In this issue of the Amazon FBA deep-dive, we are analyzing a 6-year-old baby brand, Warm Cuddles. The brand is well-positioned but has shown signs of neglect in recent months.
The estimated monthly revenue for this brand is $17,730. With the easy wins, we envision it can be increased by 75% equating to $31,027/mo.
This is what we cover in this deep dive:
- Business Summary
- 4 Easy Wins to increase revenue
- What is the exit valuation of this brand?
- Actionable takeaways
Let’s get into it!
Warm Cuddles Brand Overview
Warm Cuddles was first established in 2017 with it’s premium toddler towel offering. A classic private label business, it quickly grew it’s review count on Amazon and established a strong position in the growing baby niche. Since then however, sales have gradually diminished and the brand has shown signs of significant neglect. Reviving sales and positioning it for a future exit is possible though using the easy wins listed below.
- Strong review structure of top product (700 reviews, 4.8 star rating)
- Multiple opportunities to launch new products/variations in niche
- Significant revenue concentration – top product accounts for 52% of overall revenue
- Undifferentiated product from competitors leads to price competition and margin compression
4 Easy Wins To Grow Warm Cuddles By 75%
There are opportunities to significantly grow this brand. We break down the following easy wins:
- Change the main image to increase click through rate
- Add a video to each product listing
- Increase advertising spend to improve organic ranking
- Introduce additional color/design variations
Let’s get into it!
➡️ Win #1: Change main image to increase click through rate in search results
Changing the main image of a product listing represents one of the best ways to stand out in search results and increase traffic to a listing. A good main image has distinctive elements that make it stand out among the page and draws the click.
Looking at the first 4 organic results on Amazon for the term “toddler bath towel”, we can see how each brand distinguishes themselves
Looking at the main image for Warm Cuddles, there are multiple opportunities to improve. We estimate changing the main image may be able to increase click through rate and overall revenue by between 5-10%.
➡️ Win #2: Add a video to each listing
As shown below, the secondary images are well done and feature the main components of a highly converting listing on Amazon (main image, infographic, lifestyle, dimensions, and comparison image).
However, one big aspect that is missing is a video on the listing. Listing videos can improve conversion rates by 10-25% through showing customers exactly how a product looks in real life and pointing out the top benefits of the product compared to competitors.
Another benefit of a listing video is that they can be used in advertising through the Sponsored Brand Video ad unit. These ad units are highly prominent in search results and have click through rates 2-3x higher than normal sponsored results.
➡️ Win #3: Increase advertising spend
Currently the main listing for Warm Cuddles (B07PV6ZMX6) is estimated to be doing $9,300/month in revenue and is advertising against 198 keywords.
If we look at some of the closest competitors in the niche using tools like Helium10, we can find additional keywords.
For example, Touchat Bamboo Baby Towels (B08FR58BCJ) is estimated to be doing $33,000/month in revenue and is advertising against 621 keywords.
➡️ Win #4: Introduce additional variations
One easy win in a niche like this is to introduce different variations. The current main product only has 3 color variations (blue, pink, and white).
Introducing new colors and new designs represents a great opportunity to increase overall sales velocity and conversion rate. Touchat baby towels for example offers 6 new different variations – all of different designs.
How Much Is this Amazon FBA Brand Worth?
Currently the estimated monthly revenue for this brand is $17,730 putting the estimated 12 months revenue at $212,760. At an 20% net margin, annual net profit is $42,552.
This is a small Amazon FBA business and has shown signs of neglect in the previous months.
3 Actionable Takeaways
Here are actionable takeaways that you can apply to your business today:
- Incorporate video into your entire Amazon strategy (listings and ad strategy) in order to improve conversion and drive traffic to your listings
- Don’t relax just because you have strong reviews – even brands with 5 star ratings will see their sales decline over time if best practices aren’t continually being implemented
- Introducing new variations represents a low cost way to introduce new products and grow revenue 25% year over year