Don't Be Fooled by Booming Amazon Holiday Sales

The AMZScout team provides insight into Amazon's 2020 holiday sales in this guest article.

We are well into the fourth quarter of 2020 and most sellers are currently seeing increases to their sales volumes if they are managing their accounts correctly. This Q4 is special, considering that for the first time, and probably the last time, Prime Day took place during the fourth quarter. We also have consumer events such as Black Friday and Cyber Monday which always come with greatly increased traffic and more Amazon holiday sales.

The closer we get to the end of the year, year after year, there is more traffic and for most sellers, more sales. To put it simply, people are spending more, and more people are shopping on the Amazon platform.

Another Record-Breaking Year for Amazon

Every year, total sales on dates such as Prime Day continue to grow and break new records. Just recently, Amazon announced that on Prime Day 2020 third-party sellers made over $3.5 billion dollars in revenue.

Amazon has not announced its full Prime Day numbers yet. However, it would seem that the sales made by small and medium-sized businesses have increased by 60% in comparison to last year. This is excellent news for any private label seller.

We can expect similar things to happen during this entire fourth quarter. We can clearly see that Amazon total sales are consistently rising. Also, every single fourth quarter has a distinct spike as sales increase. However, that spike drops dramatically in the following quarter.

We can see that Amazon is growing as a platform and that sellers are growing along with it. We can also see that the growth isn’t evenly distributed across any given year.

How Q4 Trends Can Affect Your Future Plans

On average, sellers should experience an increase in their sales volume during Q4. This might not necessarily be the case for all sellers or all products. However, some increased Amazon holiday sales can actually be misleading, especially to sellers that don’t have a lot of experience and are going through their first Q4.

Naturally, there are always seasonal trends when it comes to demands for certain types of products. For example, you are bound to sell more flip flops and beach towels during spring and summer than other times of the year. This is why the sellers who sell seasonal items plan their inventory accordingly.

Here's an example of how seasonality can impact a seller's inventory. These numbers may look great at first glance: average reviews 431, average monthly revenue is over $100,000 and the average margin is 61%.

However, if you check sales and trends throughout the year, you will see that these numbers apply only until the end of October.

Rough calculations show that in just two months an average seller of Halloween sweets earns almost four times more than they earn during the rest of the year. This product is a very obvious and expected example of this phenomenon. Others might not be so obvious.

Avoid Miscalculating Demand

Q4 can be treated as a sort of “seasonal spike” across the board in a variety of product categories. Because of this, if you are basing any decisions on average sales numbers from any given December, you are probably going to make some planning mistakes.

There are two basic ways where you can be lead to miscalculate your decisions:

1) Overestimating the necessary inventory you will need for the following period.

If you have a sudden spike in sales in Q4, you will hope that you have reached a new average monthly sales level that would hopefully remain at a higher level. This kind of thinking is not productive. It’s true that if you’ve had a particularly bountiful Q4 your total average sales should increase on average in January. However, planning your inventory according to December averages can be a serious mistake.

Inventory management and planning is not easy. It’s one of the few things that get progressively harder the more you grow on Amazon. Your increased sales could prompt you to order a large number of items, expecting high sales in January.

Planning your inventory according to December averages can be a serious mistake.

The best you can do is find a way to properly predict your necessary inventory levels and manage them accordingly using a specialized tool like RestockPro by eComEngine. This is a prudent way to go about handling your inventory. You don’t want to overstock and hold excess inventory. You also don’t want to tie up too much of your Q4 earnings in new inventory when you can possibly invest it into something else.

2) Overestimating the potential of a type of product you want to start selling yourself.

One of the most exciting parts of deciding to sell on Amazon is to start researching the various products you can sell. One of the biggest factors when it comes to deciding which product you wish to source is the current sales of the existing product in that niche.

Most people use software tools such as AMZScout Pro Extension in order to check estimated sales. Below is an example of what those numbers look like:

This is crucial and useful information, but it isn’t enough. Using Amazon market intelligence tools is a given for any aspiring seller. However, making sure that the tools you use are advanced enough makes a huge difference.

If you click on any of the sales numbers that show up in an AMZScout Pro Extension window you can see the sales history:

Here is a perfect example of a product that has had a recent spike in sales that started pretty much as Q4 began. This sort of insight is what provides you with the necessary bird's-eye view that helps you to see past the temporarily inflated Q4 sales volume and allows you to properly evaluate any potential product ideas.

Of course, having the full picture when it comes to product research has other positive impacts, such as the ability to generate product ideas. This is why additional tools such as the AMZScout product database are necessary for success.

On top of this, keyword research is one of the most important factors when it comes to determining the viability of a product idea. Your potential growth depends on advertising with the right keywords as well as using them in your listing. This is why getting a list of keywords that existing products are ranking for is one of the most valuable pieces of information you can possess as a seller. A tool like AMZScout Reverse ASIN Lookup can make all the difference.

Be Prepared for a Drop in Q1 Sales

Q4 is a favorite time of year for many Amazon sellers. It is often the most profitable quarter. The entire sales volume of Amazon as a whole reflects this trend. This is precisely why those inflated sales can create a distorted image of how the market is going to behave when Q1 of the following year starts.

This is why it’s important for new sellers who are going through their first Q4 to be mindful. They should expect a drop in sales and demand and plan their inventory accordingly using specialized tools designed for Amazon sellers.

This also applies to aspiring sellers who want to have the whole picture when it comes to evaluating product ideas. Good luck sellers!