I’m excited to welcome back Bernie Thompson of Efficient Era. You probably remember Bernie from the first post he enlightened us with about Amazon hijacking listings and what to do if it happens to you. Today I have the pleasure of sharing with you his predictions for the future of Amazon in 2017.
“What three trends do you see shaping the Amazon marketplace in 2017 and how can sellers prepare and adapt to these trends?”
1) Amazon over-corrects in protecting the integrity of the review system
It took several years for Amazon to notice and take effective steps against the gaming of its review system. But by the end of 2016, Amazon had all guns blazing. Overall, it’s a good thing. The challenge now is in policing these much stricter rules without harming the selling community that is trying to live within them. Years ago, eBay started suspending and downgrading seller accounts in ways that were capricious and felt unavoidable for most sellers — and in doing so insured they would all take up shop on Amazon’s Marketplace. Amazon is now the company everyone is dependent on, and they too are mechanical about policing their systems. Amazon is now the one that can seem capricious — no warning, little information provided, and not a lot of statistical perspective or account history considered.
But there isn’t another marketplace to jump to in 2017. Walmart’s weeks of paperwork and hand-holding to get started on their platform is indicative of their chance of success. So sellers are going to take the brunt of any over-correction. In 2017, Amazon will struggle to get rid of sellers gaming the system (it’s still good that they’re trying), but some sellers trying to do the right thing will also be collateral damage. Given these risks everyone will be nervously trying everything they can to diversify off Amazon — and largely failing to do so as Amazon continues to dominate e-commerce in the USA and beyond.
2) Geographic Expansion
From 2011 to 2013, Amazon quickly expanded the geographic reach of their programs for 3rd party sellers. Marketplace and FBA quickly went from USA focused to globally focused — spanning North America, Europe, and Japan. However, the past few years Amazon has got stuck in a bit of a quagmire in China and India — you could say it’s like a snake digesting a panda and an elephant. Efforts in China continue, but they don’t look healthy, especially considering the headwinds against non-Chinese companies there. India continues to have difficult regulatory barriers, but looks to be a more competitive playing field. Amazon is doubling down there and doing better.
But for 2017 and beyond, Amazon seems likely to clear the blockage and begin seeking out new worlds and new civilizations. Public news reports have Amazon hunting for warehouse space in Australia. And perhaps even some countries that would seem poorly matched because of their high import duties and protective customs, such as Brazil where public reports show Amazon having one warehouse already. Sellers would be wise to jump on each of these new opportunities, keeping watch for country-specific tax and regulatory burdens that could kill the deal.
3) The Retail Empire Strikes Back
Jeff Bezos views Amazon’s Retail (1P) and Marketplace (3P) teams being separate entities which compete with each other, and either way Amazon wins. For the last 7 years, it’s been the Marketplace team that has been winning by making it easy to get started, by giving sellers control over listings, pricing, and customer communication, and by having transparent and predictable fees. But in 2016 there were signs that the Retail team wanted their ball back, with the launch of the Vendor Express program, Amazon Launchpad, and the Official Contributions (to Q&A) program.
So far, these initiatives have been very tentative, not nearly as compelling as the Marketplace features, and have had the downside of increased confusion as Retail has allowed a wider set of distributors to override the product listings of Marketplace sellers — including Brand Owners. But if Retail were to get serious, they might get rid of all the crazy, time-consuming, seller-specific negotiations over margins and marketing budgets, and instead move to a transparent pricing model like Marketplace. If they did, sellers would have two viable choices within Amazon, and everyone would benefit.
And a bonus #4:
4) Amazon’s house brands conquer more categories
AmazonBasics is a known category killer. But did you know Amazon has a nuts and coffee brand called “Happy Belly”? You won’t find Amazon’s name anywhere on the package, but yep – it’s them, just like AmazonBasics. And check out Lark & Ro for women’s dresses, Mama Bear organic baby food, and Pinzon towels and sheets. All are Amazon house brands. All of them are launched using what Amazon has learned about the market from the rest of the products selling on Amazon — including yours.
Amazon’s well-known strategy is to compete with itself and the world at every level of the business — from low-level service, to integrated marketplace, to branded product, and every layer in-between. It’s only a matter of time before Amazon moves into a nearby business. Every year, competition with the “house” will affect more product categories. The only question is how level the playing field is, and whether sellers can find ways to differentiate themselves from Amazon’s own offerings.
Ready to Step Up Your Amazon Game?
“Flywheels and Feedback Loops” is a book for sophisticated private-label sellers and manufacturers who recognize that there are no tricks or schemes. There are only winning strategies, best practices, and tools for overcoming the inertia of discoverability to get the sales flywheel moving. So get moving and pick up your copy today.