THE AMA­ZON CAN­NI­BALS

As the in­ter­net giant pre­pares to gob­ble up the re­mit of re­tail­ers, do brands need to fear they are next on the menu?

Campaign UK - - FRONT PAGE -

Ama­zon is throw­ing a small party for con­sumer brands this month. What’s for din­ner? Re­tail­ers.

Some of the world’s big­gest brands have been in­vited to Ama­zon’s Seat­tle head­quar­ters to hear about how they should start ship­ping prod­ucts di­rectly to online shop­pers and by­pass chains such as Wal­mart, Tar­get and Costco.

Ex­ec­u­tives from Gen­eral Mills, Mon­delez In­ter­na­tional and other pack­aged-goods com­pa­nies will at­tend the three-day gath­er­ing. They will tour an Ama­zon ful­fil­ment cen­tre – 21st-cen­tury stores? – and hear a pre­sen­ta­tion from world­wide con­sumer chief Jeff Wilke, who re­ports di­rectly to Jeff Be­zos.

This is an in­ter­est­ing time for Be­zos to de­clare war on re­tail­ers in such an open way. As we all know, retail is in melt­down. A sam­ple head­line I read this week: “Retail sales plum­met at fastest quar­terly rate since 2010.”

In the UK, retail is hurt­ing due to Brexit push­ing down the pound and push­ing up the cost of stuff you can buy – all the while wages are stag­nat­ing.

In the US, there is the same stag­na­tion of mid­dle­class wages, and there are too many stores, plus young peo­ple are spend­ing less money on stuff and more on ex­pe­ri­ences. Foot­fall to the big malls has dried up. As a re­sult, there were nine retail bank­rupt­cies in the first quar­ter of 2017 – that’s more than the whole of 2016. Grim stuff.

But retail stores are just the be­gin­ning. Ama­zon has de­cided that this is the per­fect time to ef­fec­tively team up

with bil­lions of price-con­scious con­sumers not only to attack retail stores but to de­stroy the very no­tion of brand value on which much of retail is built.

The ben­e­fit of brands is that, in re­turn for a price pre­mium, they guar­an­tee the prod­uct they sell will be of a con­sis­tent qual­ity. This saves con­sumers the time of re­search­ing which prod­uct is best. Brands then lever­age their prod­ucts with pack­ag­ing, shelf space, in-store pro­mo­tions, mar­ket­ing, part­ner­ship with re­tail­ers and so on.

Ex­cept Ama­zon now wants to change all that. It can use al­go­rithms, user re­views and sheer scale to hol­low out that ben­e­fit and kill the price pre­mium that brands com­mand – and give it back to the cash-strapped con­sumer.

Ac­cord­ing to Ita­mar Si­mon­son and Emanuel

Rosen, au­thors of Ab­so­lute Value: What Re­ally In­flu­ences Cus­tomers in the Age of (Nearly)

Per­fect In­for­ma­tion: “Brands now have a re­duced role as a qual­ity sig­nal. Brand eq­uity is not as valu­able as it used to be.” Put an­other way, why rely on brands when you can use Tripad­vi­sor or Google to fig­ure out which ho­tel to stay in?

A night­mar­ish vi­sion of the fu­ture in which brands mean noth­ing is al­ready avail­able. It’s called voice and it has been pop­u­lar in the US. Ama­zon’s Alexa is a fric­tion­less, brand-less way to or­der prod­ucts to your home.

In case you don’t get the hint, Ama­zon is al­ready dis­count­ing its own Ama­zon­ba­sics la­bel on Alexa and, in the case of bat­ter­ies, does not even of­fer non-ama­zon brands.

Are brands fin­ished? No. Hot brands and great deals will al­ways at­tract the al­go­rithm – whether it is Ama­zon’s or Google’s.

But, as crit­ics have pointed out, merely good brands and merely good deals will be ig­nored by the all-pow­er­ful search and ag­gre­ga­tion en­gines and, with them, a bil­lion con­sumers.

Can Ama­zon be stopped be­fore it hol­lows out the en­tire retail sec­tor? Will it face reg­u­la­tion – or even be bro­ken up – be­fore it does the kind of dam­age to retail that Face­book has al­ready done to pub­lic dis­course? If you are a brand or a re­tailer, it’s worth stay­ing tuned.

“A night­mar­ish vi­sion of the fu­ture in which brands mean noth­ing is al­ready avail­able. Ama­zon’s Alexa is a fric­tion­less, brand-less way to or­der prod­ucts”

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