When it comes to eCommerce, Amazon is undoubtedly the market leader. In 2019, the company recorded average sales of $4,722 per second and was responsible for 47% of all eCommerce sales in the U.S.1
The overwhelming success of Amazon has also filtered down to its Marketplace sellers. Small and medium businesses sell more than 4000 products per minute through the Amazon Marketplace and there are more than 225,000 sellers making over $100,000 in sales in 2019.2
While there is no arguing that the Amazon Marketplace is a huge commercial opportunity, one of the major barriers to entry is the cloud of complex Amazon warehouse terminology that essentially forms its own language. Being successful on the Amazon Marketplace requires you to become fluent in this language of complex terms and acronyms.
To help you on your road to Marketplace success, we’ve put together a glossary of Amazon abbreviations, metrics, and terminology.
A9 is a subsidiary of Amazon that creates its product search algorithm, which in turn determines what a customer finds when they search for a product on Amazon. Understanding how this commercialized search engine works is critical to succeeding on the platform, as it determines if, and in what order, your products appear in customer searches.
The exact method that A9 uses to determine the outcome of product searches has not been made accessible to the public by Amazon — although they do note that it takes into account “factors such as degree of text match, price, availability, selection, and sales history.”3 This means that details such as the information contained on the Product Description, the Product Title, and the associated Keywords and Search Terms are vital to your product’s organic search ranking.
This metric describes the amount of sales generated by an advert — a sophisticated approach to ad sales can allow you to understand when and where sales came from. This can help to inform you of your customer profiles, meaning you’re better placed to build an advertising strategy that aligns with your customer.
This simply refers to the amount of money you’re spending on advertising campaigns. This can include Amazon’s search ad products such as Sponsored Products, Sponsored Brands and Sponsored Display or Amazon’s more recent demand side platform (DSP) product that focuses on display advertising.
Suggested reading: For more information around Amazon DSP, check out our blog — Amazon DSP: How The Platform Will Change in 2021
Alongside organic rankings, Amazon Pay Per Click (PPC) advertising is a vital tool that can also be used to augment your ranking for important search terms. Amazon PPC is a unique beast that is quite different from other PPC advertising and getting a full understanding of how it works to improve your Amazon PPC organic results is a critical step to seller success. You can also use Amazon PPC to increase profit margin, but more on general PPC later.
Advertising Cost of Sale (ACoS) and Return On Advertising Spend (RoAS) are critical metrics that allow Amazon Marketplace sellers to understand how effective their advertising campaigns are.
- ACoS: This allows you to understand what percentage of sales goes towards the advertising needed to make that sale. As a general rule, low ACoS is good ACoS.
- RoAS: Lets you understand to what extent your ad spend is being turned into new sales. It is essentially the inverse of ACoS, and high RoAS is good RoAS.
Essentially, if your ACoS is low and your RoAs is high, you’re spending a small amount per sale attributed to advertising and getting a significant conversion of new sales for your advertising spend.
However, as important as these metrics are, they shouldn’t be taken in isolation. When creating an effective Amazon advertising strategy, ACoS and RoAS should be viewed in the context of their trajectories, your overall objectives, and other key metrics — but you do need a good ROAS on Amazon to succeed!
Amazon Brand Analytics (ABA)
Available to members of the Amazon Brand Registry program, your ABA is a crucial treasure trove of information that can be used to inform business planning decisions and advertising campaigns. You can find your ABA under the Reports tab in Seller Central.
The data contained in the ABA is split into four sections:
1. Amazon Search Terms:
- This shows you the search frequency rank for the most common search terms and the Amazon Standard Identification Number (ASIN) for the top three products for each search term.
- You can click on each ASIN to learn their particular click share and conversion share.
- This shows you what other products put in their basket alongside your products, helping to identify which products your customers are buying, but that you don’t currently offer.
3. Item Comparison and Alternate Purchase Behavior:
This report is split into two sections: Item Comparison and Alternative Purchase.
- Item Comparison: This shows the top five items customers view after looking at your product.
- Alternative Purchase: This shows the top five items purchased after viewing your products.
- As you might expect, this section gives you critical demographic information about your customers.
- While ABA is an excellent source of information, learning how best to navigate and apply it is critical to making full use of its insights on how to use Amazon brand analytics.
The Amazon Brand Registry is a free service that Amazon sellers can sign up to. However, there are certain eligibility requirements, the largest being the need to hold a registered trademark in the area in which you sell. You can find a full list of those eligibility criteria here.4
The Brand Registry gives you access to —
- The data held in the ABA
- A+ content
- Final say over the product listing
- Mechanisms to help eradicate unauthorized resellers
- Sponsored brand ads
Break-even ACoS/Break-even RoAS
We’ve already explained the importance of ACoS and RoAS in becoming a successful Marketplace seller. However, when it comes to setting targets for your business, there is no metric more critical than your Break-even ACoS/Break-even RoAS.
