Amazon has emerged as one of the global leaders in business success. It makes use of a model called the Amazon Flywheel, which is not secret and can help any seller boost their revenue if they grasp and use it.
We’ll examine every facet of the Amazon Flywheel in this article, along with some ideas for incorporating it into your own marketing.
In this article you will know:
- The Amazon Flywheel: What Is It?
- The Amazon Flywheel’s Three Primary Aims
- The Operation of the Amazon Flywheel
- The Amazon Flywheel: How Effective Is It?
- The Benefits and Drawbacks of Third-Party Sellers for Amazon Flywheel
- How to Use Amazon Flywheel to Strengthen Your Brand
- Amazon Flywheel for Sellers
- CONCLUSIONS
The Amazon Flywheel: What Is It?
If you’ve never seen a flywheel before, imagine a large metal desk that is fixed to an axle. The ultimate objective is to get the flywheel to spin quickly on its own.
The theory is that the flywheel won’t start to move until you exert a great deal of force. However, as you continue to turn it, enough momentum accumulates for the entire object to start rotating on its own.
Similar to a flywheel, Amazon’s growth can be compared to each step in their growth strategy as a turn in the flywheel that contributed to the company’s momentum and current state of development.
The Amazon Flywheel, also known as a virtuous cycle, is made in the same manner as a regular flywheel, with each step assisting in the spread of the others.
The Amazon Flywheel’s Three Primary Aims
It is well known that Bezos’s growth strategy was originally scribbled on a napkin. (Apparently, Jeff was unable to purchase a proper sheet of paper at that time despite having a lot of money.)
They determined that the following three elements are the most crucial to bringing Amazon to new heights:
- Cheap costs
- immense choices and
- Excellent delivery experience
The illustration of the Amazon Flywheel looks like this:
The concept behind Amazon Flywheel, which drives the company’s rapid expansion, is that every effort it makes in one area should lead to advancements in all other areas as well. Bezos wants Amazon to be the world’s most customer-focused company, so the company came to the conclusion that thinking about what the customer wants and working backwards from there is the best way to strategize.
The Operation of the Amazon Flywheel
To attract customers, Amazon lowered its prices significantly. This enhances the user experience for customers and boosts website traffic. Before long, most people (i.e., those seeking a good deal) swarm the Everything Store.
Still, traffic isn’t just about customers. To support the next crucial factor, selection, Bezos and his team welcomed third-party sellers rather than just offering products that were exclusive to Amazon.
At first, this may seem illogical. When you can easily monopolize a platform, why would you let competitors join it?
But as was already mentioned, Amazon puts the needs of its customers first. Indeed, there are instances when that entails passing up the opportunity to make more money.
Although people are drawn to deals, having a platform with more options would be more enticing. Prices continue to drop as more brands join the Amazon community, increasing supply and fostering diversity.
Any profits that Amazon makes are then put back into systems that assist in bringing down costs and enhancing the shopping experience. For instance, more delivery vans and airplanes are bought, and more FBA (Fulfillment by Amazon) warehouses are constructed.
Enhancing one Flywheel item has a positive ripple effect on all the others, feeding the Virtuous Cycle even more.
The Amazon Flywheel: How Effective Is It?
Should you need more proof that the strategy is effective, consider this: Amazon is the world’s largest online marketplace and Jeff Bezos is currently the richest man alive. This is how much Amazon has expanded over time as a result of the Flywheel model, though, to help you understand how much more.
The price of Amazon’s stock rose to $3,200 as of July 2020, per Forbes. One reason for this is that more people are making purchases online as a result of the pandemic. Considering the favorable conditions for online shopping, it is not unexpected that Amazon’s revenue will keep rising.
Of course, if the revenue had not increased significantly as well, the stock price would not be at this level. The following graph from Statista shows the company’s revenue in billion US dollars.
Additionally, the company employs roughly 935,000 people, a significant increase from its modest beginnings in Bezos’ garage in 1994. Additionally, Amazon maintains more than a hundred warehouses worldwide, some of which are larger than a few football fields.
The Benefits and Drawbacks of Third-Party Sellers for Amazon Flywheel
Amazon welcomes third-party sellers because they give customers additional options. Flywheel helps sellers by enabling them to advertise their goods on the platform and reach a wider audience.
This implies that brand owners can also benefit from other services offered by Amazon, like expedited shipping via Prime and fulfillment and storage via FBA. For a more successful promotion, product bundling is another option.
But in order to stay competitive, brands have to cut their prices due to the rise in sellers from other countries. Furthermore, even though there is a great chance that more people will see your listings, this does not guarantee that your Amazon conversion rates will be high.
A few things remain for business owners to think about and enhance, which causes advanced Amazon hacks to surface in order to make listings stand out from the competition.
How to Use Amazon Flywheel to Strengthen Your Brand
As an entrepreneur, the first thing you should do is mentally get ready for what lies ahead. I understand that this may sound like self-help or spiritual jargon, but bear with me.
Do you recall the first force I repeatedly used earlier? When implementing the Amazon Flywheel in your own business, this is a crucial factor to take into account.
