Zero Sum Game: growing brand value in the Amazon era
Global Chief Strategy Officer
As we look up and down the BrandZ list for 2017, perhaps no brand stands out more than Amazon. While it falls in the retail category, its impact stretches far beyond any one industry or vertical. Technology, packaged goods, consumer electronics, transportation, and telecommunications all find themselves in a position to partner with or be disrupted by Amazon.
What makes Amazon such an important consideration for nearly all brand leaders today?
Amazon destroys retail brands. Retail brand leaders have been thinking about Amazon for years, so the company’s impact on the sector is hardly news. What is surprising, however, is the pace of retail brand disruption. By one estimate, 8,640 U.S. retail stores will close in 2017, which is 39% higher than during the 2008 financial crisis. And Amazon’s revenue growth in 2016 was higher than the total revenue of the top 3 department stores combined.
Amazon is a brand commoditizer. Brands earn a premium by elevating perceived value and creating an emotional bond that influences purchase decisions, particularly at the point-of-sale. Leading brands in most categories have some level of product or pricing advantage, but that’s a small component of what drives a premium over generic alternatives. Amazon’s model has the potential to destroy brands by using data to connect people to their preferences, replacing the connection between a consumer and the brand with the convenience and simplicity of Amazon Prime. For example, Alexa today suggests products based not only on a customer’s preferences, but also on Amazon’s pricing, availability, and customer reviews. More than 45% of Amazon Echo owners have already put an item in their cart with Alexa, and the coming years will see more people letting the brand make their product and buying decisions for them.
Amazon is a media channel, not just a retail channel. Part of increasing brand value lies in a brand’s ability to create competitive advantage with superior targeting. With the Amazon Ad Platform (AAP), Amazon is rapidly becoming a force in advertising. Brand leaders will likely have no choice but to shift media dollars to Amazon – a company that is more than willing to invest its profits to compete directly with other advertisers. Outside of technology, brand leaders have never had to compete directly with their media channels.
Today, brand leaders don’t just need to articulate a brand strategy. They need a strategy for working with and competing against Amazon. How?
Brand as a commerce experience. Warby Parker, Blue Apron, and Dollar Shave Club all offer commerce experiences that grow out of their business models. The way you buy razors at Dollar Shave Club is a huge part of the brand. The same goes for Warby Parker, whose try-on box makes shopping for frames a rewarding experience.
While all of these brands are new, it’s a mistake to think mature brands can’t succeed with this as well. They have the products, data, and customer-service expertise needed to create these kinds of services—sometimes more robustly than the narrowly focused online upstarts.
Build a commerce-based relationship. Some major brands are succeeding by doubling down on their relationships with their best customers. While Nike and Adidas both sell through Amazon, they also offer their own commerce platforms. And these aren’t just stores, they’re relationship-magnets.
For example, you can buy shoes on Nike+ SNKRS, but the app is also a source for new releases, limited editions, and sneakerhead-friendly content. Adidas Glitch was a product initially available only via app and delivered within four hours. The catch? You needed a referral from another fan to get it. That may not be the best way to move lots of product, but it’s a terrific one for making noise and connecting with loyal fans.
Make a personal connection. Human interaction still matters. Best Buy has proved that a personal touch (and smart salespeople) can create a competitive advantage, especially for high-consideration purchases. Nordstrom makes e-commerce a seamless extension of its legendary customer service. For example, you can first select clothing items on your phone, and when you visit a physical store, they will be waiting in a dressing room that has your name on it. This kind of hands-on attention can go a long way to keeping brands relevant and customers happy.
Deliver something special. This is a narrower opportunity, but some retailers have found success by offering products no one else has. For example, Gleem & Co. is a jewelry e-consigner that focuses on one-of-a-kind estate engagement rings. That ensures that your fiancée’s ring will be something very special. You can also do unique commerce at scale. Lululemon has stood apart for years by stocking very few of any one item in any store and changing collections frequently. As a result, its customers don’t have to worry about running into someone else wearing the same thing. This makes the commerce (and by extension brand) experience highly personal and rewarding.
Put simply, Amazon is a powerful brand that destroys retail brands, commoditizes brands of all kinds, and uses advertising revenue to take on everything. But if marketers can connect theit brand strategy to Amazon strategy, the Big A doesn’t have to be a zero-sum game for everyone.