The New Amazon Normal – Looking Back on the Effects of 2020
2020 - a year of unpredictability, to say the least. We were all faced with new experiences, new challenges, and forced to find new solutions. After this year, many things will never be the same and we are, therefore, adjusting to “new normals” in every aspect of our lives. On Wednesday, December 9, factor-a Managing Director Marc Aufzug joined Amazon veteran and expert Alexander Ortner to discuss the challenges online retailers faced this year and how the “new Amazon normal” will change the way businesses proceed with their ecommerce. In this, kind of, year-end and looking back on 2020 session we would like to address the major challenges and also discoveries we made:
- The best practices in ecommerce and on Amazon
- Strategic challenges
- Biggest impacts of COVID
- Changes in product content
- Software and analytics
- Marketing and advertising
Amazon best practicesAmazon is no longer a niche topic, but rather a substantial part of the ecommerce, digital and advertising strategies of our clients at factor-a. So, what are the biggest Amazon developments that will bring a long-lasting shift in the field? One of the biggest that Alex addresses is the addition of new industries to the Amazon sphere. With fewer people wanting to go to in-person shops, fast-moving consumer goods (FMCG) are becoming much more demanded online. Products below 5€ were not seen as profitable on Amazon before this year; however, now the focus has shifted. The categories containing these FMCG are predicted to follow an upward trajectory, only continuing to become more profitable as time goes on. Amazon Pharmacy, mentioned Alex, has also launched in the US, allowing companies that never thought their products could successfully sell online to see great success on Amazon. In addition to these new categories, Amazon is also expanding to new countries, with marketplaces in Sweden and the Netherlands already live and Poland coming down the pike, as well as websites in Saudi Arabia and the UAE.
“COVID might have been the first enemy ever to bring this famous unlimited shelf to its limit”
Strategic challengesAs far as strategic challenges, large, international manufacturers and brands with huge marketing budgets have for years abided by the universally accepted rule that they wouldn’t allocate any of it to retailers. This inevitably begs the question: is Amazon considered a retailer or a marketing platform? The answer, Alex explains, is that Amazon uniquely takes on both of these roles. “They own the whole sales funnel, from product and paid advertising to the sale.” Businesses need to reconsider their budget allocation because it is nearly impossible to succeed without investing in every part of the sales funnel on Amazon and, “visibility is everything.”
And solutionsIf businesses want to manage sophisticated digital advertising, they need to recognize that Amazon has become an important player in the digital advertising sphere, like Facebook, even independently from sales and begin to deal with it as such. The solution, therefore, is to hold open discussions with stakeholders and internally to determine if Amazon is, in fact, considered as only a retailer or also a marketing machine and advertising platform. It is no longer possible for brands to observe the advertising and sales aspects of Amazon as two separate entities. And it is also no longer possible to only participate in the generic growth of Amazon (meaning simply listing your product under a category and waiting for it to sell). The result of the “fight for visibility” is that success can no longer be driven by sales alone. As generic search results become a thing of the past, “everything is paid, every placement” says Alex. Businesses must now integrate their advertising strategy into their sales strategy while addressing every part of the complete sell-through, direct-to-consumer business that Amazon offers. Of course, this is uncharted territory for most businesses, creating a huge challenge as far management. Merging these functions requires new roles that have a handle on both the sales and advertising aspects simultaneously as well as open communication with the retail stakeholders.
Biggest impactsSo, what is the most surprising effect of COVID? “The power and the speed of this shift,” remarks Alex. No one could have predicted what would happen when the world shut down in April and shifted focus to system-relevant products. And no one could have predicted that Amazon would run out of capacities. “COVID might have been the first enemy ever to bring this famous unlimited shelf to its limit,” as a life without in-person shopping turned everyone into online shoppers. With traffic numbers that were comparable to an “always on Prime Day,” Amazon doubled its profit by 100% to 5.2 billion USD in Q2 alone. As a result, the ecommerce giant also hired 100K new employees in the US and Canada alone.
Product contentIn terms of product content in 2020, it has become much more professional. With a focus on relevant and, most importantly, good-looking content, there has been a notable increase in text on pictures, and A+ content is a standard addition to a product detail page (PDP). Brands are using A+ content as a space to establish a brand image because it has ultimately been discovered that shoppers are starting to recognize brands from Amazon, which influences the traditional offline business. This focus on A+ content, combined with increased mobile shopping has turned our attention to the importance of creating aesthetically pleasing and informative images. When shopping on a mobile device, the customer comes across product images before any text, therefore, the goal is to put as much information as possible into the product images, so the shopper’s fleeting attention does not prevent them from learning all they need to know about the product. The solution? Increased use of infographics - using images rather than words to describe the product. Artificially emphasizing package sizes, serving sizes, included items, etc. in the product images allows the customer to quickly see the product’s USPs in an extremely efficient manner. Including videos is also becoming status quo. There is room for videos among the PDP product images as well as in A+ premium content, so including them only helps to fully maximize your product’s optimization potential. The biggest change, concludes Alex, is ultimately the new goal to have the most astonishing content. “No matter what it costs, you want to be the best in class on Amazon,” just like in the offline world- if your product is not the most attractive one on the shelf, shoppers will walk right by it.
"No matter what it costs, you want to be the best in class on Amazon"
Software and analyticsChanges in the software and analytics field this year are proving that people are no longer satisfied with JUST Amazon data when it comes to flexibility and building dashboards. The need to customize dashboards and collect data is becoming possible today and is actually “quite easy to build,” remarks Alex. Amazon’s new role as a marketing platform presents the need for a system that integrates data from numerous sources in order to view advertising and retail as well as other funnel data like social networks all in one place. The issue of companies dealing with multiple marketplaces, meaning several vendor centrals from different countries, also requires an all-in-one software system, rather than having to deal with multiple different tools.
Marketing and advertisingYou can’t look at the “new Amazon” of 2020 without acknowledging the immense growth that has occurred in the platform’s marketing and advertising arenas. Search advertising is now being used in combination with the display marketing platform, now searching for traffic and customers outside of Amazon. Amazon, Alex predicts, will soon become the most important platform for display marketing. Businesses will be able to target DSP topics, implementing features within Sponsored Advertising, so everything can be managed from one console. Marc and Alex closed the session by summarizing the top 3 most important drivers:
- The growth of Amazon that was catalyzed by this crazy year will continue and only speed up
- There is a new standard in terms of content and actively building your brand on Amazon is key because all of your customers are on Amazon
- Lots of big things are happening in the world of FMCG on Amazon. Amazon Fresh and Prime are merging in the UK while Amazon Pantry and Plus are also being abolished - doing away with minimums for free shipping. You can now order a product for any price and have the opportunity to receive it that night.