We have been writing about the threat to UK retailers from Amazon for a long time. Not just the immediate threat of strong competition but the longer term issue of what some people call Amazon’s take over the world plan.
A key component of the Amazon plan is to offer a delivery service to all households of regularly used products of all types. This would start with brands and then move to Amazon’s own brands. By having a regular delivery to your house it makes the cost of adding other products to the delivery very low and will undercut existing home delivery services as well as retailers. We’ve already recently seen the impact on Royal Mail of Amazon starting to do their own deliveries. The ultimate is that Amazon branded vans deliver everything and almost everything is branded Amazon.
Building the Amazon engine
One of the early steps to this grand strategy was the delivery of fresh goods to homes in various parts of the US. When launched in Seattle 50% of Amazon business came from fresh. That was a massive hit to to local retailers and gave Amazon the proof that their grand plan was likely to work – they just needed to add more products. They have now done this by launching Amazon Elements in the US. This is a new line of private label nappies and baby wipes offered exclusively to Amazon Prime members. On a landing page for the new brand, Elements is described as “Premium Products. Transparent Origins. Exclusive to Prime.”
Incentives to sign up
Seven of the nine Elements products are available through PrimePantry, the US national program featuring everyday household essentials Amazon launched for Prime members in April 2014. One pack (the monthly pack) is eligible for Subscribe & Save, another Amazon program offering savings for regular shipments of high-frequency consumables.
Amazon says it is developing the new products with customers in mind based on input from ratings and reviews. The company claims it won’t “design packaging for store shelves instead of customers” or “base our decisions on business needs instead of customer needs.” Needless to say brands are not happy that feedback on their products is being used in this way.
We’ve been talking to retailers about how to respond to Amazon for some time and all major retailers have plans in place or are being formulated. Our expertise is in helping retailers sell more in their stores through the use of smart signage because Amazon currently can’t do this as they don’t have stores, yet. Have a look at the Amazon Approach white paper that we created to help retailers take some of Amazon’s strategies that get shopper to “buy now” online and use them in their stores. It’s our most read white paper. It’ll help you be more agile which is much easier if you are not a steamroller.
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