Simply put, your Break-even ACoS gives you a solid line between a profitable advertising campaign and a loss-making advertising campaign. It does this by showing the amount spent on advertising for each dollar earned by that advertising. You can then compare that to gross profit divided by your revenue. If the ACoS is lower than the result, your ad strategy is profitable, if it isn’t, you need to reassess. Your Break-even RoAS is essentially the inverse of this.
You calculate your Break-even RoAS the same way as your Break-even ACoS but substitute in your RoAS calculation before comparing it to your gross profit divided by your revenue. You then take the inverse of that figure and treat it as a minimum goal for your ad campaigns.
For the best and most accurate calculations, both of these figures then need to be adjusted based on the customer lifetime value (CLV) of your customers, which shows the monetary value of the customer relationship to your business across all of the customer’s purchases. The CLV changes the above calculations because it is easier and less expensive to retain a customer than it is to attract a new one, which impacts your break-even point.
Calculating your CLV-adjusted Break-even ACoS/Break-even RoAS is as critical to maintaining an effective advertising campaign on Amazon and growing your business as it is complicated. Thankfully, the articles we’ve linked above explain how to do the calculations, how to understand the results, and how to plan around those results, clear and simple to understand.
The Buy Box refers to the two buttons marked Add to Basket and Buy Now, that allows the customer to purchase a product from the search results page without considering if it comes from Amazon or a third-party seller. Around 83% of Amazon’s sales come through the Buy Box and those sales were worth around $320 million in 2020, making it one of the most important facets of selling on Amazon.
The Buy Box works on an algorithm that takes into account a range of factors, with seller history and price being some of the more heavily weighted. The algorithm selects which buyer is awarded the sale when the customer clicks the Buy Box buttons. This seller is the ‘winner’ of the Buy Box. Instead of consistently awarding the Buy Box to one seller, Amazon rotates it through several sellers with the same attributes.
When it comes to winning the Buy Box, your price, stock availability, sales volume, and delivery speed are the most important metrics. Having the correct pricing strategy and using PCC to boost your sales volume is vital to winning the Buy Box.
COGs is an acronym for Cost of Goods Sold, it is the cost of manufacturing the goods that you sell — this can include any freight fees. Understanding your Cost of Goods Sold is vital to accurately calculate your customer lifetime value (CLV) on Amazon. In order to calculate your COGs, follow these steps —
- First, obtain the total valuation of beginning inventory, ending inventory, and the cost of goods sold.
- Then subtract your beginning inventory value from your ending inventory value.
- Finally, add the cost of goods sold to the difference between the ending and beginning inventories and there you have it!
Your CTR stands for Click Through Rate and is another important metric in understanding how effective your advertising strategy is and how accurately you can evaluate your organic search results. This last point is particularly true when looking at the click share % documenting in your ABA search term report. You can calculate your CTR by dividing your number of clicks by your number of impressions per advertisement.
Your CTR is an important component in understanding which of your ads lead to sales and which do not. It’s useful to treat your ‘clicks’ as a proxy for brand relevance — that is when someone searches for a product and clicks on your product, your product is considered relevant. This allows you to streamline your ad strategy by dropping ineffective ads while building a clearer picture of which kinds of ads are the most effective at converting clicks into sales.
Optimizing Your Advertising Strategy Takes More than Improving Your CTR.
Get your Free Audit with us and improve your Amazon ad performance immediately with an in-depth report revealing wasted ad spend, missed revenue opportunities and best keyword practices.
We’ve already spoken a little about Customer Lifetime Value (CLV) on Amazon because of how important it is to successfully sell on the platform. But to reiterate, it is the total profit made per customer over the entire period that you have a relationship with them — from their first to last purchase.
We, at Nozzle, have pioneered the optimization of eCommerce on Amazon and we highlight CLV as one of the most underutilized and important metrics available to amazon sellers, with benefits such as:
- A greater understanding of true product worth.
- A new approach to break-even ACoS and Break-even RoAS.
- An effective approach to planning PCC spend.
- Critical insights into which products are able to produce the greatest long-term profits.
- A vital metric for long-term planning.
Unfortunately, calculating your true CLV, sometimes listed as LTV, is as difficult as it is critical to business and advertising success, requiring advanced calculation tools to accurately work out. Thankfully, as a market leader in amazing Amazon advertising, Nozzle has a full deep dive into your CLV calculation that makes it simple, understandable, and easy to approach.
Fulfillment by Amazon (FBA) is Amazon warehouse terminology that refers to the process where merchants send their products to an Amazon fulfillment center and allow Amazon to deal with the rest of the order fulfillment process.