To get the Flywheel rotating, you must be able to give it that first push. You might have to incur losses because it won’t be easy—Amazon, for example, did. Therefore, you must be committed to the long term.
The Flywheel can be applied to your own brand in the ways listed below.
1. Create top-notch products.
A lackluster product cannot be made up for with great marketing or customer service. You must create superior products that your clients will genuinely value.
The following procedures can help you develop the ideal product for your company:
- Choose a niche that you are informed about, or even better, that you are enthusiastic about.
- Investigate which products have the potential to be profitable, taking into account the volume of keyword searches, the number of rivals, etc.
- Make your product stand out from the competition by making it unique.
- Locate a manufacturer or supplier who can satisfy your requirements for quality.
- Try to get your MOQ or the product’s initial cost reduced by negotiating with the supplier you have selected. This will facilitate your future efforts to draw in new clients by lowering prices.
You should request samples from your supplier once the manufacturing process is complete, as the last thing you want is for a full container of subpar or faulty goods to arrive at your home port
Tips: In the nation from which you are importing, independent quality inspectors are accessible. Even before your products leave the factory floor, you can obtain thorough reports about their quality for a fair price.
2. Increase interest in your listing.
Getting more people to know about your products is the next action you can take. There are two ways to accomplish this, both within and outside of Amazon. Among the things you can do on Amazon to boost traffic are the following:
- Invest in PPC advertisements to properly launch your products.
- To gain traction, try to get as many reviews as possible early on.
- Think about offering discounts and giveaways in the initial weeks following launch.
However, the best thing you can do to boost external traffic is to produce high-quality content that benefits your readers. Building this may take several months or even years, but the results will be worthwhile.
3.Deliver exceptional customer service.
Find out from your customers what they think you can do better in your business by listening to them. Provide prompt answers to inquiries and offer generous refunds. Retaining a portion of your customer base while suffering some losses is preferable to losing them one at a time due to an excessive focus on profit.
Be aware that even though it is suggested, “Collect Profits” is not included in the Flywheel. This indicates that it has little bearing on this strategy. Recall that the customer is Flywheel’s primary focus. Thus, take whatever action you can to satisfy the client.
Naturally, you ought to act rationally in doing this. Our goal in starting a business is not to make a profit. Make wise choices and understand where to draw the line.
Moreover, metrics are an excellent means of assessing your performance as an entrepreneur. You can assess the health of your account using a variety of features and metrics available in Seller Central.
To view the Account Health page, navigate to your Seller Central dashboard and hover over Performance.
You can use the metrics on the Account Health page to identify the areas that require further investigation in order to enhance the customer experience.
All sellers should take note of the first two columns, Customer Service Performance and Policy Compliance, while only those who fulfill their own products—that is, those who did not use FBA—should be concerned with the third column, Shipping Performance.
Amazon Flywheel for Sellers
The original Amazon Flywheel served as the model for the recommendations listed above. But, there is an additional flywheel variation that is more concerned with seller success. This is referred to as the Amazon Sellers Flywheel and appears as follows:
The flywheel’s primary objective is growth. Three areas should be your primary focus if you want to expand your business:
- Accumulating more evaluations
- Increasing revenue
- Getting higher in the rankings
The flywheel operates as follows: in order to improve rankings, you must increase sales; in order to increase sales, you must increase reviews; in order to increase reviews, you must increase sales; and so on. One will feed the other once the flywheel is spinning.
Initially, you must make sure that your product is sold. This is significant because sales play a major role in how products are ranked by Amazon’s algorithm; the more units sold, the higher the rank.
However, what about fresh goods? You should be aware that Amazon will drive some traffic to new listings during the honeymoon phase in order to generate sales during a launch. But, how you design your product page will determine whether or not you close a deal even with the traffic. As a result, you must raise your conversion rate.
Some actions you can take to improve your listing are as follows:
- Use bullet points to highlight the advantages of your product.
- Make use of crisp photos that highlight the features of the product.
- Enumerate every detail in the description.
More reviews, the flywheel’s next component, will be powered by these sales.
Your chances of getting more customers to write reviews will increase as more people purchase your goods, particularly if you encourage them to do so.
You can ask clients who have left you 4- or 5-star reviews to make sure you receive reviews that
- left a favorable seller review
- You have offered client support.
Inserts can also be used to remind customers to write reviews, but be careful not to imply that they should only be positive.
Improved rankings are the last part of the Amazon Sellers Flywheel. With more reviews and sales, Amazon is more likely to list you on the first page of search results and perhaps even award you with an Amazon badge or two.
Every component of the Flywheel feeds the others as the cycle goes on.
CONCLUSIONS
The implementation of the Flywheel strategy has enabled Amazon to grow into a thriving e-commerce giant with a substantial market share. Any owner of a business can use it as a successful growth strategy for their own brands. But achieving it will take a certain amount of commitment and dedication, which won’t come easily.
Have you attempted utilizing Amazon Flywheel for your own company yet? How did it go, if at all? We would adore hearing from you.