The Amazon Flywheel: How to Use It in Your Amazon FBA Business
November 11, 2020
Imagine if you could take forward momentum and continue to use it on autopilot.
That is essentially what the flywheel is designed for. The flywheel is a mechanical device used to make machinery more efficient. Originally it was a large wheel with a very heavy rim, so it was difficult to get it spinning, but once it started it would tend to want to keep on spinning.
Constantly stopping and starting over and over again is productive to no one. The creation of the flywheel was an important moment that helped to fuel the industrial revolution. Although the design has since been modernized, the principle is still exactly the same, and the flywheel is still important to this day.
The principle of the flywheel has been used for more than just mechanics. Over the past decade, marketers have taken this idea and used it as the catalyst for their own revolution. Hubspot has redefined its marketing funnel into a marketing flywheel and Jeff Bezos used this idea to propel Amazon into the giant it is now (more on this later).
We even created a YouTube video on how entrepreneurs are leveraging the asset flywheel to build their online business portfolios.
Why am I telling you this?
Because the flywheel can be implemented to grow your Amazon FBA business. The beauty of the model is that the momentum you generate feeds every aspect of your business and can even start to generate its own momentum to take your business to new heights.
To explain this in more detail, we’ll begin by establishing how Amazon used the flywheel before showing you how you can implement it for your Amazon FBA business.
What is Amazon’s Flywheel? What Makes it So Special?
The original idea for the Amazon flywheel was scribbled on a napkin by Jeff Bezos in 2001. The framework that he dreamed up for Amazon would go onto having a bigger effect than anyone could have realized.
It’s built on a customer-centric belief that lower prices, a greater selection of products, and an incredible delivery experience would not only bring customers in but grow the company.
The cycle begins with customer experience. If you work on making their experience as good as possible, they will recommend you to other people which increases the traffic. An increase in traffic that will bring more third-party sellers to the platform which increases the selection of products. With more products to choose from it also improves the customer experience. Amazon Prime is a perfect example of the customer obsession that takes Amazon’s service from good to great.
Another part of the flywheel model is that Amazon invested in large fulfillment centers. By taking on more selection from third-party sellers it allowed them to get more for their money from the fulfillment centers and lower the cost structure. Lower costs meant they could charge low prices, beating their competitors, and also improving customer satisfaction.
See how the flywheel concept works?
It can take a large amount of effort to initiate the spinning sequence. But once spinning, if you feed any part of the flywheel it should spin faster and accelerate the speed at which you grow. It can also continue to spin through the use of its own built-up momentum. This is known as a virtuous cycle.
When you compare this to a standard marketing funnel you realize how special it is. A typical marketing funnel relies on constantly driving new customers into the funnel whereas the flywheel will build momentum to influence every part of the business to improve the customer experience. The overriding benefit of this for Amazon is more customers, increased market dominance, and, of course, more profit.
How to Apply Bezo’s Flywheel to Your Business
To implement Amazon’s flywheel to your business you need to put the customer at the core of everything.
Thinking about profit is the natural thing to do, and it’s understandable, you need to be running a profitable enterprise for it to be worthwhile. But, changing your perception and working on improving the customer experience can be the best way to improve your profit.
To do this you can be experimental and try things you wouldn’t have ordinarily done. Take a step back and try to look at your business objectively from the perspective of a potential first-time customer. What would make their experience better?
Begin with the big picture and analyze your catalog performance. Which products are performing well and which ones need some improvement. Perhaps for your successful products, you can find complementary products to sell. If you were selling a weightlifting bar it’s likely that someone would need weight plates as well.
Using the traffic you’re already receiving, and providing increased selection, makes it better for the customer and it gives you the chance to make more profit. When that customer purchases the complimentary product it also boosts its individual organic ranking on Amazon. This is how a flywheel Amazon FBA flywheel grows your business by harnessing its own momentum.
To narrow down your focus further, optimize your listing pages for search engine optimization (SEO). Create detailed listing pages that not only include the necessary keywords but answers any common questions potential buyers might have.
One way you can find these questions is to start using reputation management tactics. Reputation management can be used to increase brand perception. People like to buy from someone they can trust.
Go through your reviews, good and bad, and respond to negative reviews with how you’re addressing them. However, don’t just respond to them externally, also respond to them internally. If the same negative reviews are cropping up, then maybe you can work with your manufacturer to improve the product, or maybe a simple update to your listing page would clear up the confusion.
If your page is lacking in reviews you can request feedback from buyers through the buyer-seller message service in your seller account. This can be a time-consuming process if you have a large number of sales to go through, so it might be worth your while to use software to automate this process.
Reviews are a hugely important factor in the success of your Amazon FBA business. It provides much needed social proof that gives people the confidence they need to become buyers. This has a positive effect on the organic performance of your products. Both of these things increase your conversions and contribute to the momentum of the flywheel.
