Four Pillars of Amazon: What Amazon Really Wants

Four Pillars of Amazon: What Amazon Really Wants Speaker 2: Hello everyone and welcome back to our mini series where we are diving into pretty much all of the changes we've seen on Amazon in the last, how long have you been in the space Gabi? Speaker 1: 10 years. Speaker 2: 10. I've been in for seven years, which is quite some time and we both got thrown in in the very beginning, but there has been so much change and chaos and it can be really difficult to keep up. You know, I primarily play in the advertising space and we all know how chaotic that's been. But what we've seen is across all of the changes, all the categories, everything that involves success on Amazon, Amazon has stayed really close to one core principle, which is obviously providing the most exceptional experience for the end consumer. So, when Gabi and I started talking about speaking on stage at Patterns Accelerate, we really wanted to tie everything back to that principle to kind of shed some light on why Amazon does the things Amazon does. A lot of people tend to think that Amazon's out to get them or to make more money, which, I mean, is advantageous for all of us, I would say. But a lot of their decisions do come back to that core principle. So, we've identified the changes in advertising. We've identified the changes in supply chain. In building a brand across your PDP and store experience and today we're really diving into the Amazon store and why it used to be the everything store but why it's now a little bit different. So Gabi, do you want to open up a little bit of what selling on Amazon was like seven years ago? Speaker 1: Yeah, absolutely. So really you hit the nail on the head. Amazon shifted from it being the everything store where, you know, started in with books and then invited all sellers of all likes to have the broad assortment that they have today. But they've shifted in the last few years. They want to be incredibly consumer centric and they wanted to be the everyday store they want you to as the consumers as the shoppers to go and use their platform. For beyond just shopping you know it's it's a brand discovery platform now they've got all of these other health services that they're focusing on they've got pharmacy they've got photo they've got music they want you to engage with their brand that is the amazon platform in a plethora of ways every single day. Speaker 2: Yeah, and even going a little bit further back, if we think about why Amazon had to become the everything store, it's because that was their main competitive advantage against the retailers. So Walmart really has limited shelf space, as we all know. Everyone's fighting for premium shelf space, for in-cap placements to get maximum visibility. So when Amazon started, you know, they discovered a niche in books. And then they built upon that and they wanted to have an assortment that was outside of the retail stores. That was their competitive advantage back before two-day shipping was a thing. You could go to Amazon to find all of the most random things that you didn't even know existed. So that's what I feel like grew a lot of their loyalty. And then they started layering in all of these other advantageous things like two-day shipping and then COVID happened, which made all of our lives complete chaos in the e-commerce space. And it was a major catalyst because now they didn't have to compete with the, you know, two-hour go-in-store-buy-what-you-need. People were not going in-store, so they were willing to wait the 48 hours to get their products. Amazon sees a major spike, everyone and their grandma literally starts investing in Amazon and then Amazon kind of had to shift because they were directly competing with Walmart at that point in terms of just retail sales. So they realized that maybe it's not As consumer-centric to have every single product or it's difficult in supply chain and operations. And they kind of started to shift. I feel like we saw a major prioritization in the larger brands, a lot of CPG brands, but I also think the brands had to shift. They started shifting media spend. They started shifting prioritization. They realized that, okay, you know, maybe my digital shelf actually needs to look good because customers aren't buying in store anymore. Where are they going to buy? So brands started shifting to a higher Amazon focus. Amazon started making more money on ads. And I think that's where we've seen a major change in their priorities across the board. Speaker 1: Yeah. One thing that I want to go back to is how COVID materially changed the consumer experience and the consumer habits. Because along with that, so you mentioned consumers aren't going to store as much. My retail buddies will absolutely hate that line. But it's less, I think it's less about that. That is certainly happening. We're definitely seeing and have been seeing for several years the shift in the online portion of retailers. That is where the growth is coming from. And, you know, just zooming outside of Amazon as well. Absolutely. That was a behavior shift. But you talk about the digital shelf. There are so many incredible data points over the last several years that again COVID was a big catalyst for. People couldn't physically