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Much of Amazon’s ecommerce journey has been marked by success. Last year, a few dents in their armor started to become apparent. That’s because in 2023, more than half of the sellers on Amazon’s increasingly competitive marketplace saw their market share decrease. 

That’s a pretty clear signal of the escalating global economic challenges that in one way or another, we’re all facing. 

That sentiment is echoed by Warren Buffett’s observation, “it’s only when the tide goes out that you discover who’s been swimming naked.” For a lot of entrepreneurs, the past year helped reveal much more than that. Specifically, it helped draw attention to the increasingly challenging realities of competing on Amazon. 

To be able to compete on Amazon’s marketplace, sellers need to understand the underlying forces. Entrepreneurs used to be able to just ride the rising tide of Amazon’s growth.

That’s just not the case anymore.

This post explores the foundational root causes of these challenges and charts a course for success in 2024, offering sellers actionable strategies to not just survive but thrive in the Amazon marketplace.

Why Did Your Amazon Market Share Decline In 2023? 

1. Intensified Competition

The increased competition on Amazon has had a significant impact on seller profitability and growth. As more sellers join the platform, the fight for visibility and market share has become fierce. 

One of the primary consequences of this heightened competition is the continued erosion of profit margins. With so many sellers vying for the same customers, there is a strong temptation to engage in price wars to gain a competitive edge. 

Sellers may feel pressured to lower their prices to match or undercut their rivals, hoping to attract more sales. This strategy can quickly lead to a race to the bottom, where sellers sacrifice profitability for the sake of maintaining market share. As prices drop, profit margins shrink, making it more challenging for sellers to generate a sustainable income from their Amazon business.

In the past, sellers could rely on Amazon’s expanding customer base and the platform’s overall growth to drive sales. That alone – combined with the increased competition – has made it more difficult for sellers to achieve organic growth on the platform.

However, with popular Amazon selling niches now saturated with sellers, simply listing products on Amazon is no longer enough to guarantee success. Sellers must work harder to differentiate themselves, invest in marketing and advertising, and continuously optimize their listings to maintain visibility and attract customers. 

Sellers Will Need to Adapt, Differentiate, and Optimize

This requires a significant investment of time, effort, and resources, which can slow down growth and make it harder for sellers to scale their businesses. For those sellers attempting to move forward without the assistance of an Amazon Agency, the climb towards profitability is even more difficult. 

To succeed in this highly competitive landscape, sellers must adapt their strategies, focus on differentiation, and continuously optimize their operations to maintain profitability and drive sustainable growth. This may involve exploring new product niches, investing in brand building, and leveraging data analytics to make informed decisions. 

That’s why many of the most successful online entrepreneurs are reaching out to top Amazon Agencies such as Canopy Management. 

In 2024, the increasing sophistication of Amazon’s marketplace demands it. 

2. Rising Advertising Costs

The intense competition on Amazon has also led to a greater reliance on paid advertising to drive sales. Organic visibility has become infinitely more difficult to achieve. Sellers that previously counted on a little assistance from Amazon advertising to gain exposure and target potential customers, are now realizing that it’s become nearly impossible to succeed without a strategically crafted Amazon PPC strategy. 

However, as more sellers invest in advertising, for every-day sellers without high-end Amazon ad skills, it has led to a steady rise in the cost per click (CPC) for popular keywords and ad placements. This increased demand for advertising space has made it more expensive to acquire customers through paid channels. 

This further erodes profit margins and makes it harder for sellers to achieve a positive return on their advertising investments.

In 2024, the trend of rising Amazon advertising costs is expected to continue, posing significant challenges for sellers looking to promote their products and drive sales on the platform. As competition on Amazon intensifies, more sellers will continue to turn to advertising to gain visibility and attract customers. 

Rising Amazon Ad Costs Will Continue to Pressure Profit Margins

The rising costs of advertising will put pressure on sellers’ profit margins, as they will need to pay more to achieve the same level of visibility and sales as they did in previous years.

The increased competition for advertising space has also made it more difficult for smaller sellers and those with limited budgets to compete with larger, well-established brands. As the cost of entry for advertising rises, without the benefit of a lean, well structured Amazon ad campaign, smaller sellers may find it challenging to manage the expense, especially if they are already operating on tight margins. 

This could lead to a widening gap between the top sellers who can afford to invest heavily in advertising, and those who struggle to keep up with the rising costs. To mitigate the impact of rising advertising costs, sellers will need to focus on optimizing their ad campaigns, targeting the right keywords, and improving their product listings to maximize the return on their advertising investments.

3. Evolving Consumer Behavior

In the ever-evolving landscape of ecommerce, customer behavior has undergone a significant shift throughout 2023, posing challenges for online sellers in 2024 vying for market share. 

Consumer expectations are constantly evolving, driven by factors like faster delivery options and personalized experiences. Sellers need to adapt their strategies to meet these changing demands, often requiring investments in technology and fulfillment methods. 

The COVID-19 pandemic accelerated the shift towards online shopping, and consumers now expect a seamless, convenient, and tailored experience when purchasing products on Amazon.

