Blog Post - Hugh Fletcher, Jul 27 2017

Why brands need to fight back against Amazon

Why brands need to fight back against Amazon

Hugh Fletcher, Global Head of Consultancy and Innovation recently spoke with Retail Week about why brands should adopt a more balanced, less Amazon-centric ecommerce strategy to succeed in today’s competitive market and why brands should care about Amazon's myriad of services.

As a consumer, it is hard not to love Amazon. Almost every single product you might ever need is just a few clicks away, often delivered the next day.

As a customer, it’s hard not to love Amazon. Almost every single product you’d ever need is just a few clicks away, and for the most part will get to you the next day. And once you’ve run out of the need or the desire for products, then there are myriad services that you can purchase from Amazon too – from hosting, to music events, to content.

It isn’t too much of a stretch to imagine that one day, all of our product and service needs will be fulfilled and supplied by this most aggressive of retail innovators.

But why should brands care? And why would you be interested? The fact is that any executive, in any industry that influences and shapes his or her organisation’s strategic direction, needs to take note. Amazon is slowly expanding into new and diverse industries and yours could be next.

The end of Brands?

A 2017 consumer survey by Salmon found that 39% of online spending in the UK is spent with Amazon. And that’s before its grocery offering has reached maturity. While the excitement and importance of ecommerce grows, the opportunities to grab the share of online diminishes with each Amazon innovation and every passing day.

This is bad news for the ecommerce laggards and for many of the brands who are still wrestling with how to convert their decades of hard-earned brand equity into online currency – a currency which is more about ease, convenience and price than it is about brand.

So why is Amazon winning the day?

There are multiple strategic answers to this question – be it logistics, innovation, the business model, its service and product ecosystem... However, perhaps it is most truthful to look at this much more simplistically. In a world where ease, convenience and price are king, Amazon is better at fulfilling customers’ expectations on these fronts than any of its ecommerce competitors.

It is its dedication to the customer that puts it at the top of the retail class. Jeff Bezos is famed for his “day 1” strategy, giving it an approach which is less stifled by legacy and a more entrepreneurial style despite its size. It just so happens that by giving customers what they want, Amazon has also worked out that its business benefits. Who knew?! This may seem an obvious connection to make, but many business processes and practices are still worryingly devoid of any customer consideration at all and are all still busy navel-gazing at the expense of, rather than for the benefit of, their customers.

Beyond the horizon

Whilst most companies are thinking about how their ecommerce operations are faring today, very few are thinking about tomorrow, and even fewer are thinking about the longer term future. This lack of vision is not only harmful to those companies, but plays into the hands of Amazon, whose unique business model allows it to innovate freely, as more emphasis is placed on its growth rather than its profits.

Take interfaces as an example. Most companies are building their future with screens in mind. Amazon is not. Whilst most organisations are concentrating on how their ecommerce operations work on desktop, laptop, tablet and phone, Amazon has taken its ecommerce operation to the next iteration of interfaces – initially the home via voice delivered through Echo, but what next… gestures, thoughts? The possibilities are endless, and will be here sooner than we think.

Don’t forget logistics; the battleground of the future

When speed of delivery is more important than the brand of product being ordered (88% vs 78%) then logistics, rather than brand equity, is where the battle needs to take place. This means that more strategic time and investment needs to be placed in working out how customers can get products as quickly, easily and conveniently as possible, rather than working out how to generate awareness and brand associations.

What constitutes customer experience (CX) is therefore becoming much broader. It’s not just about in-store or online shopping. It’s about the full end-to-end process; from first hearing about a product, to ordering, to delivery, to unboxing, to ownership and renewal. Elements of the customer journey previously subcontracted out to third parties now either need to be managed by or even owned by, the vendor themselves. Amazon has realised this.

As always, omni-channel is the answer

In May 2017, Amazon announced its first physical book store in New York, and intends over the next few years to have more than 400 book stores across the US. It is of course also trialing its Amazon Go grocery store in Seattle, and has just announced the purchase of Whole Foods for $13.7bn. So in a world where pure-play digital retailers have risen in prominence, it is interesting that it now seems to be investing in bricks and mortar.

The reason for this is simple – an omni-channel strategy is the best strategy. Offering customers the ability to interact and buy with a brand across multiple interfaces, be they digital or physical, is the route to success.

Amazon’s bricks and mortar offerings aren’t about to commit the same errors that previous high-street occupants have. No, Amazon is, of course, bringing its own take on the high street; using its most precious commodity – data – to curate the right products for its customers.

Its Amazon Go concept has also looked at addressing a key customer pain-point; the payment and checkout, to improve the customer experience. So while omni-channel is as always the answer, the component parts of an omni-channel strategy – website, mobile, physical stores, checkout – need to be under constant review and improvement.

Fighting the tide of paralysis

Faced with such an organisation, it can be too easy for brands and etailers to give up, to not fight back against Amazon. But this is the lazy option. Businesses must address their lack of customer centricity, their unambitious expansion strategies, their short term goals and incentives and their lack of vision. Apple didn’t shy away from taking on the portable music business because of the Sony Walkman, did it?

So, if you’re ever in a meeting, and an executive suggests selling your product via Amazon, make sure you’ve considered a balanced strategy, and question the reasons for that decision. Could you do more with your existing business, products and services? Can you work harder for your customers? For some organisations, sales via Amazon is the right route, but for many, it’s an all too easily-made decision which carries with it enormous risks. Are you brave enough to challenge Amazon and become a retail revolutionary in your own right? Or are you happy to give up your interface, your data, your customer, and your future, and become just another brand consigned to history?

Hugh Fletcher will be speaking on this topic Amazon: what this digital juggernaut’s strategic expansion means to you. (Clue: A lot). at RETAIL Week’s Tech event on 13th and 14th September.

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