This past weekend, The Washington Post put out a blog article entitled, ‘We’re starting to shop online as often as we take the trash out’. This title is perfect for a piece about online shopping. No one likes to take out the trash and, as they depend more and more on online shopping, consumers are growing bored with the task of shopping. From ordering to delivering, they will want to avoid the logistics. This monotony and fatigue is exactly what Amazon is counting on to kill your brand.
A great brand story is not enough to save your product if Amazon lays siege to your entire product category. All consumer brands should be worried about Amazon’s recent acquisition of Whole Foods – not because Amazon will compete for the 42 billion dollar grocery delivery market, but because Amazon couldn’t care less about groceries --- or electronics, beauty products or content, subscriptions for that matter. Amazon’s ambitions are much bigger --- and scarier for brands.
Amazon’s end game isn’t about any particular category. Its end game is nothing less than to be the facilitator, the conduit and the supplier of consumers’ lives. They are creating a new kind of service product (the trusted home supplier) on the backs of entire marketplaces (e.g. groceries, electronics, toiletries, subscriptions, news, and entertainment).
As ‘the trusted home supplier’ (my words, not theirs), Amazon is positioned to dominate entire new consumer categories (like groceries) as easily as it has rendered existing models obsolete (bookstores). The implications are profound because they have the power to erase a consumer product’s branding altogether; think of the ubiquitous cardboard Amazon box.
How did we get here?
Amazon was one of the first companies to truly understand the importance of designing and optimizing the ideal shopping experience. That’s how they have been able to dominate category after category. Amazon’s leaders have consistently spotted opportunities to provide unique utility, and use technology to differentiate their offerings, leaving less innovative competitors in the dust.
Their biggest stroke of genius was to comprehend early a key consumer insight: people value their time.
Shopping takes time. In the real world or online. Amazon dot com is designed as an efficient, highly tuned shopping race car. One destination is all a consumer needs to manage all of their home supply needs – from automatically reordering goods and checking for the best prices to delivering subscriptions to their door. In Amazon’s world, the act of shopping is little more than an afterthought; saving consumers precious time they value.
Fifteen years ago, when I was first starting my career, I worked for a corporate and product branding agency. At that time, every consumer brand in the US was afraid of Walmart. Walmart dominated the retail marketplace and was (surprise!) expanding into groceries and selling private label brands that knocked off consumer brands that spent billions on branding.
Existing brands were livid but they were forced to suck it up, lest they lose access to Walmart’s billion dollar channel. On one hand, brands needed the distribution and shelf space, but on the other hand, they resented Walmart for their private label strategy that cut into their sales. Yet somehow, the consumer brands survived Walmart. They won’t be so lucky with Amazon. If Walmart started the decline of consumer brands, Amazon is already gleefully finishing that process.
Over the last twenty years, as internet speeds and digital experiences improved, Amazon positioned itself to dominate with smart choices that anticipated the needs of today’s consumer. They allowed other sellers on their platform so that any given shopper was guaranteed to find the item they wanted at the best price. As they improved the shopping experience – both online and delivery, the frequency of orders and items in basket increased steadily. Today, almost a third of Americans buy online each week. Amazon benefits from this shift more than any other company for a reason.
But like Walmart, Amazon’s coup de grace was its decision to offer private label solutions, AmazonBasics and AmazonFresh. A commoditization journey which Wholefoods complements and expands in profound ways.
Today, Electronics are cheaper, streamed content is cheaper, subscriptions are cheaper and in time the reorder and delivery will all be automated based on algorithms or peoples’ Internet of Things environments (e.g. Dash, Wand, Echo, etc.). Even shopping for clothing may become systematic with PrimeWardrobe. Amazon is well on its way to controlling and dominating the entire e-commerce marketplace and it will leverage that position to commoditize the many brands it used to get there. It’s just a matter of time.
The fallout
Not surprisingly, Amazon’s win is also American retail’s loss. 46% of department store jobs have vanished since 2000, coinciding with Amazon’s ascendance. According to Fung Global Retail & Technology, 5,300 stores have announced closures this year (three times as many as 2016). Between 2013 to 2017, America’s clothing retail stores suffered 64,000 job losses, and from January to June, general merchandisers saw 31,000 jobs go away. Brick and mortar stores have suffered and will continue to suffer as the Amazon’s of the world take market share and disrupt entire shopping models. But the real casualty here will be consumer brands that overly depend on ‘choice’ and placement at the shelf.
If the buying and selling of goods becomes determined by algorithms like Amazon, the work of swaying consumer opinion will radically change. Marketers will need to convince consumers to care enough about baked beans, soda, laundry detergent or toilet paper that they will actively choose to alter their predetermined shopping settings. Asking a person to change their preferences between two extremely similar items is a very tall order. It’s a brave new world, with Amazon at the helm.
Has branding run its course?
Yes. Today’s consumers are extremely brand savvy. In the words of Shane Smith, the founder of Vice, today’s young shoppers have a “built-in bullshit detector, so don't bullshit.” Young people are keenly aware of how to build a brand which is why so many of them are running their own media empires via YouTube, Snapchat, and Instagram. In a world where young people know how to build a brand, how does a consumer brand stand out?
How brands should pivot
The promise of branding has always been that a well-crafted story can add intangible value to an otherwise commoditized product. This worked well in the past, but examples like Brandless (new household goods startup with $50m before launch) and Dollar Shave Club are calling bullshit. We are entering into a new era where consumers are able to separate the brand from the commodity. As social brand consciousness rises, people will start to prioritize other means of differentiation, like a better utility. This is where Amazon wins. Amazon makes life easier for millions of people. Thus, brands today need to understand the utility they should already deliver and the differentiating utility they could deliver.
Experience mapping
In recent years, many agencies have started to move away from the assertion that the brand story is everything. There is a tacit admission in the industry that the story is irrelevant if the experience or product is subpar. The role of experience design, media and data is more important than ever. Crafting a unique experience for a brand that feels tangibly different from the competitive set is key. To do this, all marketers need to embrace experience design – the act of mapping and deeply understanding the consumer journey process in order to meet and anticipate people’s needs and wants. Only then will brands be able to spot opportunities to create extra utilitarian value that sets their brand apart. There is no silver bullet to the threat of Amazon, but there are solutions. Pivot to subscription-based models, new means of distribution, showrooming, events that foster culture, new customer services, and unexpected partnerships and collaborations. Brand will increasingly need to stand for more by delivering something new, not simply claiming something new.
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