As a company that is traditionally known for customizing its retail store with a one-to-one model, the headline “Everything on Amazon is an Ad” is a bit jarring. The article, authored by Marketplace Pulse founder Juozas Kaziukenas, explores Amazon’s efforts to better monetize its retail presence through paid advertising.
Of course, this is a perfect topic for the Innovation Conversation, with co-presenters Tom Furphy, CEO and Managing Director of Consumer Equity Partners and CEO of Replenium, and Kevin Coupe of Morning News Beat.
In a recent episode on this digital discussion platform, Furphy and Coupe use the article’s statements as a jumping off point to explore the shift—with the understanding that Amazon’s strategy is in no way unique and an exploration of what it means to the ecommerce landscape.
The Great Disappearing Act of Organic Suggestions
The move towards ad-centricity over customer-centricity has become evident over time. Kaziukenas explains that the organic suggestions of “Customers who bought this item also bought” and “Customers who viewed this item also viewed” have all but been replaced by advertising sections of: “Sponsored products related to this item,” “Four stars and above,” and “Brands related to this category on Amazon.”
“The last remaining recommendation functionality is ‘Frequently bought together.’ Everything else on the product page, including additional display advertising, is an ad,” avers Kaziukenas.
Kaziukenas isn’t wrong in his assessment. Amazon is building a massive ad business— with a primary goal of funding profitability (e.g., keeping prices down, offsetting the costs of a direct-to-consumer fulfillment network). Consumers seeking out the “customers who bought this item” and “customers who viewed this item” recommendations can still find them, it just takes some effort.
Yet, Amazon isn’t the only mega-entity employing this strategy. eBay and Walmart have also shifted focus from a customer-centric approach to more ad-focused. Walmart has also stated that they plan to be one of the top ten advertising platforms in the U.S. over the next few years.
A Natural Progression Towards Digital
Given the increasing adoption of digital over the last five-plus years—accelerated even more due to the pandemic—should anyone be surprised this ecomm-focused progression is on retailers’ minds?
“Retailers do need to evolve their ad models, which used to be co-op advertising in media, shelf presence, end caps, in-store media. Now, more is just happening online. It’s natural that a lot of the dollars are shifting to search,” notes Furphy. “But I think it’s going to be really important they do it well. If you become a site that’s obnoxious with your ads, and you’re not helping customers solve their needs, it’s not going to bode well for you long term.”
Getting a Piece of the Online Pie (Caution: Don’t Wait)
As Amazon moves to increased ad presence, Coupe raises an interesting point about what that may mean for other retailers… or, what it is perceived to mean. “The question now is, will other retailers have the opportunity—if they can achieve a certain level of customer centricity—to actually become more competitive.”
In many ways, facing competition is nothing new to Amazon. The position of being vulnerable to “better” competitors has been with the company since its inception. With this new model, Amazon may alienate some customers along the way.
However, Furphy warns non-Amazon retailers to not sit idly by waiting for Amazon to make mistakes, especially considering that Amazon is still in a minority share of all of retail (online + offline). What matters more is for retailers and brands to find ways to differentiate themselves; to identify ways they can uniquely serve their customers so they can focus on both retention and growth.
“The [online] pie is going to be getting so big, so as a retailer, come and get your piece of that pie. Online versus offline, it really doesn’t matter if you’re just serving your customer in all the ways they want to be served,” Furphy urges. “Now is as good of an opportunity as any to be on your ‘A game.’ It’s not about Amazon stumbling and you suddenly having the chance to strike. You’re not striking Amazon, you’re serving your customers.”
Watch for future Innovation Conversations between Kevin Coupe and Tom Furphy by subscribing to the Morning News Beat YouTube Channel.