6 Predictions For Amazon In 2021, And How They Will Play Out For Retail BrandsSheng
2020 was an incredible year for Amazon. The pandemic gifted Amazon more market share and sales volume than even the relentless e-commerce behemoth could dream of. (Relentless being the name that Jeff Bezos originally wanted to call Amazon.)
EMarketer estimates that Amazon increased its share of e-commerce sales to 38% in 2020, up from 37.3% in 2019.
What will next year bring for Amazon? With the company’s foundations stronger than ever, what investments could they make to consolidate their position and future-proof their business model? What changes could be driven by external parties like fulfillment partners and branded manufacturers themselves? Here are my predictions of what changes we could see in 2021, as it relates to consumer product brands who sell on or to Amazon.
1. Amazon’s Fulfillment capabilities will become their next AWS
2020 was a year where Amazon’s multi-year investment in fulfillment and delivery infrastructure really shone. While the UPS, USPS, and Fedex FDX +1.1% significantly throttled supply in their delivery systems, Amazon continued on. There were still challenges – manufacturers cited instances where Amazon would not retrieve Purchase Orders, there were significant delays in receiving inventory at fulfillment centers, and periodically Amazon even gave priority to sellers who were fulfilling their own orders rather than using Amazon’s fulfillment system. But compared with the restrictions imposed by the other major carriers, Amazon’s logistics systems stood up to the challenge of an avalanche of online orders in 2020.
2021 is when Jeff Wilke, formerly considered the top Leutenant at Amazon, leaves the post of CEO of Worldwide Consumer at Amazon. Dave Clark, Wilke’s successor, was the brainchild of Amazon’s December 2019 decision to block its third-party suppliers from using FedEx to ship their products due its slipping performance. With an operations-minded evangelist now in the top job, we are likely to see further improvement and investment in Amazon’s fulfillment systems.
Last-mile delivery is one of the most challenging problems in fulfillment, and Amazon’s investments in solving this problem have proven out I believe we will see Amazon doubling down on their investment, and ultimately offering excess fulfillment capacity to other retailers and businesses who need a reliable alternative to the major carriers. AWS was initially developed to solve an internal constraint at Amazon, and once the infrastructure was built, Amazon could sell incremental excess capacity on third parties like private companies and government. Similarly, Amazon developed its logistics systems to solve its own problems, and can resell capacity to other parties.
Amazon has dipped its toe into this solution in the past, offering ‘Multi-channel fulfillment’ to Amazon sellers who want to ship FBA (Fulfillment by Amazon) inventory to non-Amazon customers. Amazon has also piloted delivery programs for 3rd party shippers, and even implementing fit-outs of Amazon solutions at 3rd party warehouses. But as the infrastructure matures and scales, Amazon will be able to make much bigger moves in this space. Imagine Amazon being a vendor of warehouse management solutions, a shipping carrier that any individual or company can use to send packages, and a preferred 3PL for direct-to-consumer brands.
As a result of Amazon’s increasing sophistication with shipping, I believe that they will also change up the Seller Fulfilled Prime program. In 2020 we saw increasing restrictions placed on this program that was already challenging to execute. If Amazon is destined to become the most reliable shipping carrier, we could see this program end entirely. Alternately, we could see SFP users be required to use Amazon shipping only, and SFP users actually become micro-fulfillment hubs for Amazon.
2. More experiments with live video and virtual experiences
Amazon first launched live video as a marketing opportunity for brands in 2019. As I wrote for a previous Forbes post, Amazon’s Live video feature will play a significant role in online shopping going forward.
Brands and influencers alike can ‘go live’ on Amazon using a simple app, sharing makeup tips, doing recipe demonstrations, and hawking wares.
We can see from the Chinese market where livestreaming is likely to go in the US. In 2019, livestream shopping accounted for 9% of China’s total ecommerce revenues.
In September 2020, Amazon also launched its ‘Experiences’ platform, with virtual classes and sightseeing tours offered as one-to-one livestreaming sessions. Products like ingredients for a baking class are offered as in-session shopping opportunities.
