People do it all the time, everywhere. Not only in bedrooms, but also in restaurants, bathrooms and even in public transport. Oh yes – they shop. A lot. Contemporary consumers want convenience. They want everything to be fast and easy when it comes to shopping. That is why so many of us shop online and more precisely, shop on Amazon. There are over 300 million active Amazon customers and Nordic brands must not ignore it. Instead, they have to meet their customers where the customers already are.
As an e-commerce platform Amazon has recently gone through two significant processes of change. First, Amazon has been evolving from wholesale company to a marketplace. Secondly, by some supportive actions Amazon has made it possible for mid-range and premium brands to finally start selling successfully on Amazon.
In the beginning, Amazon’s business was basically traditional wholesale gone online. 20 years ago, 97% of Amazon’s gross merchandise sales came from vendors – the 1st party sellers selling their product to Amazon on wholesale basis. Now the figure is only 42% and decreasing year by year. Last year Amazon’s 1st party business’ sales were $117 billion and 3rd party business’ $160 billion. Amazon has naturally perceived the direction of change. Company’s founder and CEO Jeff Bezos recently stated that last year the third-party sellers were “kicking our first-party butt. Badly.” *
Last week, Amazon announced that it will focus 1st party wholesale purchasing only on the major brands selling more than $10 million per year **. Thus, the number of vendors is reducing and many businesses need to re-think their Amazon strategy. In practice, Amazon is prioritizing the marketplace side of the ecosystem and this is great news for existing and new 3rd party sellers looking to capitalize the Amazon sales potential.
As Amazon has always wanted to be a platform with broad selection and the lowest prices, it has traditionally have numbers of small sellers offering fast-moving, low-interest and cheap products. Therefore Amazon has been profiled as product-centric platform favoring high-volume items, and it has not been very alluring for premium and mid-range brands.
Now the next step of evolution is here. Amazon wants to be “the Everything Store” and fulfil all the customers’ needs. Thus, it needs to have also more expensive products in both 1st and 3rd party selections and this in turn means fulfilling brands’ needs in a more comprehensive way than ever before. Although Amazon has recently taken more premium brands into account, there are still a number of white spots in Amazon’s offering. This is why Amazon has created different kinds of new programs and features for brands, eg. Accelerator Program or Indie Beauty Brands.
Amazon is now offering also more data and possibilities to create inspirational content in order to acquire more big brands as third-party sellers. In general, brands have reacted to Amazon’s actions positively. Figures show that while the number of small 3rd party sellers is shrinking, the number of major well-known brands selling on Amazon is increasing.
So Amazon wants brands in and brands want Amazon’s customers. What about consumers?
First of all, people want to engage with brands. They trust and are loyal to manufacturers. Secondly, people like buying from Amazon. Over half of all online purchases eg. in USA and Germany are made on Amazon and over half of product searches start on Amazon***. Nine out of ten people buys rather from Amazon than any other e-commerce platform ****. In practice customers want their favourite brands on Amazon.
Amazon’s new direction is an extremely interesting opportunity for Nordic brands as well. As many Nordic companies are just starting their Amazon operations, they might come a bit behind compared to international competitors. However, being late might be an advantage. Today all the knowledge of how to manage successful actions on Amazon is available. By combining best practises on how to succeed on Amazon and Amazon’s new features for brands Nordic brands can unlock the huge potential waiting for them.
Amazon and millions of potential customers are waiting. Nordic brands must take action and satisfy the demand of brand-hungry Amazon customers, whether they are in their bedrooms, in a restaurant, in the bathroom or using public transport.
If you are interested to learn more, contact us and let’s talk.
* Source: Amazon: 2018 Letter to Shareholders
** Source: Bloomberg: Amazon Is Poised to Unleash a Long-Feared Purge of Small Suppliers
**** Source: Feedvisor: The 2019 Amazon Consumer Behavior Report