110: Amazon – Friend Or Foe?

Amazon have polarised the retail market in many ways over the past few years. They’ve pushed the innovation boundaries and raised the bar for customer expectations. They have earnt repeat business that makes any retailer enviable. But, they’ve also caused pain and anger amongst those that feel they’re too big, too powerful and too greedy. Meanwhile, the Covid-19 pandemic has further reinforced those feelings. And now, some consumers grow more loyal whilst others grow more frustrated. Their behaviour and actions make it hard to decide if Amazon are a friend or a foe. So, join Oliver Banks and explore the situation from both perspectives so you can decide what’s best.

Listen to this episode to discover:

• Key Amazon statistics that make them an irresistible force.
• The warning signs that could deter you.
• My advice about how you should proceed when thinking about Amazon.

Get in touch with Oliver Banks

Share your thoughts. Ask a burning question or a topic that you’d love to hear unpacked on a future episode of the Retail Transformation Show podcast.

So, send an email to oliver.banks@obandco.uk

Or connect on with Oliver Banks on LinkedIn.

Key Amazon statistics

Customers start their journey with an Amazon search

• So, for regular Prime users, 79% start their search for a new product on Amazon.
• Then, for less regular Prime users, that number decreases slightly to 65%.
• Finally, for non Prime users, still, 37% of people start with the Amazon search bar.

Prime customers are loyal and valuable

There are reported to be 112m Amazon Prime subscribers, worldwide, as of December 2019. Again, you can guess how those numbers have changed with the coronavirus pandemic in 2020.

As reported by Business Insider, Amazon’s Prime customers are worth $1,400 in sales per year, vs $600 for non-Prime customers.

And Prime members now account for 65% of all of Amazon e-commerce customers.

Marketplace sellers are growing

Sellers account for over 50% of Amazon sales. And 80% of these sellers do not sell on Amazon exclusively.

Plus, Amazon have announced that they intend to add an additional 100,000 new small and medium-size business sellers in the next year.

But, highly reputable brands and companies like Nike are leaving the Amazon platform to make their products more sought after and less commoditised.

However, the Wall Street Journal have reported that Amazon uses data from 3rd party sellers performance to guide and direct their own brand strategy. Read more as reported by CNBC if you don’t have a WSJ subscription.

Amazon Advertising revenue continues to grow, at pace

In Q3 2020, Amazon reported that their Advertising revenue has grown by 51%, that’s up to $5.4 billion.

Then consider the growth of marketplace sellers and the advertising revenue that they will spend – and Amazon Advertising is quickly growing to compete with Google Ads and Facebook Ads.

But intellectual property and fake reviews remain a thorn in Amazon’s side

There are always rumours and conspiracies about loads of fake reviews and scams on Amazon.

Plus, increasingly, reports of counterfeit or pirate goods. So, Amazon is starting to act to help companies protect their brands. Although, there will continue to be more calls that this does not go far enough and that Amazon should take more responsibility of the products they are selling on their website.

4 ways to consider your strategy alongside Amazon

Amazon describe themselves as “Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.”

So, using those same themes:

• How are you obsessing over serving your customers? And should you be focused more on doing that rather than worrying about Amazon coming for you (or any other competitor for that matter!)
• How are you showing a passion for invention and creativity? Do you ensure that you have unique products and offerings? And how can you promote those key differentiators, rather than playing on the price only field?
• What does operational excellence look like to you? How will you consistently deliver for your customers, your colleagues and the business?
• Finally, how are you focused on long term thinking? Do you have a plan in place for the long term? Especially after the volatility of 2020. Or are you winging it a little (it’ll be our secret!).

So, is Amazon a friend or foe?

Both, in short.

You’re not going to be forming a close and exclusive partnership with them. But at the same time, only a few brands in the world are strong and valuable enough to be able to discard Amazon’s hordes of loyal customers.

But what’s most important is that you choose a strategy with intention. And then you follow through with that strategy. Else, you’ll be caught in the middle and will confuse your customers and your balance sheet!

And a closing thought… if you decide not to work with Amazon, will ANYONE ELSE (other than you) notice or care?

But, what are your thoughts?

Let me know by email at oliver.banks@obandco.uk or on social media. I’ll look forward to hearing from you.