term that describes the different stages in a buyer’s journey toward a purchase.
Like Amazon does, Arnt sees MercadoLibre providing valuable real estate for the brands that advertise on its platform since customers generally come to MercadoLibre knowing what they want to buy.
In fact, Amazon’s own CFO, Brian Olsavsky, made a similar statement about the strength of its advertising business on his company’s third-quarter earnings call: “Advertisers are looking for effective advertising, and our advertising is at the point where consumers are ready to spend.”
Both Amazon and MercadoLibre benefit from being at the bottom of the conversion funnel since advertisers want to be at the point of purchase.
Why ads are a big deal
Amazon’s advertising business is only a decade old, but it’s become a juggernaut for the e-commerce giant, on track to generate more than $30 billion in revenue this year. Though Amazon doesn’t break out profits in its ads business, it almost certainly generates high margins based on the performance of digital ad peers like Google and Facebook, which generate operating margins of 30% or better from advertising.
With a 30% operating margin, Amazon’s ad business would bring in about $10 billion in operating income this year. Its own advertising business has also proved to be more resilient than that of Alphabet‘s Google or Meta Platforms‘ Facebook in part due to its position at the bottom of the funnel. And MercadoLibre’s ad business has performed well in a challenging environment, too, as Arnt’s comments above indicate.
MercadoLibre is just starting to go down the same path as Amazon, and its recent investments in its ad products should only accelerate its growth. Amazon’s advertising revenue is about 5% of its estimated $600 billion in annual GMV, so 5% of GMV seems like a reasonable goal for MercadoLibre’s ad business as well. With its GMV now at an annual run rate of $34 billion, that would be equal to $1.7 billion in ad revenue, or roughly $500 million in operating income, assuming a 30% operating margin.
MercadoLibre’s e-commerce business is still growing rapidly, and it would only need to grow 25% annually to triple over the next five years. If the company hit that 5% target in five years, assuming GMV triples, it would have $1.5 billion in operating income from advertising.
Considering MercadoLibre had just $685 million in operating income in the first three quarters of 2022, that shows advertising could have a huge impact on the bottom line.
With profitability already surging and the company posting strong growth in a difficult environment, the emergence of the ad business is one more reason to buy the stock while it’s still on sale.
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Fewer people are starting their product searches on Amazon.
When you’re looking to find a product online, your first stop is most likely Amazon(AMZN -0.36%). The majority of online product searches start with the e-commerce giant, followed by a regular old search engine like Alphabet‘s (GOOG 0.59%)(GOOGL 0.39%) Google.
But Amazon’s dominance of product searches appears to be waning while search engines like Google remain resilient.
Is Google gaining ground?
Jungle Scout, a company that develops software for online marketplace merchants, recently asked consumers where they start their product searches online.
While 61% of respondents said they started on Amazon during the second quarter, that’s down from 74% in the first quarter of 2021. Meanwhile, search engines have remained steady at 49%. (Respondents could select more than one option.)
That might suggest Google is becoming a better discovery platform for online shopping. It’s been an area of focus for Google for years, even before former CEO and executive chairman Eric Schmidt called Amazon its biggest competitor.
Current CEO Sundar Pichai said investments in e-commerce are paying off. During Alphabet’s second-quarter earnings call, Pichai said: “People are shopping across Google more than 1 billion times each day. We see hundreds of millions of shopping searches on Google Images each month.”
Interestingly, Amazon wasn’t the only site or app that saw fewer respondents in 2022 versus 2021. In fact, practically every other potential response was selected less often, except for search engines. That includes Walmart and social media apps. That’s despite heavy investments from competitors, including Alphabet’s YouTube, in growing e-commerce on their platforms.
The survey shows Amazon is still dominating other retailers in the product-search space and fending off the growth of social media. Overall, consumers might be using fewer sources to search for products online, but Amazon remains the top option for more people than anything else.
Amazon has built a business as a search engine
The reason investors need to pay attention to Amazon’s position as a product search engine is that it now runs a very big business based on product searches. The bulk of its ad revenue comes from sponsored products and brands in its search results.
Last quarter, ad revenue grew 18% to $8.76 billion. That’s a $35 billion run rate. And that revenue is very high-margin relative to its marketplace, third-party seller services, and even its cloud computing business. Notably, that ad revenue growth has slowed significantly after monster increases in 2020 and 2021.
Amazon dominates e-commerce channel advertising even more than it dominates e-commerce. While its robust user base and meaningful data on its users help attract more-valuable ads, it’s the search traffic that has led to that dominance.
As e-commerce growth continues to outpace in-store sales growth, Amazon is poised to see the benefit of shifting ad budgets from things like end caps in store aisles to banner ads on Amazon and other online retail websites.
But Google sees that opportunity as well, and it could present a bigger threat to the growth of Amazon’s ad business than any of its retail competitors. While the most recent Jungle Scout survey indicates Google is making progress in e-commerce, Amazon remains at the top of the chart. For now, there appears to be plenty of growth left in Amazon’s ad business, but Amazon investors should keep an eye on Google’s progress in e-commerce advertising.
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