At the same time, the rise of conscious consumerism and heightened expectations for personalized experiences have reshaped the playing field, forcing businesses to adapt or risk losing ground to more agile competitors.

One example of a positive trend shaping customer behavior is the growing demand for sustainability and ethical practices. Consumers, particularly younger demographics, are increasingly scrutinizing the environmental and social impact of their purchases, favoring brands that align with their values. 

This has led to a surge in eco-friendly and socially responsible products, as well as a growing emphasis on transparency and accountability from ecommerce sellers. Those who fail to adapt their offerings and operations to meet these evolving expectations risk losing market share to more conscientious rivals.

4. Amazon’s Fee Structure

While, on balance, Amazon’s fees are relatively static at the moment, the volatility of Amazon’s fee structure over the past few years underscores the importance of keeping a close eye for any potential changes. 

Amazon’s dominant position in the ecommerce market allows it to adjust its fees periodically, often with little warning, and these adjustments can have far-reaching consequences for sellers.

While there haven’t been massive blanket increases across all categories, Amazon has introduced variable fees in some categories. Based on a combination of factors like product price, weight, and dimensions, this can lead to higher fees for specific items.

Changes to Amazon’s fulfillment fees, which cover the costs of picking, packing, and shipping orders, have also put pressure on sellers relying heavily on Amazon’s FBA fulfillment services. These increased fees have eroded profit margins, making it difficult for some sellers to sustain their market share.

FBA (Fulfillment by Amazon) Fee Changes:

• Storage fee increases: Storage fees have been steadily rising over the past few years. This can significantly impact sellers who store a large inventory with Amazon.
• Fuel and inflation surcharge: A 5% surcharge was introduced in February 2024 on most fulfillment and removal costs, further increasing seller expenses.
• Peak season fees: These additional fees are applied during the holiday rush to cover increased operational costs.

The volatility of Amazon’s storage fees has also forced sellers to reevaluate their inventory management strategies continually. With higher costs for storing products in Amazon’s fulfillment centers, many sellers have had to limit their product offerings or risk stockouts, leading to potential customer dissatisfaction and loss of market share.

Canopy Management’s Growth Checklist for 2024

The increasing competition and rising Amazon advertising costs are likely to continue in 2024, presenting challenges ahead for ecommerce sellers. However, this dynamic landscape also reveals an exciting path forward for those Amazon sellers who have the ability to adapt and strategize to find a more lucrative way forward. 

To help with your journey, here’s what Canopy Management’s Amazon Agency experts anticipate will be solid growth opportunities for online sellers in 2024: 

1. Leveraging Data Analytics

In 2024, it’s going to be important to leverage data analytics to gain deeper insights into customer behavior. Using this information, you will be better able to optimize your advertising campaigns across multiple platforms, streamline inventory management, and ultimately WIN for yourself a significant competitive advantage. 

That will help you to stay ahead of evolving trends, target the right audience, and maximize your return on investment.

2. Exploring New Marketplaces

Amazon is an amazing marketplace, but it’s not the only game in town. Diversifying your sales channels by listing products on emerging and established marketplaces like Walmart, TikTok, and Target can help you reach wider audiences and mitigate the risks associated with overreliance on a single platform. 

These alternative marketplaces offer unique opportunities to connect with different customer segments and capitalize on their respective strengths.

3. Building Brand Loyalty

In a crowded ecommerce landscape, building brand loyalty through exceptional customer service, compelling brand storytelling, and the creation of a memorable brand experience can differentiate sellers and cultivate a loyal customer base. 

Repeat business and positive word-of-mouth can drive sustained growth and help offset the impact of rising fees. Ecommerce or brick and mortar, it doesn’t matter; it’s just good business. 

4. Embracing Automation

Now that 2024 is here, increasing numbers of sellers are experimenting with technology and automation for tasks such as product listing optimization, inventory management, and ad campaign management. 

If done correctly, it can help to streamline operations, reduce costs, and free up valuable time and resources for strategic thinking and innovation. By leveraging automation, sellers can also more efficiently scale their businesses and stay agile in the face of rapidly evolving market conditions.

Many of the top Amazon sellers are doubling down and hiring Amazon agencies to hand craft highly-curated, custom-built automations for ASIN-specific solutions. 

How Canopy Management Can Help

What would adding 67% more organic sales mean for your brand?

Turns out that when you combine the massive experience of Canopy’s Amazon Advertising Experts with smart tools and tech, you get industry-leading results like this:

• 84% Average Year-Over-Year Profit Growth for Our Partners
• 2.7 Billion in Revenue Managed
• 99.1% Partner Retention Rate

Canopy Management is a full-service marketing agency for Amazon and Walmart sellers. Our team consists of former Amazonians, multi-million dollar sellers, and award-winning experts.

When you consider the many ways that Canopy Management can help you grow your business, you’ll see why selling on Amazon is much easier “under the Canopy.”

• Strategic Growth Planning
• Listing Copywriting Optimization
• Listing Photography
• Product Videography
• Advertising Management
• Customer Service
• Demand Side Platform (Amazon DSP)
• Amazon Posts
• Full Service Management
• Amazon Review Aggregation