Amazon also has an opportunity to further leverage the various AI-driven try-on technologies it has built and acquired to create virtual beauty counters, fashion dressing rooms, and virtual layouts of home furnishings.
Amazon’s experiments with these immersive, live experiences are an investment in the future of shopping. We will see many more live shopping experiences and the ability to virtually ‘try before you buy’ many more product types before the end of 2021.
3. Amazon will slow down or even stop its private label brand expansion
Amazon’s array of private label brands came under a lot of fire during Congress’ investigations into anti-trust this year. It is an ongoing concern for Amazon sellers and vendors that their products are being either ‘ripped off’ directly or that Amazon is using sales data and supply chain data to create competing products. I wrote in a previous post for Forbes that it must be embarrassing for Amazon to be publicly shamed for this practice, when these private label brands generally represent tiny fractions of the categories they sell in. I also doubt that these products surely can’t be more profitable than selling advertising to brands that they compete with.
But the real clincher to Amazon’s expanding private label empire could ultimately be that the negative publicity and potential antitrust action could be more damaging to Amazon than the potential gains in profits or customer loyalty. So in 2021, I believe that Amazon will put this strategy on the back-burner and focus on other ways of retaining customers.
4. More competition amongst sellers
A big news story from 2020 was how Thrasio and other funded companies are executing large-scale rollups of e-commerce brands. Small businesses with some degree of success on Amazon are being snapped up in large volumes by these holding companies, who then use their resources to beef up advertising and sales volume.
There are critics of this business model, but the fact remains that this activity increases the general savviness on the marketplace. Combined with a long-term trend of manufacturers in China selling directly on Amazon, the overall competition on Amazon is likely to increase in 2021.
5. Bulking up Amazon Fresh
But Amazon is far from asleep at the wheel. In October this year, Amazon took a stake in the grocery wholesaler and distributor SpartanNash SPTN +0.5% – shoring up its access to the grocery supply chain. Amazon started opening its own supermarkets in 2020 too.
A crucial ingredient (pardon the pun) that Amazon is missing right now is seamless integration of its various shopping platforms. The consumer experience is disrupted when trying to shop across Amazon.com, Amazon Fresh, and Prime Now. In the future – my guess is 2021 – these platforms will be consolidated to eliminate the current confusion that shoppers experience when trying to build a basket. It’s hard enough for me to figure it out as a shopper, let alone someone who doesn’t know the ecosystem as well. The consolidation ideally should extend to brands as well. Right now there are limitations on marketing features for products sold on Amazon Fresh. As Amazon bulks up its grocery fulfilment capabilities, I believe we’ll see more in terms of demand-generation tools.
Amazon Fresh is live in the US and UK markets, and I also predict that they will launch soon in the Canadian market, where Instacart has recently launched some grocery retailer partnerships.
6. Amazon Advertising will accelerate
Here’s a fun fact that eludes most digital marketers: Amazon is the 3rd largest advertising platform, after Facebook and Google. And in 2021, I believe Amazon’s lucrative advertising business will continue to grow at a rapid clip by offering more ‘above the line’ media opportunities to brands.
Amazon added new features to its Sponsored Display ad type in 2020 that are more similar in nature to traditional media spend (impression tracking, interest targeting) than to pay-per-click performance advertising. This opens up many new opportunities for both established and startup brands to target Amazon shoppers at ever-earlier stages of the purchase journey.
And we have noticed at my agency Bobsled Marketing that Amazon has been publishing a great deal of content about the non-linearity and complexity of the Amazon sales funnel and the impact that Amazon media spend has on other sales channels. This points to Amazon making a big push for above-the-line ad spend. In 2021, I believe that Amazon will launch many more advertising features that will allow smaller brands to target shoppers with first-party data segments, such as general interests, household composition, in-aisle shoppers, and new-to-brand shoppers. Amazon will also unleash more creative options, such as the ability to advertise Posts, advertising featurettes within Live video, and more.