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Industry Viewpoint

Former Amazon exec on the state of retail e-commerce

James Thomson knows Amazon, having spent years heading up Amazon Services, and understands the challenges smaller retailers are facing in the e-commerce environment. He explains that while Amazon is the big competitor, it can also be a retailer's big opportunity.

Former Amazon exec on the state of retail e-commercePhoto by istock.com


| by Judy Mottl — Editor, RetailCustomerExperience.com & RewardsThatMatter.com

The e-commerce retail environment is only getting more competitive thanks to digital and increasing mobile retail innovations.

And while Amazon reins supreme, and often cited as the one to beat in e-commerce, the mega omnichannel player's marketplace can be a prime opportunity for online retailers big and small, brand name or no name.

To get insight on what retailers should be doing and not doing in e-commerce to attract customers and drive business we reached out to James Thomson, who headed up Amazon Services for years and runs a summit/education conference for large Amazon sellers. He's also a partner in Buy Box Experts, an agency supporting brands that sell online.

Q. Let’s start talking the state of e-commerce as it is today — how would describe where it stands overall. Is Amazon still truly the king to beat?

A. Amazon is the king to beat in terms of: total customers/sales activity — over 100 million shoppers in the US, and more than $130 billion a year in sales — no other site comes anywhere close to this; product search traffic (over 55% of product search in US starts on Amazon, with about 30% starting on Google where Amazon is usually one of the top three paid search and top three organic search results), and its ability to turn so many of its customers into brand-indifferent shoppers — 69% of all search on Amazon is unbranded, leaving brands in a position where they have to fight for eyeballs using unbranded keywords (e.g., "men's running shoes" is the more common search term to "Reebok men's running shoes"....so lesser known brands that are willing to spend ad dollars on Amazon can buy their placement atop organic search results on Amazon).

Q. What do retailers need to compete in today’s online commerce world?

A. Retailers need to understand Amazon is very good at identifying and taking advantage of underperforming sectors of retail. Using the massive amounts of data is collected, Amazon can understand a sector or category better than retailer that has been around for decades. Amazon is willing to accept lower margins than most retailers, thinking about long-term customer loyalty. So, for the typical retailer that sells other companies' brands, it's not usually a good idea to compete head to head with Amazon unless the retailer has unique access to unique selection that no one else sells on Amazon. In this situation, the retailer may want to sell the items on Amazon or aim to compete with Google ads to attract online consumers that are searching for products first somewhere other than Amazon. But if the retailer plans only to offer the products (unique or not unique) on its brick and mortar shelves, the retailer should expect that various competitor brands and competing resellers will offer their similar products on the Amazon marketplace (often at lower prices than what the retailer may financially require, or be mandated by brands to use). It is no longer feasible for retailers of brands owned by someone else to expect to be able to compete on Amazon without having unique selection and be willing to invest heavily in traffic-building efforts (like online advertising, or email marketing, or social media activities)

Q. What are some common pitfalls/mistakes retailers are making in going online/or expanding online presence or launching a mobile shopping experience?

A. The significance of the brand is a lot less important online than what traditional brick and mortar retailers may be used to in their stores... online, so much of the search activity is unbranded, creating situations where brands that consumers have never heard of (or brands that national brands have never encountered before) are the products winning the eyeballs online. Secondly, just because a retailer has a big brand to sell doesn't mean it will be able to sell the products, if that brand hasn't adequately controlled its distribution so as to reduce likelihood that gray market (unauthorized) online sellers will offer diverted product at lower prices to online customers. We have all too often seen retailers carrying big brands be disappointed that no one buys from them online because of the willingness of some unauthorized sellers to make a sale at a lower price/lower margin. 

The biggest mistake we see is brick and mortar retailers thinking they can sell on Amazon using the same experience and skills they developed in their brick and mortar operations. Selling on Amazon requires its own set of skills and clear understanding of performance metrics to which all sellers are held by Amazon (e.g., around fast delivery, low cancellation rates, very clear definition of products being sold, fast response time to any online customer email inquiries, etc.). Some of these skills are not skills the retailer would normally have in-house, leaving the retailer in a position that it may fail quickly. Note that Amazon doesn't offer sellers any practice room — it's live from the first day the retailer chooses to start on Amazon.

Every retailer must understand how important low price and the use of Fulfillment by Amazon (FBA - Amazon's service to fulfill individual orders) are to determining which seller wins the sale on a competitive listing. Tenure on the Amazon marketplace or name-brand recognition of the retailer are basically irrelevant.

Q. Can you offer tips on what retailers should do or not do that can help them navigate an omnichannel strategy?

A. If the retailer is selling its own brands (not reselling someone else's brands), then we encourage the retailer to view Amazon as a place where the most potential customers will congregate — a large opportunity, but also vicious competition from other resellers and brands. So, if the retailer sells on Amazon, understanding the Amazon rules and policies and forms of competitive activities will be critical to survival of the fittest.

If the retailer is reselling someone else's brands, the first matter at hand is to investigate whether other sellers are offering the same items on Amazon. Are those sellers selling at prices aligned with the brand's pricing policies? If not, the retailer may not want to bother offering those particular items. Remember that each SKU should be managed by its own P&L, with different cost assumptions, different competitors, etc. Too many brick and mortar retailers fail on Amazon because they take their full catalog and place it on Amazon, even though they aren't likely to sell large portions of the catalog due to specific competition on particular items.

Q. Any predictions on what you expect to see this year in terms of e-commerce trends or online/mobile commerce overall?

A. Chinese manufacturers continue to be aggressively recruited by Amazon to sell their own brands in the U.S. These brands may not have any name recognition among U.S. consumers, but they can win large share on Amazon by playing by the rules of the Amazon sandbox and investing heavily in traffic-building activities like advertising on Amazon and price discounting.

We prefer to see brands investing in their own Shopify/BigCommerce/Magento sites primarily to educate consumers, while using the Amazon marketplace primary to sell units of products. While the brands may sell on their own websites, it's important to recognize that there is no other US destination that has as many prospective customers as the Amazon marketplace. 


Judy Mottl

Judy Mottl is editor of Retail Customer Experience and Rewards That Matter. She has decades of experience as a reporter, writer and editor covering technology and business for top media including AOL, InformationWeek, InternetNews and Food Truck Operator.

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