go into stores anymore, so they started to shop online. Then the foot traffic eventually started to come back into stores and they started to go on stores, but they're so used to that online component. So then the behavior started to become consumers using the digital shelf to do that research whilst they're in store. You know that they are price checking or they're finding out more information. If you look, picking up a product off of a physical shelf, You've only got these four panels and a certain character count that you can fit on that packaging to get your attention. It is tremendous the behavior change that consumers are now in store and they're looking up their keywords for what aisle they're in and then they're making decisions based off of that as well. So that digital shelf And your presence on Amazon actually becomes far beyond the sales that you're trying to make on Amazon. It's your overall brand building. It's your overall consumer engagement experience. You have to obsess over the consumer and shopper regardless of where they're shopping. Based off of your Amazon presence. Speaker 2: Absolutely. I mean the path to purchase is not linear really never has been but it used to be a lot easier. I mean I was in Walmart two weeks ago and I was in the beauty section and I picked up a product and I was reading through it and I was like I'm going to go check the reviews. Just having the reviews is incredibly incredibly important. I still end up making my purchase at Walmart. But I converted because of the reviews online that really sold to me why the product was better than any other product on the shelf. And that has changed the game. That has changed Amazon's prioritization. I mean, across the board, there's a few things that I think you and I were just talking about where we see major changes. I think Amazon's price matching has gotten a lot, lot stricter as they've realized what customers are doing. And Amazon knows customers are shopping everywhere. So it is a terrible customer experience to be standing in Walmart and to pull up an Amazon listing and see a difference in price. That's not a great customer experience. Other areas I think that we've seen major changes in is just the assortment they're prioritizing. I mean, seeing products crapped out has always been an issue. The 1P, 3P split has always been an issue, but we're definitely seeing those priorities change as well. Do you want to talk a little bit about what you ran into From the brand side, when it comes to assortment in general on Amazon. Speaker 1: Yeah, absolutely. I think, you know, one part you mentioned the 1P, 3P side. Over the last few years, we've seen waves of Amazon rejecting many vendors, right? So that that was a whole cause of turmoil of you're losing your vendor account, figure out how to sell on your own. And that is an entirely different model. But along with that, it's all on this phase of streamlining for efficiency on their side and making sure that they have the right assortment. There's a couple of things that they look for when they're picking their assortment or they're putting pressure on brands for the assortment. They want to drive trial. So it's not a $1 item, but it's something that's an entry price point into that category or into that brand. So you really have to think about that part of your assortment. And they want broad-based selection. What is this brand known for or what started to go viral in some area? They definitely want that broad core selection, if you will. And the third part is they want value. So these are three different SKUs, theoretically, within your brand within that same category. That value might be the larger price pack or it might be some sort of combination differentiation, but that has made it increasingly more difficult for brands that have an omni-channel presence, especially when Amazon is in this place of not just price matching to online. They are price matching to in-store because they've got this data point. I've had it paraphrased to me from Amazon retail teams of 60% of these club shoppers are in these club stores and then checking to see what that item might be on Amazon. They're really looking for this price slope parity. If there's too much of an aggressive slope between the value that club is getting or another key retailer that they have their site set on, they will suppress that buy box or they will If it's a vendor and a listed item and they can control that price, they will drop the price down to be matching and at parity. You have to be thinking about that and obsessing over that as your brand perspective because, again, you're talking about and you're talking to the connected consumer, and Amazon's just following that connected consumer. That connected consumer is in-store and online, comparing the selection, comparing the prices, Amazon's just following that. They want to be the most consumer-centric company. They're doing it by following this behavior. Speaker 2: You ended perfectly. It's going back to that end customer. It's obvious. You're so annoying. We're not going to prove Alex wrong. That was the issue. We made it so far, it is your eyebrow that did it. So it's the end customer that they're thinking about. It's not advantageous for brands to have your buy box