Amazon Lightning Deals: Are They Worth Doing?
As Amazon sellers we must be constantly aware of all the different options and strategies we can use to improve our Amazon business. Getting more sales is a constant and unchangeable goal for any Amazon seller. Not only does more sales mean more revenue and profits, but it also means a higher ranking which leads to more sales. This is generally the case, however, sometimes you might find yourself in a position where it is smart to temporarily sacrifice your revenue for the sake of getting higher rankings. The ability to make calculated and well planned out strategic decisions like this, is a mark of a good Amazon seller. This basically means that you create a discount structure where you hope that you can increase your sales temporarily in order to position yourself so that you will have a permanent increase afterwards. There are a few ways of doing this, one of them is to set up an Amazon lightning deal. What is an Amazon lightning deal exactly?
An Amazon lightning deal is a limited time and quantity discount offer you create on one of your products within Amazon’s own system. It works like this: for a period of 6 hours your product will be featured on the deals page, which is one of the most visited pages on Amazon. In addition to that, during this time period, wherever your product can be found it will have the exclusive “limited time deal” badge in it’s title. Above you can see the IPad stand on the deals page. On the image below you can see the same product found in an organic search with the “limited time offer” badge.
Since you set up an Amazon lightning deal with a set quantity, on the deals page below your listing will be a bar indicating of how much of the discounted units are left in the offer. It’s clear that the lightening deal is the result of Amazon’s effort to put a product in a position to be sold as much as possible in a short of a time-frame. An important thing to note is that if your designated inventory for the deal gets sold out before the 6 hours have passed, the deal is done. Another important thing to mention is that while you have the “limited time deal offer” badge, it will be displayed on your PPC ads as well as your organic positions during the 6-hour period. So, how to go about setting an Amazon lightning deal set up?
It is very simple, you can go to your Amazon seller central and go to Advertising > Lightning deals. Here, you will immediately see which of your products is eligible for a lightning deal. You will first see that Amazon will put some mandatory contingencies on your lightning deal. The 2 limiting factors that Amazon is going to impose on you are: The Maximum price and the Minimum quantity. the algorithm will come up with these numbers to create what it considers to be a minimum appealing offer. What this means is that is the minimum (or maximum) you can choose in order to make this deal worthwhile for the customers. You can, of сourse, lower the price and increase the quantity as much as you like, just you cannot input a value higher (or lower) than what Amazon demands. You just have to stay within the value parameters that Amazon has set.
Once you have set up your lightning deal, submit it for Amazon to approve it. If/When they do, it will be ruin when a slot is opened. The lightning deal also costs money. This is a service that is created as a marketing channel and is used as another source of revenue for Amazon. The minimum price for a lightning deal is $150. it can be more expensive depending on some factors that only the A9 algorithm knows.
It is entirely possible that none of your products will qualify for a lightning deal. From gathering some data, is seems as though only products that are available for prime shipping and have a 4-star+ rating can qualify. However, that is the absolute minimum requirement, since plenty of products that fulfill those conditions are not eligible either. Luckily this changes week to week, so even if your product isn’t eligible this week, the next it might be.
What are the Benefits of Running an Amazon Lightning Deal?
A spike in sales – This is an obvious benefit. The whole system is designed to do exactly that. The increased volume of sales will help get more of your product into the hands of customers, which in turn might increase sales long-term via words of mouth.
Exposure – Being featured on the deals page can help you get much more impressions than you usually would via a standard PPC campaign. Even the people that visit the page and decide to take another deal will be aware of your product and might decide to look for it in the future.
Higher organic ranking – Since your listing will have the “limited time offer” badge wherever it can be found during the promotion period, you are bound to have more sales through various keywords. Moreover, you will be more likely to sell the product if a customer finds you organically on a particular keyword due to the badge. Therefore, you will get higher organic rankings on those keywords.
Higher bestseller ranking – Your BSR (best seller rank) is almost guaranteed to rise using a lightning deal. This can be especially useful if you believe that you are close to getting a Bestseller badge. If you wish to know more about both the Bestseller badge and the Amazon’s choice badge you can read about it in one of our previous articles.
Getting rid of inventory – If you find yourself in a situation where you need to get rid of your inventory fast, this is most likely the best way of doing so. Most seasonal products use this tactic to get rid of leftover inventory before their season is over. Also, sellers use the lightning deal for when they discontinue a product and wish to move on to another one.
Defending your Bestseller badge – This is also a valid course of action for those that are in danger of losing their Bestseller badge. Only the top 100 bestselling products in any department can hold the badge at any time. If you are in this position and you see you rank dropping, a lightning deal can be used to solidify your position.
What are the downsides of running an Amazon lightning deal?
It’s expensive – Firstly, you are sacrificing your short term revenue for an increase in sales which is already a big financial burden. Secondly, it costs $150 or more for the promotion itself. It takes a lot of careful planning and cost-benefit analysis in order to make this move.) It’s a costly investment and you better make sure it’s worth it ahead of time. To give you an example of how much of a decrease in revenue per unit is normal for a lightning deal, let’s take a look at the IPad stand that was mentioned above. I have used AMZscout product database to calculate the profits per unit after finding the manufacturing price on Alibaba. As you can see in the image, the seller is only making a $1.23 per unit profit compared to over $5 per unit for its usual price.
You are at Amazon’s mercy – Once you submit your Amazon lightning deal proposition, everything else is at Amazon’s discretion. In other words, you don’t get to decide at what time is your 6-hour window going to be. You are running a risk of paying for the promotion that gets activated in the middle of the night or at some other inopportune time. It can happen that the promotion won’t generate nearly as many sales or as much exposure as it would during the day. This might leave you feeling as if you threw your money away.
You need to carefully plan you inventory ahead of time – This is another negative aspect that has financial implications. Since you might sell a much greater number of units, you will need to make sure you have enough inventory leftover so that you don’t run out of stock before you get your next batch in. This usually means that you will have to pay for more inventory ahead of time since you won’t be able to get the revenue from the units you sell during the promotion for at least 2 weeks. Not to forget that you will be selling those at a much lower margin. Therefore, you will not be able to fund your next batch as much as you usually would for selling that many units.
Your BSR will most likely be the same in a few days – It has been seen plenty of times that seller’s BSRs (Best Selling Ranks) return to their per-lightning deal value soon after. This is not an indicator that lightning deals are a bad idea. It just means that most people have high expectations from them. If you have a true quality product, with a decent number of reviews, and if you plan and calculate your Amazon lightning deal carefully, you can achieve a permanent boost in sales. However, it would seem that either sellers are not thinking things through well enough; or that sellers have the wrong impression about what can be achieved with a lightning deal.
In conclusion, Amazon lightning deals are a big deal. This is not a strategy to be taken lightly and any seller considering it should do their best to weigh the cost-benefit analysis. Certainly there are situations where a lightning deal is the smartest course of action, however, I would think that in most cases other alternatives would do the job. For example, another valid option is to generate discount codes and to distribute them via social media campaigns. This way you can even give out links to your product through a particular keyword search so you can boost a specific keyword ranking. Just by reducing your price and increasing you daily PPC budget is basically a lightning deal on a smaller scale. This way you will be in complete control of it, free to turn the PPC campaign on and off at any time of the day. The point is that their are other options than an Amazon lightning deal. Considering how much of a risky and expensive strategy it is, it would be wise to consider all other options before deciding on using it. Good luck sellers!