As 2019 continues, brand owners need to assess what impact Amazon might have on their businesses. It’s important for startups and established enterprises alike to understand the different ways Amazon will impact their retail strategies in the near future. However, before we look towards the future, we need to take a look back.
Amazon Boosted Smaller Retailers’ Visibility.
In 2018, Google collaborated with Pointy, a tech startup. This empowered a lot of small businesses because Pointy integrates with small retailers, allowing users to see what products are being sold by Amazon via a simple Google search. Amazon is known to boast that they have the largest inventory. However, consumers are looking for both immediacy and a direct relationship with retailers. The collaboration between Google and Pointy gives small businesses higher visibility and allows them to share inventory. If these small retailers begin to offer faster shipping options, Google and Pointy could allow them to have customers bypass Amazon altogether and increase sales.
Amazon Uses Brands’ Intellectual Property to Develop New Services.
Amazon is now allowing businesses to register their intellectual property with Amazon. They create a lot of services that these businesses are growing to rely on. This includes services like fulfillment and distribution, being able to sell on the Amazon marketplace, and having access to Prime’s delivery speeds. Amazon has been making it incredibly easy for businesses – even fashion startup firms – to get started on their platform by supporting them with these services. This is a huge benefit to small businesses because it removes the challenge of finding fulfillment partners and offering rapid shipping. All of this keeps these business competitive while taking much of the stress of logistics off of their shoulders.
Amazon Is Diving Deep into Sponsored Ads.
Amazon has also been ramping up a lot of their advertising on the platform, competing directly with Google and Facebook. When you search for a product on Amazon, you now see sponsored ads related to your search. This can be both good and bad. As a strength, it greatly boosts the visibility of your products. From a consumer standpoint, however, these ads can be annoying or even intrusive. Also, smaller businesses may not be able to afford to use these sponsored ads effectively. With ad costs steadily increasing across leading platforms, it’s reasonable to expect Amazon to follow suit as it competes with the other giants in web advertising.
Retailers Are Forced to Innovate to Compete with Amazon.
One of the biggest things Amazon has forced us to look at is the customer experience. Small retailers now have to consider what value they add in order to remain competitive. Jeff Bezos understood the allure of one-click shopping and being able to quickly get something you ordered to your door within one to two business days. I’ve seen more discussion and focus on the customer experience in the retail sector in the past two years than I have at any other point in my career. Even national chains like Target are now driven to bridge their in-store and online shopping experiences and how they deliver products to their customers. Other businesses are following suit. This evolution can be credited directly to Amazon and the pressure they put on us as retailers to be more innovative with experiential events inside of our retail stores and to create more hyper-local shopping experiences.
Walmart no doubt sees Amazon as its biggest threat. To keep from losing ground, Walmart now ensures that within a 50-mile radius of any major or mid-tier city there are multiple Walmart options. If you want to touch and feel the product before you buy, you can go to a Walmart and do that. If you want to order online and have the product in two days, Walmart can do that as well. When we observe trends like these, we can see what major conglomerates will be doing as they vie for more profits.
Enterprise Companies: It’s vitally important to seriously consider increasing ad spending if you use Amazon as a sales channel. Ignoring Amazon advertising puts you at a direct disadvantage, and as other businesses adapt, you’ll only fall farther behind.
Growth Stage Businesses: Ask serious questions about Amazon and your strategy. We used to view Amazon strictly as a distribution channel. Now, to get people seeing our products, we need to spend more money. Alternatively, you can choose to forego Amazon entirely and really push towards experiential. Both options can be just as viable.
Fashion Startups: It’s important to see Amazon as a potential big asset. You’re in a great position to leverage Amazon as a distribution platform and marketing tool to build strong business. However, there is a huge caveat: Amazon is known for pushing its private label products hard. Amazon is mining data, looking to see what’s trending, what’s working and what the great price points are. If you grow your fashion startup on Amazon, you’re really only allowing yourself to take advantage of one channel. You have to think in terms of multiple prongs and distribution points. We’ve seen a lot of fashion startup brands suffer from getting on Amazon and then having their products ripped off and losing profit until eventually shutting their doors. Make sure you’re thinking of this as a distribution channel as well as a new place for your marketing spend.
Thinking of incorporating Amazon into your strategy? Send us an email at hello@scalingretail.com.