Episode 9: Amazon: Fight or Join?

Most Ecommerce brands are starting to feel like they can’t beat Amazon and thus, they must join them. Ryan unpacks the benefits of joining Amazon and the things you need to watch out for if you do.

TRANSCRIPT:
Jon:
So, Ryan, we've all heard the old adage, "If you can't beat them, join them." Right?

Ryan Garrow:
Mm-hmm (affirmative).

Jon:
So from what I hear on a daily basis in the conversion optimization world is that most eCommerce brands are starting to feel like they just can't beat Amazon, and thus, they must join them. If nothing else, they're looking to have a presence on Amazon so they can at least be found. It's becoming a huge search engine. I'm sure we'll talk about that. But I see a lot of good things that brands get from participating in the Amazon game, but there seemed to also be a lot of downfalls in doing so as well. So today, I'd like to pose the question, Amazon, fight or join? So Ryan, I think start just by breaking this down a little bit. What are the benefits to joining Amazon?

Ryan Garrow:
There are a lot. I mean, the easiest answer for that is volume, volume, volume. I mean, Amazon. There's no statistic that shows Amazon is not dominating the online ecosystem as far as volume of sales. They're over 50% every holiday season. They somehow made July into a shopping holiday because every retailer on the planet has low sales in July until Amazon comes along and says, "Well, I'll just put Prime Day out there." There are sales on Amazon. They have figured out how to remove friction from the purchase process better than any other retailer has so far in at least initially looking at it. The benefits of joining Amazon? There's a lot of volume. You can sell stuff.

Jon:
Okay. So what are the benefits to fighting Amazon?

Ryan Garrow:
Well, you enjoy pain. You like losing. The benefits of fighting it is you get to control a lot more of your brand. Amazon has been trying to do some things to improve that, but you get more control. You get customer data. It could increase your chances of having repeat purchases if they buy from your website. You get to personally handle that conversion optimization after the purchase, and you get to keep some additional margin. Amazon does charge for the platform when you sell. So there are some benefits to not selling on Amazon.

Jon:
If you were to choose to join Amazon, what would be your recommendations? Where should we start?

Ryan Garrow:
Whether you join or fight Amazon probably needs to start with what type of business are you. If you are a retailer selling other company's products through your website or even with a retail storefront as well, Amazon may not be the best place for you. Amazon, largely speaking, is the biggest retail. I mean, Walmart and Amazon are both massive retailers. Other people sell their own stuff on Amazon. Amazon also is a brand. They do have their own products that they sell as well. But as a retailer, it's probably less beneficial. Your margins are already smaller, and you're going to give another retailer some of that benefit. You race to the bottom when you're competing with the same exact product that other retailers are also selling on Amazon.
If you're a manufacturer, I think there's a little more upside. You get to control your brand exposure on Amazon. As a manufacturer brand owner myself, I limit my retailers. I don't let them sell on Amazon. I want to own that and keep my cost as low as possible from an ad perspective. But the big key here too is you need to be able to protect your product. Hopefully, that's with some patents. Hopefully, it's a difficult thing for Amazon to maybe find your factory in China to have them make them cheaper for Amazon because they probably will.
If you make or sell clothing, you better have a powerful brand. I mean, even Nike doesn't sell on Amazon right now. They went down that path and decided not to. I don't know the intricacies of their agreement and why Nike backed out, but Amazon is the biggest clothing manufacturer in the world. Most of the brands on Amazon for clothes are actually owned by Amazon, even if they don't say the Amazon name. It's just clothing would be difficult, but generally, most manufacturers should be considering it, at least in their process. Retailers, there's probably some different things you need to be looking at.

Jon:
Well, we've probably all heard the story about Allbirds, the shoe company, right? That Amazon went out and basically created a knockoff because Allbirds was selling so well on Amazon. As a consumer coming to the site, you really can't tell the difference. I've heard from numerous brands that the biggest downfall has been that they have a product that is easily reproduced or that Amazon... Maybe we should get into this a little bit, but I've even heard from people where they've done direct factory to Amazon shipping. So it's not Amazon Fulfillment Warehouse. Amazon then knows who's making the product, and then they contact those people and say, "Hey, we'll pay you a little bit more. Make it for us," or, "We'll do a much larger order if you make it for us," and then they lose their... The retailer loses the factory, and so it's something where Amazon is a double-edged sword for sure. That's why this is going to be such an interesting topic.

Ryan Garrow:
It is. Amazon basically is going to be frenemies with every company on the planet. They're a necessary evil for certain companies. Google and Amazon are very much frenemies. They both will say that, hey, their biggest competitor is... Google will say it's Amazon. Amazon will say it's Google. They're fighting over that search volume and that revenue from search traffic and paid ads, but Amazon is... I don't know this for sure, but I would argue probably the largest advertiser on Google and driving traffic to the apps into their website.
So you have to go into Amazon with your eyes wide open, understanding that Amazon is aggressive. They are not your friend. They will stab you in the back. They will cut you if they get the chance. So you have to always be on your guard and looking at Amazon as, "How could Amazon steal this from me?" and just being operating as a paranoid brand owner or even a retailer. However you're operating on Amazon, protect yourself as often as possible, and look at it through the lens of, "If I was trying to steal this product from me or make money off of me, how would I do that? What would it look like?" Always use that lens on Amazon to see, "Does it make sense? Does it not make sense?"
There's too much of a risk. There's a problem because even if you have a patent, which I'm sure Allbirds had some protectable intellectual property within their product. Amazon has more money than you, guaranteed, and they can fight you in court, and they can also probably have... They probably have enough smart lawyers on staff that they can say, "All right. Here's the patent. How can we get close enough to compete, but not necessarily actually break that product or break that patent?" It's probably going to get Amazon in trouble long-term, but in the short-term and where we're at right now, they are able to operate that way, and it's been very effective. I don't dislike Amazon, so don't hear me saying that Amazon is bad for what they're doing or how they're operating. You just as a retailer, or a brand, or a manufacturer have to understand what you're getting into in this relationship.

Jon:
Yeah, and I think that goes into why Nike left Amazon because Nike, I believe, originally joined on to fight counterfeits on the platform. The problem was is that it just wasn't effective. It actually made more counterfeits because they had more products on there that people could counterfeit, and then list and say it's a Nike product, and list it for cheaper than what Nike was willing to do. So ...