How Amazon Has Become the Ideal Marketplace for Supplement Brands
Christina Gonzales, June 19, 2019
By 2024, the global vitamin and supplements market will be valued at $278 billion USD. With 77 per cent of those online transactions occurring on Amazon, here’s how certain brands grab their piece of the pie.
Vitamins and supplements may just be the perfect items to sell online. With offshore manufacturing, low price points, compact packaging that’s easy to ship, and a wealth of consumer-generated reviews that measure product effectiveness, it’s easy to see why a growing majority of consumers buy their supplements through Amazon.
But growing a supplement business on the world’s largest e-commerce platform isn’t simple. The companies that win employ specific sales-driving tactics like keyword searches, sponsored ads, Prime days, and more.
One of the most successful players in the space is Dr. Tobias, recently purchased by Mimi’s Rock, a Canadian wellness company offering a range of supplements, including a colon cleanse and fish oil, which both boast the #1 Best Seller Rank on Amazon. CEO Dave Kohler and his business partner acquired Dr. Tobias, previously based in Germany, after Kohler noticed a few trends in the private-label pharmaceutical business, where he worked for decades. His customers—drug stores and other big-box retailers in the United States—began to see in-store traffic and off-the-shelf sales decline.
“I saw the struggle retailers were having with what I would call the ‘Amazon effect,’” Kohler says. “For non-experiential purchases, consumers were drifting away from brick and mortar to online purchases.” - Dave Kohler, Dr. Tobias
At the time of acquisition, Dr. Tobias sold some 90 per cent of its product through Amazon. But everything Kohler thought he knew about the platform was wrong. He was naïve, he says. What he believed to be a community-driven program where reviews and ratings carried the day was actually more of what Kohler calls a “virtual mall,” offering a curated customer experience. “When I talk about the curated experience, I’m talking about things like keyword searches, and banner ads with product placement,” he explains.
One of the tactics Kohler employed on Amazon was the creation of a Dr. Tobias storefront, also known as a brand page. “Prior there wasn’t one, and that meant if a consumer came looking for a Dr. Tobias product, like fish oil, for example, they would landlock that product page where the fish oil resided, but with all the other fish oils, as opposed to with our colon cleanse and our probiotics, and so on,” he says. “[A storefront allows you] to be able to put your foot forward, electronically, to say here’s our offering, here’s our product family, here’s our reviews, [and] here’s our added brand content as you scroll down.”
Nuvana business partners Ike Pyun and Peter Kanaat had no experience in the supplements category, but both had marketing and e-commerce experience. When the opportunity to build an entirely new brand on Amazon presented itself, they seized it.
The Nuvana sleep aid launched on Amazon in August 2018, and at first, they researched keywords and managed sponsored product ads (paid search) on their own. Kanaat took as many Amazon pay-per-click tutorials on YouTube as he could muster and implemented them, before the company reached a sales ceiling of $36,000 a month. The founders knew they needed to bring on an Amazon-specific technology partner to help them optimize, so they could grow sales. Once they found the right partner in Perpetua, an intelligence software that optimizes sponsored ads, Nuvana was able to double its sales, going from some 50 units sold per day, up to 100.
Still, Nuvana is a relatively small player in the supplements space, and it has plans to grow. Pyun says that going to market with a sleep aid in particular, wasn’t random. He and his partners knew that Amazon reviews would mitigate ineffectiveness or any placebo effect their supplements might have.
“[Our customers would] know if they had a good night’s rest, it would be easier for us to show our product worked as opposed to something that might take weeks or months.” - Ike Pyun, Nuvana
Kohler asserts that you have to think of your product like a virtual store within Amazon. “In most of the supplement categories there would be hundreds of products available,” he says.
“Certainly things like reviews and ratings are critically important. Bestseller badges are critically important. Keyword searches are critically important. But there’s also other things like lightning deals, Prime days, and a Vine program, that gives you the ability to promote yourself.” - Dave Kohler, Dr. Tobias
Testing what works as well as what doesn’t is imperative, too. While the Dr. Tobias founder took more of a scatterplot approach to promotions, Kohler measured his return on advertising investment with click-through rates.
But it all depends on your goals, he says. “Our focus right now is on key search terms. The best [tactic to use] is a relative thing. Prime day for example, is clearly the most promoted opportunity to have a big day of selling with Amazon. However, there’s also a lot of costs involved with participating. It depends how you measure success. Because gaining market share—acquiring a customer and keeping them over time—is probably your best bet for your buck. So it depends on your lens—what you’re looking at in terms of how you measure success.”
Other players in the space, like Matt Hesse, CEO of Performix, believe that an omni-channel approach is the future. As a company that focused heavily on retail through the now-defunct GNC retail stores, Hesse realized that he needed multiple ways to connect with his customers: experiential (he built a members-only gym in New York City called Performix House), direct to consumer through Performix’s own e-commerce site, and Amazon.
Hesse particularly struggled with Amazon when third-party sellers would beat the Performix brand on price. “When someone else is coming in, playing inside of your sandbox and taking some of your dollars, it becomes more confusing and difficult,” he says. “Controlling your distribution and selling to people who are responsible with your product is critical if you want to win on Amazon.”
On the flip side, companies growing their brands on Amazon alone have a lot less to worry about, Hesse explains. “They control the buy box and the marketing dollars. It’s easy to see where dollar A gets you at the end when the dollar comes back three-fold. That’s easy to invest in. For example, I invest one dollar and I get six dollars back. In this scenario, I’m going to invest more and more until I hit a saturation point.”
As a marketer, Hesse maintains that its about nudging the consumer towards your brand within the channel that works for them—identify the types of consumers that want to buy your brand, where they most often purchase, and build the marketing funnels to drive them into those channels.
“You don’t try to move a customer that loves buying on Amazon over to a direct-to-consumer site,” Hesse reiterates. “It’s a hard sell. There’s a reason they’re on Amazon—they like the convenience and the reviews. You have to build marketing funnels specific to the customer, not the channel.” - Matt Hesse, Performix
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