Amazon in 2019: Enemy or Ally? Hey guys, I’m Syama Meagher, CEO of Scaling Retail, and you cannot go into 2019 without thinking about the impact that Amazon might have on your business. Whether you’re an enterprise business or a fashion startup, it is important for us to see the ways in which Amazon will be impacting the way we shape our retail strategies.
So let’s unpack a couple of really interesting things that have happened in 2018, and what’s to come in 2019. Well, in 2018, Google collaborated with this tech startup called Pointy. Now why is that so interesting? Well, what they ended up doing was giving a lot of voice to small businesses. Pointy integrates with a lot of small retailers and their back end inventory, and it allows you to see what kinds of products are being sold within those small retailers when you do a Google search. Now why do we care about this? Well guys, we all know that Amazon likes to tout that they have the largest inventory. But we all know that consumers are looking to purchase and have a lot of that immediacy and one-on-one relationship with a lot of their retail store partners now. So, this collaboration between Google and Pointy allows small businesses to get some visibility, allow them to share the inventory that they have in-store, and, guys, if those retailers then flip it and provide fast shipping, could potentially allow them to have the customer bypass that Amazon search altogether.
Now, the next interesting thing that Amazon’s been doing, a lot of brands now can now register on amazon.com to register their intellectual property. Now what does that mean? Well, it means that Amazon is now helping a lot of businesses be able to register their businesses and create a lot of services that businesses are now relying on. So things from fulfillment, right, things from distribution, obviously being able to sell in the marketplace on Amazon, and having that easy connection between Prime, so that two-day, one-day delivery service. Amazon has been making it so incredibly easy for businesses – even the fashion startup firms out there – to get started on their platform and to support them with a variety of different services.
Now this I would say is a huge benefit for many small businesses. Why is that? Well, it can be challenging to find fulfillment partners. It can be challenging to be able to give products and ship products on a quick one-day, two-day service. So, as a small business looking to stay competitive in the market, this is a benefit that seems really amazing, because it helps to really add so much value and take a lot off of a business’ plate. So, so far we have one point against Amazon, and one point for Amazon. Let’s see what other kinds of examples we can dive into.
Well, another interesting thing, guys, is Amazon’s been ramping up a lot of their advertising on the platform, really trying to take a piece of that market share of that $88 billion digital advertising spend that right now, Google and Facebook have been primarily dominating. So what does that mean exactly? Well, if you guys go onto Amazon, you’re likely, when you type in a search, to see sponsored ads. In fact, sponsored ads have now been really taking over a lot of the consumer-visible real estate when you are searching for Amazon products. This is both a great thing, as far as being able to make sure your products have high ranking and high visibility, but definitely problematic from a customer experience standpoint, and also problematic if you are not a large enterprise business and cannot compete competitively with those ad spends. So we’ve all seen that companies like Facebook have become a lot more competitive in terms of the amount you have to spend, a lot more in terms of the cost per click, the cost per view. And so when you start to think about Amazon taking up more of that digital ad spend, that means that, guys, you have to have the money in order to pay to play.
Now, the other really interesting thing that Amazon’s forced us to do is to really pay more attention to experiential. It’s forced us to spend a lot more time really thinking about the value-add. And this, I think, is so important. Jeff Bezos really understood the power of the one-click shopper, right, being able to quickly get something into your cart and get it right to your door within one to two business days. However, this has really forced us in the retail landscape to be a lot more critical about that customer experience. I haven’t seen in my career so much of a focus on customer experience and experiential in retail that I have in the last two years.
Now, this is very important. This has driven companies like Target to get a lot more specific about their localized shopping experiences, really bridging in-store and online. This has also forced companies like Target, again, to get a lot smarter about how they deliver product to the customer. This means that they can either be delivering goods, let’s say, same-day delivery, offering two-day shipping, having things like order online and pick up at curbside pickup. And we’re seeing other businesses follow suit, right, we’re seeing Sears take a similar approach, we’re seeing Nordstrom take a similar approach, and this I really think is accredited to the force that Amazon put on us as retailers to be more innovative, to create Insta-bait moments by creating more experiential events inside of our retail stores, and to create more hyper-local shopping experiences.
It’s no doubt that Walmart sees Amazon as its biggest threat. And what has Amazon done in retaliation to that? Well, they keep doing what they do best. They keep mining data. What has Walmart done? Well, Walmart now ensures that within a 50-mile radius of any major city or smaller mid-tier city that there are multiple Walmart options.
So what does that mean? Well, if you want to touch and feel the product, you can go buy it at Walmart. If you want to actually get that product to you in two days, Walmart can do that as well. So now we start to see what are the major conglomerates going to be doing as they start to vie more for that big money spend.
All right, so lots of reasons why we don’t like Amazon. Lots of reasons why I think Amazon is actually helping a lot of retailers, but what does that mean for you in 2019? Enterprise businesses, it is really important that we start to think of amping up our Amazon advertising spend if we currently have that as a sales channel. This is critical. Without investing dollars into that spend, you’re going to be lagging behind, and then all of a sudden, it’s going to become much harder to close that sale on an Amazon channel if you have it.
Growth stage companies, this is an important pivotal moment for you to ask yourself, “Am I able to compete with Amazon?” Do I want to sell on their platform, in which case now I know that that’s not only an investment into creating them as a distribution channel, but also as a marketing channel? Used to be we would only think about Amazon as being a distribution channel, but now we know we need to spend money in terms of getting eyeballs on your product on Amazon. Or, do we want to say, hey, we’re going to completely forego Amazon as a distribution and marketing channel and really push towards experiential? That is a choice that you have.
Lastly, when it comes to fashion startup businesses and looking at Amazon, it’s important to see Amazon at this juncture as potentially a big asset for you. This means that you can leverage Amazon, from their distribution platform to their marketing channel, and you can really grow and build a business on Amazon. However, there is a huge caveat here, and that is Amazon is known for being able to really go home hard with their private label products. So that means, guys, Amazon is mining data. They are looking to see what’s trending, what’s working, what are the great price points, and guess what? If you grow your fashion startup on Amazon, you are really only allowing yourself to take advantage of one channel. So you have to think in terms of multiple prongs and multiple distribution points. The one thing that I’ve seen a lot of fashion startup brands suffer from is getting on Amazon and then having their products ripped off, not being able to afford the advertising spend, and all of a sudden, now their businesses are becoming far less profitable, and they have to shut their doors.
So, in order to prevent that from happening to your business if you go the Amazon route, you want to make sure you’re thinking of this as a distribution channel as well as a new place for your marketing spend.
All right, guys, thinking about going the Amazon route? Want to know how that fits into your custom business model, and what your future plans for growth are? Send us an email. I’m at email@example.com. Would love to see what your approach is to Amazon, so please leave us comments below. Make sure you follow us on YouTube, and hey, we are where you are, guys, so when you are out there thinking about what’s happening in terms of pop-ups, what’s happening in terms of Amazon, what do I do next, where do I pivot, come find us at Scaling Retail. We are here to serve you. All right, guys, talk to you later. Bye.