suppressed and to clean up messy distribution, but it is prioritizing that customer experience. When someone is a club member, they're a club member for a reason. They're looking for value at scale. And that needs to match at the Amazon level. So what are some of the things that you found like from a really high level actionable perspective that you've put in place to make sure you're hitting the needs of Amazon with all the recent changes? Speaker 1: Yeah, it comes back to this channel conflict and deciding what products, what assortment do we have physically in store, at what stores, what do we have online, and then making sure that we have a price slope that makes sense for that. So if there is a more value assortment, what is a reasonable price slope that allows for that? Not too much value at a certain area because then Amazon is going to suppress that buy box and we have seen that across our brands. And it's, you know, looking for areas of unique e-commerce, you know, differentiation in a different value that you might give them as sort of combination and alternate formula. It could be bundling in some sort of way, some level of differentiation that is, here's why you might go to online version. D2C has a lot of this as well. Why am I going to go to brand.com, that flagship store? I'm looking for more engagement with the brand. I'm looking for more education. I'm looking for something unique. Amazon is a little bit at the balance between the D2C and that in-store perspective, but it is very similar to that as well because if you know that there is going to be Just plan for the price matching. It's going to happen if you've got a similar UPC that's across the board. From an innovation pipeline, it's something we focus on. We'll get into supply chain at another area, but packaging changes that are more e-commerce ready, that's a big area as well that we'll look into. And doing a heck of a lot of audience research as well. That is one of the huge gold mines of Amazon is the data that you can extract from that to inform your business decisions, to inform your innovation pipeline, your advertising. I think that that's the core and the foundation. They have trillions of data points. What and how can you as a brand build an infrastructure and the talent and the education internally to make sure that you're utilizing that? At every single pipeline. Speaker 2: There's two things that you hit on there that I think we can expand deeper on. One of them is SKU differentiation and I think that would lead us perfectly into a conversation about product discovery and how Amazon's investing a lot in actually driving more product discovery and awareness than ever before. That's one. I'm going to note that so we don't forget. The second thing that I think is really important that relates to this conversation is really The speed of opportunity with e-commerce versus retail and how quickly you can get a product up and test and learn. We were joking, shout out to our friend Dean. We saw a post on LinkedIn and it talked about how Amazon now has the frequently returned badging. And the person was complaining about how it hurts your conversion rates. And I think Dean's comment was that it could actually be really advantageous or beneficial because you're getting feedback so much quicker. And I think that's really important because it's so much lower risk to launch on e-commerce or a platform like Amazon, get immediate feedback if you're good at collecting reviews and then adjust your product before even considering retail. Do you want to chat a little bit about that? Speaker 1: Yeah, absolutely. I mean, think through At the end of the day, if you want longevity as a brand or a product that's going to do well, you need to be obsessing over that consumer experience. And what better way to do it than gathering the reviews and, you know, forbid you get that badge that pops up on your listing that says frequently returned item. I wouldn't have the perspective of, oh no, that's bad for my conversion. I have the perspective of, how can I change that? Speaker 2: Why is it being returned? Speaker 1: Why is it? You got to fix that problem, friend, if you want that product to continue doing well. I wouldn't want to misadvertise or misrepresent something if I'm looking for longevity and brand building. So that is a huge wealth of information to be able to Gather the insights from those reviews, you know, look at, we used to love looking at the competitor reviews and competitor listings and see how are they communicating to the consumer. What are the consumers complaining about or liking about another product and using that as intel for your innovation pipeline or product improvement perspective. So it's not only Your own product because there are so many other products on there. You can do that exact same practice in the category to be able to inform what you do next. Speaker 2: Absolutely. I'm thinking of one of the protein products we were looking at. I think there is a very specific call out in the reviews and comments about the flavor and they were saying it in a slightly negative fashion. Like maybe they weren't aware of it or there's something they didn't love. And I remember we addressed it specifically at the PDP. We called it out up front