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Amazon’s aggressive strategies have allowed it to excessively outdo any of the estimates made regarding their profits by prominent e-commerce leaders and experts. For the past quarter, Amazon has reported 35% sales growth in the US and 29% sales growth in the global market. Furthermore, the last quarter alone has seen a growth of 22% in online sales compared to 18% in the previous quarter and 2016’s 20% overall growth.
For 2017, I predicted higher FBA fees for brands while Amazon catches up with the increasing demand from merchants as well as consumers. Additionally, Amazon will have a tight control over soliciting reviews in emails to Amazon customers. For this, Amazon will either prevent proactive emails to customers from brands or require an ‘unsubscribe’ option for such emails. This will also lead to an increased importance of Amazon's paid PPC (Pay per Click advertising) program as all brands, new and old sellers on Amazon, will need new ways to get traffic and sales for their products. I also predicted Amazon’s deeper expansion into international markets in the UK, Europe, Mexico, and India with added programs and investment to attract more consumers to their marketplace. Furthermore, Amazon will also try and get more 1st Party Vendors to their marketplace as it will allow them to monitor product prices, have a better inventory control and balance the ratio between 3rd Party merchants and 1st Party vendors.
With 2018 coming up, brands need to be prepared for the changes or improvements Amazon is about to roll out. Here are my Amazon Predictions for 2018.
A. More Amazon PPC features
By focussing on advertising and PPC advertising, Amazon will be able to have a very profitable revenue stream as it is present in a very high margin business. This particular revenue stream is not currently broken down in Amazon’s annual reports. However, once they do, it will show that the revenue derived from advertising and PPC advertising is huge. The revenue will be generated through two means: income from the ads and income from the increased sales on the platform. Essentially, giving brands the tools to make more money will boost Amazon’s own revenue too!
The high-profit margins of this service are one reason why Amazon will aggressively pursue PPC as a service to brands. The second reason is that more PPC features will allow them to make more profit in terms of revenue and attract and retain larger brands. Those are pretty compelling reasons why they are going to continue to invest in the platform. Additionally, to attract larger brands, they need to be able to give them more tools and features to replicate what they are doing offline. These tools could include display ads, more advertising reporting features, and re-targeting on their online stores.
More PPC features for the brands will get them more business which, in turn, gets Amazon more business along with the revenue obtained from advertising.
Here are a few improvements that Amazon could make:
1. Retargeting
Amazon holds a lot of information about their customers, specifically about households in the US where over 50% of American households have the Amazon Prime program. This is evident through a recent version of a specific targeting program rolled out by Amazon for teens in which parents would be able to give their teens access to their Amazon Prime account. Teens could request purchases and get them approved by their parents. The program suggests that Amazon has the potential to split up and identify different members of a household and, furthermore, would be able to separate the teens’ purchasing behavior out from that of the parents’ or the young children.
However, a lot of advertisers on Amazon are frustrated as there is practically zero re-targeting capability currently present. Amazon understands a great deal about their customers but they share only a little of that information with the advertisers. By starting to share more information with advertisers, they are going to enrich the program and get advertisers to spend more money on advertising as they will be able to target and re-target more individuals and households.
2. Better Reporting
Presently, the platform sponsored products on Seller Central and on other advertising platforms are very limited. It’s difficult to get custom look-back periods for specific ad types. As a result, advertisers are limited by the functionality of Amazon’s reporting. This needs to improve over time.
3. Allow marketplace sellers to advertise on Amazon’s display network
Google allows you to target potential customers and display ads around the web. Similarly, Amazon too has its own display networks. If Amazon makes the change, advertisers will be able to access some of the display network to retarget people who actually clicked on their ads on Amazon or have previously purchased their products in the past. It appears that to improve product sales, Amazon will allow advertisers to combine re-targeting with their display network.
B. Amazon will become more Brand focused
Historically, Amazon has been set up as a catalogue. This is unlike eBay which has different listings for different products and sellers even if the sellers are selling the same product. On the other hand, Amazon has one single product listing which could have multiple sellers. Amazon has been modeled to sell products at the lowest possible price. Multiple sellers competing to sell the same product are usually going to end up driving the price of an individual product down. However, Amazon has been recently dealing with reputation issues that have come from bad actors in the system. These bad actors include people selling counterfeit goods and brands complaining about having unauthorized sellers on their product listings.
As a brand, you can go back and complain to Amazon about unauthorized 3rd Party sellers selling your products or the sale of counterfeit products and they will take a very quick action on it. Unfortunately, there are less clear guidelines on the unauthorized seller's issue. Basically, the responsibility is on the brand to protect their distribution chain and try to get rid of any sellers that aren’t allowed to sell these products on Amazon, more like a blocking and tackling kind of a process.
With regard to the counterfeit goods problem, Amazon deals with an enormous reputation issue. Customers absolutely hate to find the products that they buy on Amazon are fake and Amazon has received a lot of heat for it in 2017. To tackle this particular issue, Amazon piloted its Transparency program this year which includes some unique codes, similar to barcodes on product packaging. Customers, on receiving their products, can scan the product code to verify that the item they have received is legitimate. However, this is a very expensive program for Amazon to implement because of two major reasons. First, extremely high logistic costs and, second, Amazon will now have to verify every shipment of products enrolled in that program as they come through their fulfillment network. But, it shows that the counterfeit goods issue is a very serious problem for Amazon and that they are pulling out all the stops to deal with it.
