For brands, Amazon’s vast reach and resources represent a tantalizing land of opportunity—but the platform presents pitfalls as well.
A new Feedvisor report, “Brands & Amazon: Insights, Opportunities, and Concerns in the Age of E-Commerce,” taps executives leading brands active on Amazon, including 8 percent from apparel and accessories, to identify what’s working for them and what are the key areas for improvement.
First and foremost, Amazon stands as perhaps the most lucrative platform for a good portion of consumer brands out there. The report found that 44 percent of brands active on amazon derive more than 50 percent of their sales from the platform. Plus, 28 percent say more than half of the traffic they see on Amazon represents new business—consumers who previously weren’t exposed to that brand.
More than half (57 percent) of surveyed brands claim to advertise on Amazon and 69 percent describe their ads there as driving “great value,” a nod to the platform’s growing clout in an ad space dominated by Google and Facebook, according to Feedvisor, which offers artificial intelligence-based tools to help brands optimize their Amazon performance. Gartner L2 in fact expects Amazon’s ad revenue to grow to $18 billion this year from 2018’s $11-billion haul that saw triple-digit growth in all four quarters.
The report reveals that brands are earmarking healthy, five-digit budgets monthly to promote their wares on Amazon. More than one-third (38 percent) spend north of $60,000 each month on ads for the e-commerce platform, while 49 percent shell out more than $40,000. Apparel and accessories is one of the categories where ad spending outpaces the average, the report noted.
“With its vast audience, commitment to customer experience, and increased focus on advertising solutions, brands are restructuring their e-commerce strategies to put Amazon at the center,” Feedvisor president and COO Dani Nadel said in a statement. “Our findings show that brands are already making investments to bolster their presence on Amazon through strategic advertising optimization.”
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Advertising, Nadel noted, is but one piece of a complex Amazon puzzle. “To effectively navigate the complexities, brands need a holistic strategy and real-time, decision-making technology that considers the many factors influencing success,” she added.
Despite all of the positive benefits of selling on Amazon, many brands remain concerned over their inability to control their brand voice on the platform—and more first-party brands voiced this issue than third-party players engaged in the marketplace.
“Amazon appears to be aware of this perception, and has worked to restructure its advertising suite and enhance the Brand Registry to give brands a stronger understanding of and greater influence over their brand identities on the platform,” the report said. “These changes appear to be resonating, with more than four in five brands (82 percent) in agreement that advertising and branding options are one of the most compelling reasons for selling on Amazon.”
However, these efforts aren’t sufficient to fully reverse the perception that Amazon takes a lackadaisical approach to fakes and knockoffs, as 46 percent of surveyed brands selling on the platform believe the Seattle isn’t doing enough to stamp out counterfeits, the report found.
As such, two-thirds of brands are taking steps on their own to keep phony products off the platform.
Voice commerce might be the hot new topic in retail but brands active on Amazon are divided over whether, and how, this emerging tech could aid their brand status and sales. While most (69 percent) agreed that voice could play an important role in their sales strategy, a considerable quorum (45 percent) described the technology as a “threat” to their business—in line with persistent concerns over the current state of voice search in which it’s easier to search for a generic product description like “black T-shirt” rather than a detailed, branded request, a la “Fruit of the Loom size medium 100 percent cotton black T-shirt.” That’s a mouthful that both consumers and Alexa have yet to master.
The report suggested ways to circumvent voice technology’s current limitations. “Given that voice searches are powered by natural language processes, brands can adapt content and ad copy to account for these high-value searches,” it recommended. “This will provide them with an advantage over brands that are not optimizing for voice search and enable them to unearth incremental profits via this additional point of entry to customers.”
Rather than viewing voice commerce as a risk, brands should see it as an “additional lens” to “understand how customers are interacting with their specific goods and Amazon as a whole,” the report added.
There is one threat, though, that most brands on Amazon agree on: the company’s growing stable of private-label brands—expected to reach $25 billion in value by 2025—are a top concern for 66 percent, just less than the 68 percent who describe other brand peers as their biggest headache. What’s more, 48 percent cite the perceived quality of Amazon’s owned brands, on par with their own wares, as a significant worry.
But more than these private labels (10 percent), or combating counterfeits (11 percent), the growing costs to ship and store their Amazon orders (21 percent) or fears over Amazon’s expanding influence (20 percent), what really provokes hand-wringing for the largest group of brands (27 percent) is competition from direct-to-consumer digitally native brands, the report found. DTCs are changing the game such that brands on Amazon must “bring a renewed commitment to unique brand stories, fresh approaches to engagement and customer-first mentalities,” the report added.
“Over the last two decades, Amazon has disrupted e-commerce in ways we never thought possible. It has rapidly become the go-to shopping destination for consumers, and it shows no signs of slowing down,” Feedvisor CEO Victor Rosenman said. “Amazon’s momentum created a wave of new challenges, but our analysis shows that brands see the significant value of the platform’s audience and influence.”