Amazon

The 3 things ecommerce brands can learn from Amazon Prime Day

Here's what small ecommerce brands can learn from Amazon Prime Day's success

This year’s Amazon Prime Day was record breaking generating $1 bn in sales. Not only did Amazon beat it’s own Black Friday and Cyber Monday sales, but sales also increased 60% year over year relative to last year’s Prime Day. Amazon continues to dominate e-commerce and will continue to do so for the foreseeable future. But, as we said in our last post, we definitely believe that there is room in the market for digitally native brands to succeed. They just need to compete on a different dimension rather than trying to beat Amazon at the game that it’s mastered - convenience.

As Amazon continues to grow and dominate, we think that Amazon Prime Day has valuable lessons for growing brands that they can apply to their own business models successfully.

(1) The membership model works really really well if you’re fulfilling a real need

While subscriptions of one sort or another have long been in vogue for ecommerce companies, not all of these companies have been successful over the long-term. This year, a record number of customers signed up for Prime Day, demonstrating that the membership or subscription model can work really well, but it needs to have several key components. Namely that the benefits have to be unique, exclusive and drive significant value to the customer. 

The thing that makes Prime Day so special is that it is available to only Amazon Prime members. Most e-commerce subscription providers tend to provide a subscription for the sake of stabilizing their own revenue and cash flow and not necessarily because they offer something unique, exclusive and valuable to the customer. 

That being said, companies like Stitch Fix and Dia & Co. have been successful because they provide exactly that. In the case of a company like Dia, they’re meeting an untapped market need for plus size clothing and have a unique offering in a space where there’s a clear market gap. Literally the perfect use case for a membership model. 

(2) Don’t be afraid to run experiments

In a way, Prime Day is one big experiment for Amazon. The company has used it to test new product lines and releases or supply chain innovations with the focus shifting slightly each year. Once it becomes clear what worked and what didn’t, Amazon can use the plethora of data to improve throughout the remainder of the year. 

While most e-commerce brands do have a strong ethic of A/B testing whether it’s landing pages, marketing copy or other initiatives, it can be hard to run potentially game changing experiments and take big risks as a small company. But, that being said, what Amazon and other successful e-commerce players like Jet have taught us is that big bets can pay off. In an ecosystem where retail continues to be challenged, those who innovate successfully and take bold steps to reinvent their business models even when they seem to be working will be the ones who come out on top. 

(3) Make sure your supply chain and logistics are in order before ramping up marketing

While in the past Amazon has had some technical snafus related to Prime Day, the company has certainly succeeded in making sure everything went smoothly this year. While Amazon has a particular strength in supply chain and logistics, the lessons from its past technical malfunctions can teach smaller brands a thing or two.

Similar to the Amazon example, you don’t want to spend a ton of time, effort and money driving traffic to your site when that traffic can’t convert due to a shopping cart glitch (back in 2016), or, on the supply chain side, when you’re out of the inventory you’re advertising. At Fuse, one of the most common problems we encounter is a lack of coordination between the marketing and the supply chain teams. 

While marketing may launch a meticulously planned, omni-channel campaign, too often we find that these campaigns don’t take into account critical questions like if the campaign has the desired impact, can the company actually fulfill the orders? Will there be enough inventory to satisfy demand? While it seems obvious in hindsight, it usually takes a crisis or two for e-commerce brands to streamline the coordination between functions. 

As your company grows and scales and focuses on putting these lessons into practice, Fuse is here to help you focus on your business, not your inventory. 

Is Amazon eating the world?

Groceries spilling out

Just over 6 years, Marc Andreessen famously stated that “software is eating the world.” In e-commerce today, Amazon is certainly eating Whole Foods, but is it eating the world? While the full implications of the acquisition remain to be seen, there are a few things that we can infer from the acquisition and its impact on both food and e-commerce.

Standalone food start-ups will continue to struggle

Since the first tech bubble, standalone food start-ups have struggled to succeed. In the early 2000s, Webvan, a precursor to today’s Fresh Direct and Instacart went belly-up. There are several key factors that contributed to the start-ups failure, but the main one was a lack of scale. Today, despite being tremendously popular among Millennial audiences, food start-up Maple shut down last month. Others, like Munchery, continue to struggle and may not be long for this world. On the other side, the shining success in the industry has been Blue Apron, which announced its IPO. While some attribute Blue Apron’s success to marketing, we attribute it to a laser focus on implementing operational efficiencies and constantly improving with scale. 
 
In general, that will continue to be the theme. Food (and more broadly, inventory) waste has the potential to take a company down and creates notoriously tight margins. In many ways, Amazon, who has made its name operating on razor tight margins, is the perfect acquiror for a food business that tends to experience these issues to the extreme. 

The war between Amazon and Wal-Mart is about to heat up

With a slew of acquisitions recently - Jet.com, Bonobos, Modcloth - Wal-Mart made it clear that it’s making it’s presence known in e-commerce. Amazon has countered with the Whole Foods acquisition and will start going after the bread and butter of Walmart’s business. Not only that, but given Amazon’s expertise in operating on low margins, it’s actually well positioned to decrease Whole Foods notoriously high prices. This will broaden Whole Foods’ reach and put it in more direct competition with Walmart Grocery shoppers. At the same time, Amazon can offer a slew of other attractive food related services online and in stores. 

But can brands still stand-up to Amazon?

As we look to the broader ecosystem, what does this mean for brands and retailers? Is everyone else doomed? While this may be an unpopular opinion, we here at Fuse don’t think so. 
 
As the competition between Amazon and Wal-Mart heats up, the two will tend to converge into two very similar players with limited differentiation in the consumer’s eye. The number one differentiators will be price and convenience. In many ways, while Amazon’s success has put pressure on physical retail, it’s acquisition of Whole Foods actually validates that physical retail isn’t going away.
 
By 2020, Millennials will account for 20% of retail sales. Unlike prior generations, Millennials are looking for unique experiences and deeper connections to the brands they shop with. While Amazon and Walmart will always win on convenience, brands that work hard to facilitate unique experiences, value props and bespoke feeling (if not actually bespoke) products will continue to speak to Millennials. What’s more, creating these brands online is easier than ever today and there is so much more flexibility in what a brand’s physical presence needs to look like. It doesn’t have to be a fully stocked store, but rather, it can be a showroom or pop-up. 
 
In the early days of e-commerce, all brands were essentially competing on convenience. But, today, as e-commerce becomes more and more ubiquitous, it’s clear who’s poised to win on convenience. In many ways, this can be liberating for brands given that instead of competing on faster shipping, they can compete on delivering the brand experience Millennial consumers are searching for. 
 
In short, we don’t believe that the rest of retail is going away, but we do believe that retailers have to get smarter not only on brand, but also on the operations side. As tools like Fuse continue to grow, scale and become more ubiquitous, brands can help themselves compete against larger players who have vastly more resources. No matter what type of brand you’re building, Fuse is here to help you focus on your business, not your inventory.