Have you noticed a recent drop in sales you just can’t explain?
Amazon has recently changed its search algorithm to increase the importance of geo ranking for both SERP ranking and Buy Box percentage. If you have noticed a dip in sales and you cannot identify a clear reason why geo ranking might be impacting your sales.
While the location of the buyer and the inventory has always been a part of Amazon’s algorithm, since Amazon rolled out 1 day shipping the importance of the location of the search query has increased. Amazon now looks at the ability to get an item delivered with one-day shipping for both SERP ranking and buy box rotation. This has caused a sub-section of Amazon sellers to have a sudden deceleration in their Amazon sales.
In this episode, Nate and Robyn share about what Geo Ranking is and how it could be affecting your sales on Amazon.
What is Geo Ranking?
Geo ranking is based on the distance between the geolocation in the search query and the best matching geolocation in the record. – Algolia
With geo ranking, Amazon is looking at where the customer is located in relation to where the inventory they could be potentially purchasing is stored. If someone in South Carolina is shopping on Amazon, Amazon’s going to push the products to the top of the search results that are in the warehouse closest to South Carolina. Amazon knows that one-day shipping increases conversions so it gives priority to items that can be delivered in one day both in the search results and the buy box percentage.
These two result pages were taken at the same time on the same day. The only difference was the delivery address for shipping.
How Could Geo Ranking Be Affecting My Sales?
We have noticed this change in sell-through (either related to Buy Box percentage or lowered SERP rankings) on products that are more competitive. Primarily with private label sellers in the supplement and beauty category and with resellers who shop large brands like Nike.
This change gives an advantage to larger sellers who carry deeper stock levels than those sellers who might only carry a few of each item.
The reason for this is that if I have 50 of a Nike shoe in stock, the likelihood of someone searching for my product being physically close enough for 1 day shipping to my inventory is significantly higher if I have stock in 6 warehouses around the country versus only having inventory in 1 or 2 warehouses across the country.
However, if I only have two of an item they both might be at the same warehouse limiting the number of searchers that are within the ability to receive one-day shipping for Amazon.
A NOTE OF CAUTION: It would be a mistake to simply assume that geo ranking is the root cause of any existing dip in sales velocity. It is one of many factors that could affect your sales. Be sure that you are also looking at the competitiveness of the products you are sourcing, suppressed inventory, orphaned child listings, stale inventory, and loosened buying criteria before jumping to conclusions.
The Inventory Health Report and the Detailed Sales and Traffic reports can be a great place to start your inquiry.
The point of this article is not to give you a place to lay blame for lower sales volume, but to allow you to examine your choices for inventory for the remainder of Q4. Remember, ultimately it is conversions that causes a listing to rank higher organically on Amazon.
What adjustments can I make to accommodate this update?
In this podcast, we share some tips for adjusting to this updated algorithm. You can look at the following strategies:
- Carrying a deeper level of stock
- Tightening buying criteria around highly competitive items
- Diversifying product mix
How Do You Know This?
The only people that really “know” how the Amazon search algorithm works are people that work at Amazon. Amazon has very strict non-disclosure agreements. Since Amazon rarely makes public announcements about the A9 algorithm, most of what is accepted in our industry as common knowledge comes from the anecdotal experiences of sellers.
Said another way, we cannot be completely sure of any changes in the algorithm. However, we have seen enough anecdotal evidence that supports the idea of an increased importance for geo ranking on Amazon. Below is a screenshot of another search with an even greater difference in search ranking results.
As sellers, we have to balance this idea of geo ranking and having a higher depth of stock with not having a lot of excess inventory, which would hurt your IPI and eat into your margins with excess storage fees. It comes down to really understanding your product, really understanding your lead time and your sell-through rates.
If you’re sending in a certain amount of units into Amazon, even if you’re sending it all into one location, once it arrives at the warehouse, it will be broken up and sent to other warehouses to qualify for one-day shipping. So it’s not just staying in stock anymore, but making sure you have enough depth in your stock to have that inventory varied across different locations. It is more important than ever to pay extra attention to your stock levels and depth, especially with Q4 right around the corner.
Inventory performance index (IPI)
Your inventory performance index is made up of a couple of different things: excess inventory, sell-through rate, stranded inventory, and in-stock inventory. Amazon recently announced that your IPI has to be over 400 instead of 350.