In 2018, Amazon will continue to give brands more protection, becoming more brand focused, when it comes to other sellers being able to list their products. They have already done this in a few categories, like Health & Beauty, where it’s a lot more difficult for a seller to list a product without proving that they are the owners of that brand or that they are an authorized seller of that brand.
Also, in terms of working with more household name brands, Amazon will continue to do deals with big brands in 2018. 2017 showed us a couple of landmark deals with big brands. One of them was with Nike who had long refused to sell on Amazon because of the unauthorized 3rd party seller issue that would affect the prices of their products and keep on altering their product content pages. This year, Amazon struck a deal with Nike where they promised to, for the first time ever, actively manage all the 3rd Party sellers on their product detail pages. Basically, Amazon would be taking on the responsibility to protect their product detail pages and prevent any 3rd Party sellers from listing any Nike products. This is a very significant news because it shows the other brands that Amazon has the ability and inclination to manage some brand protection themselves even though they have always bestowed that responsibility on the brand itself.
The second big deal came in November 2017 and was with Calvin Klein. Calvin Klein and Amazon made an agreement to sell exclusive products over the holidays that would only be available on Amazon. This move was contrary to previous moves that brands made with regard to Amazon where they would only give up a part of their product line for Amazon and keep some products exclusive to their other retail and department stores customers and for their own channel website. Amazon set up two pop-up stores in California and New York where they had a lot of experience-driven events with celebrities and a live video link setup between the stores, also promoting their own hardware products.
These two prominent deals of 2017 show that Amazon went “all out” to woo these big brands and is becoming more brand focused. With Nike, it is demonstrating Amazon’s capability of brand protection and with Calvin Klein, it’s creating exclusive pop-up store events and exclusive product lines. As a result, we will see more of this in 2018 as big brands start to realize that resistance is not going to help them anymore as Amazon is the place where an increasing number of customers want to shop.
C. Amazon will become more of a content platform
It appears that Amazon has a “top of funnel” problem and this refers to the consumer purchase life cycle where we start out at the top with awareness of a brand and funnels down to consideration, purchase, and retention. Amazon is doing really great for the consideration and purchase phase. They make it extremely easy to buy products, check out products in the cart, provide fast 2 day deliveries and also make the actual purchase, the transaction event, a very simple, trustworthy and safe exercise.
Additionally, they are masters at optimizing their website for conversions. All of this shows that Amazon definitely has the middle and the bottom of the funnel figured out. Before the purchasing phase, there’s also the consideration phase that includes product reviews which is one of Amazon’s strong assets. People at the stores also tend to use Amazon’s product reviews to make their decisions. This user-generated content has always been really strong with Amazon showing they have done a great job with the middle of the funnel too!
However, they don’t have a whole array of tools for brands to use to generate awareness of a brand or awareness of a product, at the top of the funnel. When a brand launches a new product, for example, the options that the brand has on Amazon right now, in 2017, is to run sponsored product ads and optimize the content on their page. But, in term of actually driving awareness, getting that product in front of new customers and explaining the features and benefits, is very limited. Paid search ads are really the only way to reach new customers about a new brand or product.
2018 will see Amazon generating more tools for brands and consumers to produce more content and resolve the top of funnel problem.
Content Features That Amazon Released in 2017
Amazon released Storefronts this year! This is a very rich visual page that a brand can setup and that allows consumers to shop by categories, interest, price points or choose from different types of categories across the catalogue. It allows the brands to upload subject images and titles to create a rich visual experience on Amazon for their customers. This feature is now available to all brands who are enrolled in the brand registry program providing a great tool for brands to merchandise their inventory. Amazon has introduced this feature to be able to send traffic from headline search ads to all the storefront pages. They have also been encouraging the brands to share the links to their storefront off of Amazon and this allows Amazon to drive traffic from the brand’s own stores or social media to their Amazon storefronts but essentially to Amazon. Additionally, they have created promotion types which allow brands to get a coupon code in front of a customer on social media so that they can go and use that code on Amazon. The latter is not really content related but it shows that Amazon is skillfully trying to drive traffic off of Amazon to Amazon!
Another feature introduced by Amazon in 2017 was a social media platform called Spark. This was supposed to be about product discovery and it was meant to be a platform for consumers to share images of Amazon’s products and how they use them and link them to the product on Amazon. It didn’t really take off in the way that Amazon intended it to and there’s uncertainty whether it is going to continue any further. However, it’s another feature that shows that Amazon has become more intentional about content. Amazon may facilitate more user-generated content such as reviews, Q&As, photos and give more space for their Spark program on the website as well as integrate it more into the review section.
Recap: what’s in store for 2018?
- More Amazon PPC features for retargeting, reporting and display network which help improve the business. They are going to allow advertisers to use their display network a bit more which also shows a tie in with content creation.
- A brand focused Amazon to get more and more big brands to partner with Amazon and also create Amazon exclusive product lines.
- Improve tools to generate awareness of a brand or product and tackle the top of funnel issue.
We hope that these predictions will help sellers to prepare themselves and stay ahead of the game. While many of these features appear to be boons for the seller and brands, it is always better to come up with a solid marketing plan to seamlessly implement the new features and reap optimum benefits.
At Bobsled Marketing, we dedicate our time and skills to find the best solutions for Amazon’s updates to ensure that our clients gain maximum benefits and improve their overall business. We prepare and guide our clients through the entire process to help them reach their goals swiftly and successfully.
