Amazon has retailers trapped in a corner. Partner with the behemoth, and retailers can grow sales, but are only offering Amazon more data on their customers, thereby helping their growth. Don't partner, and retailers risk losing ground on the competition. In this piece, Tom Manning (pictured below), head of strategy, Forward3D, discusses how even if brands get on board with Amazon, they might still ultimately be doomed.

Most of the talk around Amazon nowadays concerns their new headquarters, the Echo and Alexa, their latest acquisition, or whatever Jeff Bezos has recently done or said. As a result, not much has been made of the point of power they’ve reached in online transactions, where the choice to buy from Amazon is becoming a bigger consideration than the product or brand people buy.

A survey reported 38% of e-commerce searches start on Amazon (as opposed to a search engine) but this figure doesn't even tell the full story, because of the way people’s habits have subconsciously evolved.

With this new found power, Amazon can directly influence what you buy purely based on the products and brands they list. Do people want to go out of their way to find a brand they don’t stock and lose out on the ease and flexibility they have with Amazon? They are like the department stores of old, where you would go into a John Lewis to buy a TV and only consider the products they have there, because you trust them to select the best products and give you a great service so you value John Lewis more highly than the brands themselves.

For big established brands that think they can stand on their own two feet, this means they need to set aside any misgivings and embrace Amazon to ensure they don’t lose market share. One brand that has done this recently is Nike. Their products have been available via Amazon for a long time, but not directly sourced by Nike, only sold by their wholesale partners. Even though selling via Amazon doesn’t sound like a direct purchase, it is compared to the current situation and is all part of their overall strategy to drive more direct sales.

Tom Manning, head of strategy, Forward3D

For smaller brands, there is an opportunity to benefit from this association. In our old-fashioned department store example, simply being stocked by John Lewis would give a smaller brand a leg up on the competition. If John Lewis stock it, then it must be good quality and they’ll handle any after-sales issues. As well as trust from association with Amazon, smaller brands benefit the most from our searches starting on Amazon instead of a search engine. Their products can be seen on equal footing with the market leaders without the need for huge search budgets for advertising, as long as their reviews are strong enough. If these smaller brands use Amazon’s fulfilment services (and of course you would) then they can get their products out far more quickly than they could ever manage to do by themselves.

This part of the offering isn’t just tempting smaller brands onto Amazon but even giants like IKEA. IKEA has struggled with e-commerce and fulfilment is their major let down. The options are either spend an afternoon walking through a packed store pushing a wardrobe and a plant on a wobbly trolley, only to find it won’t fit in your car, or pay exorbitant amounts for them to deliver it at some point in the next few weeks. Not exactly a modern retail experience. By using Amazon, in what I can only hope is an experiment to review their own offering, they can see their potential with a more modern e-commerce experience.

We’ve talked about big brands and small brands, but what about brands that don’t even exist yet? They are some of the biggest winners of Amazon’s rise, with the best example being Anker, but new brands are launching all the time. Brands can build their business entirely on Amazon, which is great for them, but don’t think Amazon hasn’t noticed. In fact, it’s becoming apparent this is the next phase of Amazon's development which will truly pull the carpet from underneath brands large and small. They have all the data on what people buy, what they look for in a product, what they like and don’t like when they get the product, and, most importantly, what makes money – so Amazon is in the perfect position to launch their own products under brands you wouldn’t even know belong to Amazon, and steal a march on everybody.

In conclusion, if you have any sway over brands you work for or work with, encourage them to embrace Amazon and benefit from the relationship while they still can, because it may well be that Amazon decides to launch and push their own version of their product and it’s not a level playing field any more.