Why is Amazon 1% of my business's sales and 50% of its conversation?
We have all heard the stats: 43% online market share in the US; 8m Prime Subscribers in the UK; 52%% product search now starts on Amazon etc etc so I think it's fairly safe to say that the Pure Play book-sellers of old are worthy of some good coffee machine chit chat @ your gaff.
Despite having just been pipped to the first ever $1tn company valuation accolade by one of their Silicon Valley BFFs, I think we can also probably conclude that it's not a question of ifthey will become the biggest company in the world but when (and has anyone seen the acceleration of King Bezos's net worth recently? OMG!!).
Anyhow, let's just agree that Amazon have a really cool business model, they will continue to surprise, delight and scare us in equal measure for a few years yet, and maybe the only credible threats to Jeff's Juggernaut are regulation or some equally clever Chinese folk. Or maybe something that hasn't been invented yet. Nuff said.
But what about one aspect of the Amazon conversation in particular?
The Amazon debate I've been hearing a lot recently relates specifically to their position and potential in the UK grocery dotcom market, and what brands should do about it.
There's a few perspectives out there. Here's a childish expression of the polar opposites:
1) They're Amazon. Dur. Course they'll be massive one day. Let's keep disproportionately investing for growth.
2) Amazon? Oh Amazon. They sell groceries now do they? Oo lovely maybe we should do something about it. But aren't my brands already on there? Why is that review bad? And that image? oh my goodness. Anyhow fix those and that's the Amazon plan sorted. Cheerio.
(holds head in hands and sobs gently)
And now the grown up expression:
3) Yes we need an Amazon point of view, but let's think it out carefully. They are only 1% of our business after all, and the dotcom market in the UK isn't the same as the dotcom market in the US.
Ooo hang on, don't you want some more Kool Aid? No thanks I'm trying to give up.
So, although Tesco's online share is dropping / stabilising, could it be the case that there might be a bigger commercial upside @ the UK's biggest grocer in the next couple of years?... or @ JS/ASDA... or what about wholesale where c30% (and a lot more in some categories) of your orders are placed online already? and have you seen some of the wholesale websites lately? wowzers.
What might happen if 50% of your business chit chat was focused on how to unlock some of those nuts? What if you had a proper d-commerce (digital commerce) channel debate? (electronic) ker-ching!
I'm not saying you don't need an Amazon strategy - of course you do. They could (and probably will) surprise us at some point (eg see recent speculation around a purchase of Tesco); all I am suggesting is that some proportionality may be helpful today, especially if you're just stepping out on your d-commerce journey.
Can you answer the following questions for example?
1) What is your overall d-commerce channel strategy? ie Pure Plays v the dotcoms v D2C (or not) v wholesale v third party apps. What, where, why, when, who.
2) What's the right resourcing plan and operating model?
3) What are your sales figures for d-commerce? (internal and/ or external). Where are your share opps? what is your customer prioritisation?
4) What investment ratios are you working towards? (investment ra.... whats?)
5) What do you want to/ could you do with data along the Path to Purchase? (actually ok. Maybe go back to Amazon here).
etc
The reason Amazon is 50% of your business's conversation is quite possibly because it deserves to be; there has quite simply never been such a disruptive force in (literally) the world of retail.
But don't let that distract you from the 1% (or maybe that should be the other 99%?) in the equation too. In the increasingly challenging UK FMCG (online) market, there may be some easier and more rewarding fruit to pick right now.
At daedal we believe in creating a coherent d-commerce channel strategy first. And only when that's done do we start chatting about Amazon all day.