We Evaluate Nike’s Break-Up With Amazon
6 Jan 2020
13 Jan 2020
Reported on PIPER
In our recent survey of 2,000 online consumers in which we asked consumers to name brands they most trust, Amazon was far ahead of the pack. They have come to rely on it (47% had a Prime subscription) and are rarely let down (even when delivering the world’s biggest package, a dinosaur statue to Jurassic World).
Although initially a gateway for boring, functional products, Amazon has become an emporium for most consumer goods. In the last year, 57% had bought a gift on Amazon, 32% clothes and fashion accessories, 29% beauty products, and 18% specific food and drink products.
Business leaders, on the other hand, have a different account of working with the giant. To some it’s a ‘necessary evil’, to others it’s ‘crack cocaine’ – you know how bad it is – but it is impossible to resist. Amazon’s retail channel sharply divides opinion but one thing is certain: consumer brands with an online presence ignore it at their peril.
In the latest GeekMeet, our popular roundtable of ecommerce minds, Claire Leon gave an intriguing insight into ‘what lies behind Amazon’s famous orange gates’.
Claire worked for seven years at Amazon managing the company’s commercial relationships with media agencies and their brand clients. She helped launch the Amazon Advertising Platform in the UK, seeing it expand from a handful of staff to nearly 300. She is now co-founder of Acorn-i, a technology and services business that empowers brands and sellers to maximise their e-commerce sales on Amazon.
First came some home truths. ‘Your customers are on Amazon whether you like it or not,’ she said, reminding us of the company’s omnipotence and its numerous data entry points in an average day – from Alexa to Kindle to Prime to AWS. This means it has access to very interesting data sets that are essential for brands in helping them understand how their customers purchase. These data sets are available for brands to interpret. They just ‘make it hard to find’.
Seller Central – which enables brands to sell products directly to Amazon customers – has rapidly become an incredibly powerful and effective tool not just for brands but for Amazon as it now represents 56% of all sales.
Amazon’s other sales channel is Vendor Central, an invitation only platform where brands sell directly to Amazon who, in turn, sell on to consumers. The two platforms occupy different floors in Amazon HQ and are, like warring siblings, in constant competition.
Seller Central has recently outpaced its older sister but fast growth has come at a price. With millions of sellers now on the platform, it can be hard to distinguish good from bad. This often leads to good businesses being wrongly suspended while the bad (who cannibalise genuine brands by stealing their designs and producing cheaper and inferior versions) can go undetected for too long.
Vendor Central presents its own challenges. With an increasing focus on vendors whose retail sales value exceeds £7m, smaller brands can struggle to make themselves heard.
But ignoring the platforms is not an option, since 54% of all online product searches begin on Amazon. For brands already operating on both, Acorn-I recommends a hybrid approach. Keep the market leading/hero products on Vendor and launch new products on Seller.
Vendor Central is still a highly valuable channel for generating sales, but Seller Central gives products a chance to be bought by 40 million shoppers without waiting for Amazon Vendor to purchase the stock. Significantly, brands retain control of pricing via Seller so it’s important to be strategic in which products are listed across either channel.
Claire also highlighted the importance of ‘retail readiness’ and of brands making their Amazon shop shelves look as engaging as possible. And she drew attention to Amazon DSP (Demand-Side Platform), which isn’t widely adopted compared to paid search. While ostensibly serving as an advertising platform, it enables brands to reach out to customers who land on their page but don’t buy – they can be targeted both on and off Amazon. The service can be set up with no minimum spend and can be difficult to navigate but there are rewards for those who persevere.
For our partner brands, many of whom were in the room, Amazon is becoming an increasingly important channel. At Forthglade and Barking Heads, Amazon sales are growing by 50% year-on-year, with Mous’ sales growing tenfold in just one year.
We are well aware that engaging consumers on Amazon will become harder and more expensive with time, as has happened with Google and Facebook. In our survey, consumers said they currently spend over an hour a month on Amazon shopping – competition for those precious minutes has never been more ferocious.