More losers than winners
The explosion of Amazon's private-label products -- batteries, clothes, toiletries, dog food -- has prompted concern that Amazon is using its power to promote these house brands at the expense of merchants selling similar products on the website. The issue even surfaced in Senator Elizabeth Warren’s recent proposal to break up big technology companies. A recent study in the US, by Marketplace Pulse, suggests that Amazon-branded goods are flops that don't threaten other sellers at all. The study examined 23,000 products and founds that shoppers were not more inclined to buy Amazon brands even when they have been highlighted and elevated in search results. The study used sales rankings and the number of customer reviews as indicators of sales volume for different products, including Amazon’s own brands and brands sold exclusively on the site.
There are some exceptions that demonstrate Amazon’s strength selling generic alternatives in commoditised categories. For example, Amazon emerged as a top online battery brand to the detriment of Energizer and Duracell. AmazonBasics batteries appeared in the top three search positions on Amazon more than half the time for battery-related keyword searches, more than Energizer or Duracell, which has resulted in them capturing 94 per cent of all online sales.
For Amazon to succeed in premium categories, they need to win the hearts and minds of shoppers. Amazon's shopper data gives them a competitive advantage in the rational design of products, but they lack the creativity to make the products desirable. With the introduction of pop up fashion stores across London and their investment in an influencer programme, there are signs of improvement, but it will be a while yet before Amazon is a true threat to household premium brands.
New skin care line
Amazon is launching its first dedicated skin care line - Belei. Their goal is to help customers spend less time and money searching for the right skin care solutions.
The idea behind the skincare line, which combines the words "beauty" and "believe" to create the name Belei, is a collection of versatile skincare products that are high-quality, affordable and easy to shop. From charcoal to retinol, hyaluronic acid to vitamin C, Belei has a comprehensive range of serums, moisturisers, cleansers, masks and spot treatments filled with the all the trending ingredients on the skincare market right now. Sustainability is at the core of product design with their simple, teal packaging made from recycled materials, while the formulas are totally free of parabens, sulphates and fragrances.
We think this is a really smart move by Amazon. Global cosmetic companies have been slow to react to the Amazon opportunity, so when you browse through the catalogue you're presented with a huge range of independent sellers and only a few lighthouse brands. Amazon will give Belei visibility at the top of the search, drive awareness by advertising on competitor products and provide product pages that simplify customer choice. Combining this with a well designed and high-quality product at a reasonable price, Amazon has every chance to capture share.
Mobile ads in search results
Amazon is testing a new ad type for brands selling on the platform, video ads that are displayed within search results. Amazon is currently trialling them in some search results on IOS devices in the US.
It's expected that this ad type will be made available through Amazon’s performance marketing platform, AMS (Amazon Marketing Services) as opposed to its DSP (Demand Side Platform) which is used to manage programmatic display advertisements on Amazon and third-party sites.
This marks a new era for endemic Amazon advertisers. They will now pay for the ads to run on a Cost Per View basis, as opposed to the cost-per-click (CPC) model that most advertisers are familiar with on AMS. This ad type will benefit larger brands with bigger budgets, as it is reported that there is a $35,000 committed spend over 60 days. Furthermore, the larger brands have video assets already available, they understand brand marketing and they use agencies that can effectively plan and measure the performance.
Amazon has tried to build more content into its search platform to facilitate shopper discovery, but these tests have been limited. By building a video advertising capability and opening it up to thousands of endemic advertisers, Amazon can push the expensive exercise of content development back into the hands of advertisers. The challenge will be for Amazon, and brands, to produce video ads that are compelling enough to aid in the customer’s search journey, rather than interrupt it.
Either way, launching video ads is a smart way for Amazon to attract more spend to their platform. It will really enrich the search function, as it is a service that many brands can use to build their presence on Amazon beyond text.
Instagram took a big step this week in its evolution into an online shopping destination, exploiting one of Amazon's weaknesses - product discovery. They announced that users will for the first time be able to start making purchases of some products directly within the app. Big-name retailers like Nike and Zara, as well as younger brands like Outdoor Voices, are among the 20-plus companies participating in the initial rollout.
Instagram is a more user-friendly environment for brands than Amazon, as it allows them to control the experience through a visual narrative and present consumers with beautiful content that gets new people to discover their products and inspire shoppers to covet their wares.
Amazon facilitates a very different type of commerce. Utility shopping. It quickly gives you exactly what you want when you need it. A recent study from Feedvisor found that 74 percent of online shoppers in the US go straight to Amazon when they are ready to buy a specific product.
Amazon has not yet been able to crack discovery shopping. It's very difficult to uncover new products and the shopping experience is uninspiring. Furthermore, discovery shopping is a form of entertainment and Amazon's functional design, does not allow brands to create an immersive experience.
While the opportunity for Instagram is large, so is the risk. For years, Instagram has resisted adding purchasing functionality, in part to avoid being seen as too commercial and turning off the very audience that was attracted to the platform in the first place. The way the new shopping feature is designed, for now, may protect against that. The brands and retailers involved in the initial rollout can’t place shoppable products into Instagram ads. That means one of the only ways Instagram users will come across the shopping capability today is if they are already choosing to follow that brand or retailer account.
Risks exist on the merchant side too. Some brands and retailers may like the current setup, where Instagram users are typically redirected to the retailer or brand’s website when clicking on a product. That allows the merchant to show a shopper more products, capture valuable data and start a more profitable relationship. If customers can shop easily within the Instagram app, they have less reason to go to a direct site and more likely to be promiscuous.
Despite the risks, Instagram could become a massive online platform for discovery shopping by being the antithesis to the Amazon experience.
New Brand Store features in the US
Amazon has added some new features to its brand stores that will provide shoppers with a more dynamic and engaging experience for customers.
Background videos: With this new tile option, you can upload a 2- to 20-second video that will auto-play (and loop silently) when your Store page loads. Background videos are available in full-width tiles, letting you display your products or brand in a bold, impactful format to engage visitors.
New Stores Insights metrics. These new metrics enable brands to get more information about how customers are interacting with your brand. They will be able to find information such as sales per visit, orders, orders per visit, units per order and sales per order (a measure of order value) in your dashboard.
Custom source tag improvements. Brands will now see the top 100 source tags to determine how shoppers come to their stores, helping them to better understand and categorise traffic sources. The reporting was originally limited to the top 30 source tags.
These developments demonstrate how Amazon is continually trying to develop the shopping experience. Whilst these developments are welcomed by brands, it does not solve the major problem. Brand stores are difficult to find on the retail site and are only seen extensively when you invest money in Amazon's advertising programme.