The benefit of FBA is that it takes all the storing of inventory, picking, and delivery processes, although you do have to pay for those services. Deciding between FBA and FBM, which we’ll cover below, is one of the most important steps in setting up your Amazon Seller account.
Crucial info: The products available to Prime subscribers are most likely to be from Amazon FBA Sellers.
Fulfillment by Merchant (FBM) is yet more Amazon warehouse terminology that describes the process where the merchant is responsible for the entirety of the order fulfillment process.
The benefit of FBM is that you’re under no obligation to match FBA delivery times and can implement a fulfillment process that suits you, but you are on the hook for any missing, late, or damaged products. However, if you want your products to be eligible for Prime members, you must strive to meet the extremely strict Prime Seller criteria.
As above, deciding between FBA and FBM is a crucial step in setting up your Amazon Seller account.
Amazon Marketplace Web Services (MWS) is both a source of transactional data and the integrated web service API that allows Amazon Sellers to take advantage of the automation options on their account.
The data gathered from MWS is critical for making complex and vital calculations, such as figuring out your CLV and streamlining your selling process by automating your Amazon Seller Central Account.
Negative keywords are used to instruct the A9 algorithm to omit your products from an Amazon SERP (Search Engine Results Page) if those keywords are used in the search term. Negative Keywords are the words or phrases that prevent your ad from appearing on an Amazon SERP (Search Engine Results Page) if those terms are in a customer’s search query.
For example, if you sell something specific, let’s say trucker hats, and you bid for the phrase match keyword ‘hats’ you ad would appear in the results for things like baby hats or waterproof hats. A customer might then mistakenly click on your ad, realize you only sold trucker hats, and leave, at which point you’d be charged Amazon’s PCC rate with the hope of making a sale.
Adding in negative keywords significantly reduces the chances of this occurring and is critical to executing a search term optimization strategy.
Pay Per Click advertising does exactly what it says on the tin. Amazon advertises your products and charges you each time the customer clicks on your ad.
There is too much information on PCC to be included on this list, but the links below fully explain the three types of PPC ads and their advantages and disadvantages —
ROI (Return on Investment) is a broad metric that contextualizes the total profit generated from a sale. This is similar to RoAS but differs for a few very crucial reasons —
- ROI is stringently about profit, whereas RoAS looks at revenue.
- RoAS only considers direct ad spend, it does not consider the wider costs associated with your online campaign. ROI encompasses a whole range of sales data related to sales versus costs.
Crucially, RoAS will help you understand if your ads are effective at generating clicks, impressions and revenue, while ROI will indicate if your ad-spend is actually profitable for the company overall.
Amazon Seller Central is the web interface that third-party sellers use to list and sell their products on Amazon. It is the way that Sellers can generally manage their account. It’s also where you go to access vital data and metrics, such as your ABA, found under the Reports tab.
Total Advertising Cost of Sale, rather than delicious Mexican food, is a metric unique to Amazon and is based on the fact that PPC advertising can influence your organic search results. Essentially, an Amazon TACoS strategy gives you greater overall visibility on the effectiveness of your advertising campaign, rather than more granular, but just as important, ACoS and RoAS. Implementing an effective TACoS strategy enables your PPC ads to have a greater impact on your overall sales.
Your Total ACoS is calculated by dividing your advertising spend with your total product sales from both paid and organic sources. The reason this needs to be calculated alongside your ACoS is that Amazon uniquely allows PPC advertising to influence your organic search results.
Calculating your Total ACoS and comparing it to your ACoS shows you how effectively your PPC ads are impacting your organic search results. Having all your ACoS calculations at hand gives you the data that you can turn into a competitive break-even ACoS advantage.
Vendor Central is essentially Seller Central for 1st-party sellers. This invite-only platform enables vendors to sell their inventory straight to Amazon itself.
The process of selling to Amazon as a vendor is as follows —
- Amazon sends out a purchase order containing all the products they want to buy.
- The vendor then sends Amazon the inventory they have requested.
- Once the inventory arrives, Amazon pays the vendor.
From there, Amazon is fully responsible for storing, selling, and shipping the products from their own warehouses. In essence, Vendor Central is a hub where Amazon’s vendors can check on current purchase orders, provide product data, and manage any advertising spend.
Get help from market-leading experts in Amazon marketing
We hope our glossary of amazon abbreviations, metrics, and terminology has helped to demystify some of the complex Amazon warehouse terminology, acronyms, and jargon that are part of the businesses of selling on Amazon.
If you’re still struggling with how to implement all the various calculations and how to turn the results into actionable insights, reach out to us today for a free full audit that will help you minimize overspend and maximize profits.