like, hey, this is what you're going to get, and this is why. It was like something ingredient-based. But that was a really good example of we were able to immediately address the issue that was being left in the reviews in the copy and content, which helped prevent future, I'd say, misalignment in what the customer was getting. But it was also advantageous for customers that were looking for that specific flavor profile. So yes, it may be a What is the word I'm looking for? Like excluded some of our audience because we called it out from the beginning, but it increased our overall conversion rate with the key audience that we are wanting. Speaker 1: Wouldn't you want to be more targeted at the end of the day? You know, here's the thing is you've got a huge, huge audience count that is on Amazon that they're overwhelmed by choice. Go to page two to bury a body, you know, that you want whatever search term they're going after and whatever their audience, um, you know, uh, Specs are, that is very supply chain of me, but their audience attributes and whatnot. You want to be featuring the most targeted product for them. There is an opportunity to go more and more niche. That's a huge change again as Amazon has become part of the everyday for so many consumers across the country, across the world. That niche isn't so much of a thing anymore. Back in the day, there used to be all of these seller hack opportunities, YouTube accounts with the Lamborghinis and whatnot of here's how you can sell on Amazon and they were pitching, you know, find this white space, those white spaces of everyone's there now, you know, and it's about making A better solution for that audience or for that category because there's not much white space left, but there is if you're getting to a hyper-targeted perspective these days. Speaker 2: Again, you are leading us perfectly into the next conversation, which is on that product discovery. That's kind of the angle I want to take as well. Back in our days, it was a lot of hacking, a lot of algorithm hacking, and people would They would go find a Me Too product because there was so much opportunity. They would find a product that had high search volume and lower views and they would launch the exact same product with a slight color variation. Again, Amazon no longer needs to be that platform. They don't need 700 sellers selling the exact same protein, the exact same pen. That's not advantageous to anyone anymore. And I think that's a big shift we've seen is the sellers who are still on that mentality of just launching a product based on data. It's not solving a need. Speaker 1: Yeah, you have to solve a need at all costs. Speaker 2: Absolutely, with a unique audience. And I think that's kind of the difficult part is Amazon has the customer base and the loyalty. I mean, Everyone's going to continue shopping on Amazon as long as their favorite products show up within two hours. That is advantageous. So what Amazon's really prioritizing is, to your point, that unique assortment, the SKU differentiation, What is something that you can launch that solves a specific need that 500 other people are not solving? Because that's how they're going to drive a unique audience is by bringing people to the store. I mean, we recently saw the Alex Cooper Unwell launch. Not that differentiated of a product, but they went about it in a very differentiated fashion. They had the homepage takeover and they used a major influencer, which was driving traffic to Amazon. That's the kind of thing that I think Amazon's looking for nowadays. Not the same playbook, not copycat products. It's where can you have a unique angle to drive traffic to Amazon on your own, but also solve a customer need that doesn't have 700 other products trying to solve. Speaker 1: Let's back up a second and talk a little bit about the disparity when we talk about the assortment and selection that Amazon wants. At the end of the day, it's still an open marketplace. Anyone can buy anything and resell it online. It's not that you can't go enlist or Amazon's going to not accept it or anything like that. It's my favorite one, chatting with more brick and mortar or innovation. They're like, when will Amazon accept this? Brenda doesn't work like that. Just go and list it. But do you have the traffic driving to actually do something? But you mentioned the two-hour delivery there. So two-day shipping, that's gone. That is old news at this point. It's now sub-same-day delivery. And so with a sub-same-day delivery, Amazon's obsessing over the efficiency of the assortment All over the country, close to people within two hours or again within a few hours of that order. Now, my favorite example was we're in the space of a lot of consumer goods. Generally speaking, they want it within the same day, but my retail counterparts were chatting about or my Amazon retail folks were chatting about you know, we want toilet brushes. Now, if my mother heard me say toilet, she'd be really mad. Lavatory loo brushes, mom, that they don't need 12 of them. They want it for sub same day delivery. I just went through this. I had to buy one before, you know, a guest came and I There was only one or two options. I filter by delivery speed almost every time now. I only have 12 options available