By: Andrea Hippeau and Caitlin Strandberg
Yesterday Andrea joined Digiday’s Amazon Strategies summit to discuss consumer investing in the age of Amazon and what next generation brands should consider when developing a strategy for the nearly $1 trillion e-commerce giant.
When we meet new consumer brands, we always ask founders, “What’s your Amazon strategy?” Entrepreneurs don’t need to be building for Amazon, but they do need an opinion and thoughtful perspective on how they’re going to navigate the behemoth and barrier that is Bezos.
We find that Amazon can factor into a seed pitch in a couple ways and the company can play one of three main roles: Retailer (can you work with them?), Competitor (can you beat them?), and Acquirer (can you be bought by them?). With 49% of the e-commerce share in the U.S., Amazon cannot be ignored. How can emerging brands use the platform to their advantage without getting taken advantage of?
Consumer companies have a couple options when navigating their relationship with Amazon.
They can choose to not sell on Amazon.
This method helps brands develop a direct relationship with consumers and acquire important customer data. If they choose this route, they’ll have to:
- Build an authentic brand that cannot be replicated. Example: Allbirds.
- Create an amazing customer experience. Example: Heyday, CAMP, Studs.
- Tap into organic growth. Example: Glossier.
- Stand for something through social activism and/or transparency. Example: LOLA, by Humankind.
They can sell a single product or SKU of a broader offering.
This option helps raise brand awareness and/or test the Amazon distribution platform. If they go in this direction, they’ll need to:
- Be able to drive the customer back to the company’s site and experience.
- Develop brand affinity so they’ll explore what else the company offers.
They can engage in startup offerings.
Amazon has a couple different offerings for emerging brands, such as Launchpad, where the business can work with them directly to market their product and get access to other perks. If companies use this service, however, they should be aware of:
- The risk that Amazon is capturing customer data and could come out with a competitive product. Example: The well-publicized Allbirds copycat.
They can sell exclusively on Amazon.
If a brand chooses to sell directly through Amazon, they’ll have to:
- Appear on the first page or nothing.
- Deeply understand the platform or develop the expertise to dig in.
Taking all of these options into consideration, every new consumer brand will need to determine if, for them, the pros of selling on the site outweigh the cons.
Selling on Amazon might make sense for a brand if:
- The company already sells successfully through other optimized distribution channels.
- The business wants to create more touchpoints for both new and existing customers and be where they shop.
- The offering is in a category where Amazon pushes a lot of product, like content, electronics, and personal care, but doesn’t appear in an Amazon “basics” line.
Selling on Amazon might not work for a brand if:
- Customer data and communication is important for both the business and product development.
- The company’s products feature personalization or customized options based on customer data or preferences.
- The company is in a restricted category, like cannabis, CBD or prescription medicine.