Amazon’s Takeover Comes At A Cost
Amazon: you either love it or hate it. Some, like me, use it as a way to get things they need quickly, with the touch of a button. Ever realize the day before a trip to the beach that you were out of sunscreen? That was me yesterday, and thanks to Amazon I will not get burnt!
Others feel it is destroying small businesses, aka the American dream. (There are literally message threads debating this topic- not kidding). Whether you love it or not, you can’t deny that it has become a powerhouse- it went from selling books in a garage to one of the world’s largest companies, offering everything from groceries and cookware to clothing and home decor.
But Amazon’s takeover comes at a price. AdAge reported this week that Amazon is now the nation's largest advertiser, spending more on paid advertising than Comcast Corp, who previously held the record. Amazon spent more than $11 billion globally on advertising in 2019- with over $1 billion of that being spent in the US alone. Yup, you read that right. Billion with a capital B. Funny coming from the man who once said he hated spending money on advertising.
It comes at a milestone time for the company, which celebrated its 25th birthday this week. And oh how it has grown! In 1995, when it launched, the company spent $30,000 on advertising- around 5.9% of its net sales at the time. While their percentage of sales spent on advertising has fallen- last year it was 3.9% of it’s $281 billion net sales- this was the most they have ever spent on advertising. In fact, they have increased their ad spending every year except for the period of 2001–2003, when the dot com bubble burst and Amazon stock tumbled. Don’t worry, they had a different marketing strategy during that time- the birth of free shipping. Since a huge point of difference for Amazon today is their free shipping model for Prime members, we can count that as a huge marketing win.
It’s yet to be determined how much Amazon will spend on advertising this year, but Ad Age reports that they have increased dollar spending so far. While many companies are cutting marketing dollars to save money during the pandemic, their Q1 marketing spend actually jumped 32%!
I, personally, found the initial number shocking, a bit humbling, and (admittedly) smile-inducing. Why? Because even mega-powers like Amazon have to spend mega-dollars on advertising. The saying is true “nothing in life comes for free”. I’m happy to report that applies to Mr. Richest Man in the World himself. So now you know how Amazon seems to be everywhere these days- they literally are. And they are paying the price for it.
