Setting Your Sights on Amazon’s Buy Box: Part 1

February 20, 2015

Marketplaces Laura Lane By Laura Lane

Winning the Buy Box is at the top of most Amazon retailers’ wish lists. But how does one small, gold box wield such power? A key feature of the Amazon platform is that several sellers can sell the same product from one product detail page, which makes competition for the Buy Box fierce. Plus, the Buy Box is where a customer starts the purchase process — by adding items to their shopping basket — making it even more important for retailers.

But how can a retailer win this piece of online real estate? Although the exact algorithm Amazon uses to award the Buy Box is a closely guarded secret, we do know that it’s tied to specific performance criteria that identify the sellers that have consistently provided customers with a great buying experience.

Over the course of two blog posts, we’ll cover how buyers interact with the Buy Box, how this affects Amazon’s algorithm and what steps retailers can take to win it.

How Buyers Think

To understand how Amazon views the Buy Box, it’s worth putting yourself in the shoes of a shopper to see how they experience the Buy Box. Let’s imagine that as a buyer you’re searching for a Sony H300 digital camera on Amazon.co.uk and come across the listing below. You go to the product page, and the price is in your range so you click ‘Add to Basket’.

You’ve just used Amazon’s Buy Box.

Amazon 1

Did you pay attention to who was selling this item? Probably not. You assume it’s sold by Amazon. But in this case, it’s not. A third-party seller sells it and Amazon fulfils it. As a consumer, you had 31 other third-party options on this product page, including 8 other Fulfilment by Amazon (FBA) offers. Amazon itself wasn’t selling this item through its first-party offering.

If you’re an Amazon Prime member, you’re likely to choose ‘Free delivery by Amazon’ to filter results. In that case, products not shipped by Amazon won’t be shown in these search results. Global Prime members increased 53% year over year in the fourth quarter of 2014, adding 10 million new subscribers during the 2014 holiday season. That’s especially impressive because Amazon increased its annual Prime fees from £49 to £79 a year in the UK in February 2014, and from $79 to $99 a year in the US in March 2014.

As a buyer, if you’ve been purchasing smaller-value products and you never had any issues with Amazon’s Buy Box, you’re not going to pay much attention to this selection process. But imagine that you buy this camera, and your order is cancelled after a few hours or days. Or imagine the item is a week late or never arrives. What are you going to do next time? Are you going to trust Amazon? After all, you’re just one click away from eBay or Google Shopping. And if you go back to Amazon, would you trust the Buy Box this time? Or would you compare offers – even if you need to go through 30 of them?

Assuming you do decide to look through individual Amazon offers, which criteria is key to deciding that this offer is the best for you? Is it price, Prime eligibility or positive feedback? Let’s say that this Sony H300 camera is quite expensive anyway, so positive feedback matters. One of the third-party sellers lists this camera for £124.99, has 100% positive feedback but only 13 ratings over the past 12 months. You may even prefer the seller with a price of £123.99 with 99% positive feedback and 3,144 ratings. Or will the camera at £122.99 with less positive feedback and fewer ratings catch your eye? In the end, the question is: For this camera, how much are you prepared to pay to get a more experienced and successful third-party experience?

How Amazon Thinks

Amazon 2Now that we know how consumers interact with the Buy Box, we have a clearer picture of how Amazon narrows down eligibility. Over at Amazon, a team is working on deciding Amazon’s Buy Box algorithm. Their mission is to define what buyers consider to be the ‘best’ offer when shopping on the marketplace. It’s truly a customer-centric attitude: Amazon’s top priority is to earn buyers’ trust, as Amazon believes that this maximises profits in the long term.

Predicting which offer is best for consumers at a product’s ASIN level is extremely complex. Amazon can’t allow this formula to be transparent for third-party sellers, and Amazon is okay with that. Overall, Amazons goal isn’t to increase retailers’ trust, but buyers’ trust.

Since seller performance requirements can vary by category and are subject to change, Amazon does not disclose specific targets needed to win the Buy Box. However, we do know that becoming eligible requires meeting very high standards. To be in with a chance of winning the Buy Box, excelling in the qualifying criteria of pricing, availability, fulfilment and customer experience is the best way to work toward achieving this status.

Pricing: Amazon looks at the total price the customer will pay for a product, including delivery, so make sure you price your products competitively, including the delivery rates. The lowest price doesn’t guarantee winning the Buy Box, as pricing is just one factor that is evaluated.

Availability: Make sure you keep stock available, if you have no current stock for a product, you cannot win the Buy Box! Use inventory planning to keep your popular products in stock and make sure you maintain a consistent quantity threshold.

Fulfilment: If you can, offer multiple shipping options on your products.

Customer Experience: As a customer-centric company, it is no shock that customer metrics play their part in the Buy Box allocation. Make sure you keep on top of your Order Defect Rate, A-to-z claims, chargebacks and other seller performance and delivery metrics (such as lead-time-to-ship time).

Time and experience: In most categories you are not eligible for the Buy Box right away. You need to develop your business on Amazon and build a strong, positive reputation before you can qualify for the Buy Box. Your sales history is an important aspect – both number of sales and customer satisfaction on those sales.

Amazon’s challenge is not just confirming that buyers prefer offers with low prices, fast delivery and sellers with better feedback. The key is providing each input with a value. To get the Buy Box algorithm right, a lot of testing is needed, with Amazon’s team updating and testing new releases, measuring success by monitoring GMV, unit uplifts and the percentage of items bought so that the best products are available to customers on the Buy Box.

Next Steps

We hope this information about customer behaviour and Amazon’s Buy Box formula gives you insight into how the Buy Box is awarded. Next week, we’ll be covering what it means to compete with Amazon, how FBA can help and ways that you can increase your chances of winning the Buy Box.

 

Blog post by: David Le Roux, Account Manager and  Michal Kaluzynski, Head of European Services at ChannelAdvisor