THE AMAZON CONUNDRUM.
Unnecessary ego trips into space.
All criticisms that have been levelled at Amazon and its founder Jeff Bezos, in just the last 12 weeks.
Stories like this - although shocking - are nothing new, particularly when you’re the big fish that everyone wants to have a pop at, and riding out the storm is second nature to organisations of this size.
Having said that, even if Amazon are unlikely to suffer more than a blip in terms of revenue & share price given how central they are to post-pandemic retail dynamics, it does appear that the noise around their ethics is gaining volume, frequency and greater visibility to a mass audience. Revelations of Amazon’s wasteful warehouse practices by ITV News has even helped grab the attention of Downing Street, who were quick to condemn and claim that relevant legislation is being considered to curb such practices.
So what does the future hold for Amazon, in brand perception terms? How does their gluttonous appetite for growth-at-all-costs correlate with the more conscious profile of the up-and-coming shopper? And what does that mean for retail brands who want to (or have to) deal with Amazon directly as a wholesale partner?
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It’s this last question that I want to dissect more deeply. As someone who has worked for brands that not only trade with Amazon, but see them as a critical partner on their own paths to the growth they so deeply desire, I can offer some thoughts.
A simple pros and cons exercise might help uncover a useful answer to the question - but it’s certainly not straightforward.
In short, the vast majority of retail brands are under a unique level of pressure right now having suffered a torrid 18 months. Conversely, Amazon delivered record revenue of $386bn (up 38%) while profits grew 84% in 2020. In pure financial terms, that is an irresistible wave to ride for brands who find themselves in a pandemic-induced pickle. Investing more resources into maximising the benefits of a partnership with Amazon feels like one of the safest bets going in a sector packed with uncertainty.
So there’s a significant one in the Pros column. Other benefits include:
Unmatched Customer convenience: shoppers simply get their purchases quicker from Amazon than anyone else.
Fulfilment by Amazon (FBA): for smaller businesses looking to scale up, the FBA program is hugely attractive - international shipping, storage, customer services all wrapped into a pay-as-you-go package. You can go from selling on your local market stall to delivering all over Europe in just a few clicks.
Access to 200 million Amazon Prime subscribers worldwide : in the US alone that figure stands at more than 145 million, a staggering 45% of the population:
And that list is by no means exhaustive.
Working with Amazon is a commercial no-brainer.
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However there is a growing, albeit less tangible, value being attributed to the partnerships your brand chooses to establish.
Shoppers are upping their game in terms of the level of research they are conducting before committing to a purchase.
They are no longer just buying a product, but buying into an ethos and a set of values that a brand stands for, and a brand’s actions in comparison to its’ words will be increasingly scrutinised.
An affiliation with a retailer that has questionable methods and a reputation for world-beating greed could well backfire when trying to win the well-informed shopper of the near future.
Levi’s : Buy Better. Wear Longer. Know more?
We may only be at the start of shoppers thinking in this way, but rival retailers have long been voicing concerns about their brand partners’ dealings with Amazon.
On multiple occasions I have been in conversations with buyers from retailers who - quite correctly in my view - value brand purity as a critical component of driving long-term growth.
And here’s why: Amazon’s flywheel model - which is centred on delivering the lowest price possible in order to attract customers - essentially fires the starting gun on a sprint to the bottom. That has an obvious detrimental impact on other retailers that stock the same product, so one can see how such relationships - which more often than not are long-standing, deeply personal and built on decades of mutual support - can very quickly become damaged.
In most cases, the retailer has the luxury of dialling up other brands who align better to their expectations.
But from a brand perspective you’re in a precarious position of losing ground with partners, who admittedly may not possess the same scale of commercial opportunity as Amazon, but have the industry cachet that can give you something potentially more valuable: respect, desirability & prolonged authority in your field.
Additionally, these same retailers know that they still have the upper hand in terms of customer experience, particularly in the Sportswear & Fashion market. Despite launching Amazon Fashion as a hub within Amazon.com in 2016, the experience still feels very….Amazon-y.
Coming from a product creation background, I appreciate any opportunity to explain product features & benefits, but - even on the brand shop-in-shops - the presentation on Amazon is basic, stiff and way below a best-in-class service:
Worlds apart : the e-com experience | Amazon (above) vs. Nike (below)
And perhaps this is one of the reasons why the majority of the luxury fashion market are keeping their distance, and the biggest hitter in sporting goods - Nike - have recently made the decision to end their direct relationship with Amazon.
Another reason is that these brands can see the genuine commercial opportunity to not play the Amazon game.
This is true in Nike’s case, who’s direct-to-consumer e-commerce sales have rocketed to become 30% of their total revenue since leaving Amazon. They’ve realised that the prize is greater if you’re able to divert your customers away from Amazon and towards your own channels.
WARNING: cutting ties with Amazon altogether is not easy.
Today there are still more than 10,000 Nike items listed on the platform, presumably through the world of the 3rd-party marketplace.
Even Patagonia - a trailblazer in the realms of running a responsible business at scale - have pursued lawsuits with 3rd-party sellers to keep their product away from Amazon, yet today over 400 Patagonia items are available to buy.
The conclusion here is that partnering with Amazon is like opening Pandora’s Box, and once that box is opened you become deeply (irreversibly?) intertwined in the machinations of a gargantuan organisation that prioritises rapid turnover of stock far above the preservation of a brand. In short, you lose control - and regathering everything back into the box is an arduous, costly and possibly never-ending process.
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My advice for brands considering a partnership with Amazon?
Approach with extreme caution.
Understand the values that your brand is built on first, and what the supporting ambitions are to bring your brand purpose to life. Establish your “why”. This mantra is your compass for navigating the road ahead.
Then, when inevitably Pandora’s Box arrives at your doorstep by next-day-delivery, ask yourself if Amazon are truly the right partner to help you deliver your purpose.