to me that even showed up, but there was only one or two that fit my needs. They were coming up by the search results. That's where you start to get into what is Amazon prioritizing. Again, everything can be listed online. Are you going to be at the top of the search results? Are you going to be as consumers are filtering by same-day delivery or get it by tomorrow or get it by 5 a.m.? Are those products going to be in the warehouses near these consumers all over the country? Speaker 2: Absolutely. I'm not going to spiral on talking about the algorithm and organic rank because I really want to get into a conversation of why all this matters because even though it is unlimited, as we said, you can bury a body on page two. So saving that, Gabi and I will be diving into a whole episode on why the algorithm matters, why organic rank matters, because again, at the end of the day, as mentioned, Amazon wants to solve Customer problems. How do they have a competitive advantage over the retail stores? Well, everyone lives within two hours of some very key retailers, if not closer. Amazon's competing with that. If you can get in your car and go get a toilet brush in less time than you can have one delivered to your house, that is not a competitive advantage for the customer. So there's a million things we're going to dive into there. Save that for later. Is there anything else that you feel like we missed when it comes to your Amazon catalog, your assortment, problems that brands are dealing with that we can help solve? If you're in room you would see her side I think we covered the majority of it. I'm trying to think. We've talked about products being crapped out. We didn't really dive deep on that, but I don't know if we need to because that's the whole pricing in itself. Speaker 1: Yeah. In this mini-series, we don't necessarily have a specific section on that, but absolutely Amazon. I mean, we're in the realm, whenever you end up listening to this, right now we're in the realm of tariffs galore. Everyone is trying to... Speaker 2: I don't think it's going to change in the next 30 days. It seems to be a little chaotic. Speaker 1: It might not change in the next few years. Speaker 2: Not a lot of consistency. Speaker 1: But to that point, profit is a huge issue. It's a huge issue for everyone. It's a huge issue for Amazon. So yeah, they are focusing very much on... Speaker 2: Hold on, hold on, wait, pause. For those who don't know, if your product is crapped out, it means... Speaker 1: Can't realize a profit. Speaker 2: Thank you. Go ahead. Speaker 1: Wow. I haven't had to actually... I don't know how to explain what that is for a while, but that's a good one though. I'm glad that it popped into my memory. Speaker 2: Sellers, I feel like, don't deal with it. Speaker 1: No, but they do deal with the FBA calculator, right? Speaker 2: There's not a fun acronym for that crap. Speaker 1: No, exactly. That was one of my favorite things when I first switched over to the vendor side. CR lowercase a. But yeah, absolutely. So can't realize a profit, but you know, on Amazon's side, they are tracking obsessively their net PPM. It's their category average profit margin required. And they're getting more and more strict with that. Every single year we talk, we sort of in the industry joke and talk about AVNs, annual vendor negotiations and How tough it's getting your near over. That's not gonna change anytime soon you have to find more creative ways to add value to your brand to add value to amazon and in turn add value to the consumers. Speaker 2: Absolutely avians is a fun one while we're talking i'm coming up with more podcast episodes definitely want to dive more into one p vs three p i think there's a lot of suspicions in the space around what's gonna happen to the program and i think a lot we can dive into there. But I mean, looking back, I think we covered the core of it. We have three more episodes for this mini-series where, again, we're diving into advertising, we're diving into brand building and the changes we've seen around AI, creative, your PDP, and supply chain. Supply chain is a big one right now. I think you have mentioned tariff, so we're going to dive more into that there. But I feel like we're in a good spot to wrap it up. Anything else you think we should throw in there? You feel good? Speaker 1: No, I think ultimately... Speaker 2: Do you want to give a shout out to your dog? Speaker 1: Eddie. Speaker 2: Come here. No Ed ASMR. Speaker 1: No Ed ASMR. Different podcast. Well, the audience can't see, but we have Kat and we have Ed in our little recording studio and they're the best. They might feature as little cameos in some upcoming episodes. Speaker 2: If no one gets any value from this podcast, know that Kat and Ed enjoyed everything we had to say. Speaker 1: They listened. Speaker 2: They took notes. They're rating it an 8 out of 10 so far, I would say. So always room to improve. Speaker 1: There's always room to improve. Speaker 2: Amazing. Well, we will wrap it up here. If anyone has any questions, as always, shoot us a message. Find us both on LinkedIn. We'll drop those underneath this podcast episode and let us know if you have any ideas on topics that we should cover. Speaker 1: Yeah, happy to explore them all.