Amazon – Friend or Foe?

Amazon – Friend or Foe?

“On the one hand I’m proud of what it became, but it also scares me”
– Shel Kaphan, Amazon’s first-ever employee.

Amazon hit the headlines once again recently with the BBC’s latest Panorama documentary examining their history, and more importantly, use of data. In Planning it got us thinking about the role and power Amazon now holds, and more specifically, that if we were brand owners, what we should do and whether we should be cautious!

An e-commerce Juggernaut

Much has been written about Amazon, the power it holds over brands and shoppers alike.

Research highlights that almost 50% of online shoppers now go directly to Amazon when looking to purchase an item (only a mere 35% choose Google).

2019s Prime Day was the most significant retail event in their history, with over 175 MILLION products sold over the two days. That’s more than 2018s Black Friday and Cyber Monday combined.

Having seen a whole week of deals for Black Friday and Cyber Monday in 2019, we expect another sizeable figure this year, with many Christmas shoppers choosing to enjoy the sales from the comfort of their own homes, rather than fighting through the busyness of the high street.

The threat of Amazon Own Label

Shoppers are buying more than ever from Amazon, so, as a multi-brand retailer means that should be great for us as brand owners, right?

Amazons unparalleled access to insights into shopper purchasing behaviour, emerging consumer trends, and the value of different categories is leading many to fear the odds will soon be well stacked against brands.

What about when Amazon decides to use all that data, and enter into whichever category takes their fancy? 

The e-commerce goliath can maximise its economies of scale to deliver cheaper, own branded products than leading brands, which may ultimately lead to reduced competitiveness (as brands are unable to compete), and thus, reduced shopper value.

Scary, right? Well, it’s happening.

Number of Amazon private label brands
Source: TJI research, cited in The Grocer.

As an agency working with multiple brands within the Beers, Wines and Spirits categories, it was their recent foray into own-label gin, and even more recently wine, that caught our eyes the most.

Amazon's own brand gin and wine

Tovess – their new gin brand, retailing at £24.99 is ‘dedicated to curating expertly distilled spirits from around the world’ and already boasts a 2020 gold award from the Women’s wine and spirits awards.

Even more recently they quietly launched an own-label range of wines, designed to be ‘simple yet savoury’ at affordable prices, with a case of 6 bottles setting shoppers back a reasonable £35.

Time will tell whether both will resonate with shoppers in categories where we know brand strength and familiarity plays an important role. But, both made this continued expansion all the more real.

So, as a traditional brand, should we be boycotting Amazon to protect ourselves? 

Unfortunately, it’s still a little bit too early to fully understand what the future holds, and how categories may be re-shaped, or how the shopper journey could be transformed thanks to amazons experiments in voice tech, cardless retail, and a push towards subscribe and save business models online.

For now, in our experience, our advice remains to treat them as a key channel and use them more.

Despite Amazon’s growth in own-label brands showing no sign of slowing, research, (at least at the moment), shows that despite their unrivalled advantages, their own label brands are yet to shake up and dominate many pre-established categories. Instead, they’ve seen the most promise amongst categories with bulky items, like nappies, where it’s easier to have someone deliver, or those where shoppers are already used to purchasing online (like coffee pods).

As their appeal with shoppers shows no signs of slowing, the opportunity for brands, particularly in categories where the strength of the brand is a key decision factor, remains too significant to ignore.

The most used sales tactics on Amazon remain price promotions to help undercut high street competitors. For many brands, this approach isn’t viable long term and risks creating an environment where products are only ever bought on promotion.

Instead, the leveraging of similar marketing tactics seen across the likes of Global Travel Retail may prove more opportunistic for brands.

As an example in Whisky alone, we’re seeing brands offer:

 Exclusive products – Auchentoshan recently launched a single malt whisky only available to be purchased via Amazon.

Amazon Exclusive Auchentoshan Malt Whisky

Early distribution rights – Johnnie Walker offered early distribution rights for Amazon via its Game of Thrones special edition ‘white walker’ range.

Immersive consumption experiences – Aberfeldy hosted an online whisky tasting experience, which shoppers gained access to via purchasing of their products. It allowed customers to get closer than ever to the brand from the comfort of their own home.

The Verdict

While many brands are still nervous about Amazon, the fact that for most customers it’s the first place they go to buy products from means it’s a channel too big to ignore and which still currently offers significant opportunities for brands. They have an ever-growing role in people’s lives thanks to their Alexa devices and their prime membership scheme, linking commerce incentives with access to content including Movies, TV, Music, and Sport, arguably, better than any other brand.

We think brands should ensure they’re not seeing Amazon as a simple transactional platform, but instead start thinking of it as a channel offering new innovative opportunities for engaging with your customers.

Sources: Business Insider, The Grocer, Amazon, eMarketer

If you’d like to know more about how your brand can optimise its shopper and retail marketing strategy, get in touch!
Matt Sewards, Senior Planner.

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