Improving your product listing doesn’t just help to convert organic traffic. It also helps to convert paid traffic through Amazon PPC, DSP, or any other method. This lowers your cost per click and means you get more for your ad spend as well as selling more products.
Everything here works together and has a positive knock-on effect. It builds your business into a brand that makes it more reputable and likely to succeed long-term.
Start Turning Your Seller Flywheel
Getting the flywheel to move is the most challenging part of the strategy. The first few sales you make will be the most difficult.
If you haven’t launched your products yet, take a look at reviews of competitor’s products. Try to find out what some of the common grievances are and make sure your products are better than theirs.
When you start to create the listing page and market your products you need to get into the headspace of your consumers. Find a place where they hang out, be it forums, Facebook groups, or somewhere similar, and get used to what they’re searching for and the language they’re using.
With this insider knowledge, you can update your listing page to include SEO keywords that you might never have thought about before. It can also help to build better targeting for your paid ads by learning the right targeted interests.
Become an active voice in these spaces and start building up relationships. Consider this as a form of marketing because it can make your brand become synonymous with the community. Building up brand awareness and loyalty is a powerful tactic that will go a long way to ensuring the longevity of your business.
The critical thing to remember throughout this process to iterate. Keep tweaking the process, making optimizations better, lowering CPC, and increasing conversions. Like the flywheel, it’s going to be difficult to get going straight out of the gate. But once you get into the habit of thinking like this, every area that you improve will have a positive knock-on effect.
The supply chain is the lifeline of Amazon FBA business so you’ll want to establish a good logistics framework early-on. This ensures that your set up to handle continued and growing success. Finding out you have limited warehouse capacity or an issue with the supplier is going to restrict your growth.
Once you start gaining some traction with your products start building solid foundations for your business. We always recommend that you locate two different suppliers of your products, ideally from different countries. This creates a reliable network that negates the risk of one supplier running into issues or certain countries being put under trade restrictions.
Building up a good relationship with your suppliers comes with a host of benefits. If you’re good to work with and pay on time your supplier is much more likely to be accommodating when it comes to improving the products, finding new products, and negotiating a better rate. All of this impacts the flywheel; your products remain in stock, you can diversify your product line which gives your customers more choice and you may even be able to cut prices making your business even more attractive to buy from.
The Amazon Flywheel Means Success Begets Success
The virtuous cycle of the Amazon Flywheel dictates that if you do well you’ll do even better.
You become less reliant on purely working to get more customers through the door. Using the flywheel means that every customer should help you to generate more customers. Their experience will be so good that they can’t help but recommend your service and buy from you again.
Putting the customer first is the basis for all of this to start moving. It can be hard to get moving at first but once it does you’ll start reaping some major benefits for your Amazon FBA business.
Making your listings more attractive and useful than anyone else means you’re going to get more conversions and a lower CPC from your paid ads. Spending time on reputation management will improve the reviews you get will also go a long way to helping conversions but also improving your products and overall service. Everything ties into everything.
Let’s also not forget that the reason we’re doing this is to grow your business. Adopting the flywheel can be a huge driving force in improving your profits. Don’t get stuck doing the same thing as everyone else, dream big, and start thinking of your Amazon FBA business as a global brand. The flywheel is the metaphor that’s going to get you there.
Starting an Amazon FBA business from scratch can be challenging. Sourcing the right products is a skill in itself, you need to be confident in your choices because it takes upfront capital to test whether a product has any legs. This is why many entrepreneurs and investors are turning to buying profitable Amazon FBA businesses.
Amazon FBA has become one of the most popular online business models on our marketplace. If you’re considering purchasing an Amazon FBA business then register for a free account on our marketplace. This will give you the use of search filters and a watch list to save you hours searching through unsuitable businesses. All the businesses that appear on our marketplace are already turning over a profit.
Acquiring a business that is already successful means that you can turn your efforts to improving the asset. Someone has already done the work to get things off the ground, you can turn your hand to improve it. Perhaps you can buy a business and use the flywheel to make it more profitable and increase the profit in a way the previous owner didn’t even know was possible.
Even if you already own an Amazon FBA business you can use a version of the Amazon flywheel we’ve named the asset flywheel to buy up more FBA businesses. If you watched the YouTube video at the start of this article then you’ll know what we’re talking about. If not then it’s a method that compounds the profits from one business to buy several others. The video goes in-depth so it’s worth checking it out if the idea of building wealth this way interests you.
What it all comes back to is that Amazon flywheel is an incredibly important metaphor. Learning how to harness the power of a flywheel can not only help you to build an even more profitable business but build a portfolio of successful Amazon FBA businesses.
