NEW YORK — The growth of Alexa could mean some brands won’t matter as much over time, even though there’s still a limited opportunity for fashion brands on the Amazon site.
Digital research firm L2 hosted a presentation on Amazon.com to help marketers improve a company’s digital footprint. The key takeaway is that the “voice experience” will be huge, and that will impact how consumers shop for goods. For fashion and apparel brands, there’s still a place for them on Amazon, but the pros and cons have to be weighed.
According to Scott Galloway, founder and chairman of L2, 52 percent of U.S. households have an Amazon Prime membership. And while Amazon has disrupted much of the retail landscape, it’s also done the same from an investor standpoint. Galloway said, “Amazon doesn’t need to be profitable. Investors aren’t demanding that, so long as Amazon can take the money and plow it back to the company. So what’s the point of being profitable when [investors want] innovation?”
He noted that Amazon “runs at break-even,” but has made a huge impact on the retail ecosystem in a world where growth and vision come at the cost of profits. And that innovation has Amazon getting into other businesses, such as video, media and cloud computing.
“Brands are disadvantaged because there is no way for them to show the investments they’ve made [in the] online [world],” Galloway said. His one key point for the future: “Brands will not matter at all because of voice [searches].”
Galloway explained that as more consumers use Amazon’s Echo system to connect with its Alexa voice service, chances are consumers will become brand agnostic. Someone who asks Alexa to buy batteries or baby wipes could very well accept whatever she selects at the price offered, particularly as pricing becomes more important to consumers. Further, the Alexa demonstration he conducted showed purchase prices via Alexa as lower than traditional pricing on the Amazon site for the same item. That suggests traditional brand-building isn’t going to cut it for most labels. That’s because while most big brands are good brands, they command a premium in pricing that some consumers might not want to pay anymore, Galloway said.
Greg Hedges, director of strategy at Rain Agency, said there’s a huge opportunity for the “voice experience.” He said over 500 million are using voice now, between Alexa, Apple’s Siri and Google Home. By 2021, he said there will 1.83 billion users. He noted partnerships Amazon has for its Echo system with Ford, LG, Samsung, Whirlpool and GE. And some brands, such as Tide and Campbell’s Soup, currently use Echo to provide consumers with information, whether it’s dealing with a stain or an idea on what to cook for dinner. But he also said Amazon has the opportunity to own the “generic space,” and that would place a higher burden on how name brands strategize their marketing to be topmost of mind so consumers know to ask Alexa for a specific brand.
Maureen Mullen, L2’s cofounder and chief strategy officer, spoke about searches on Amazon. For beauty, her example was Olay and its retinol product. There were fewer searches for Olay the brand, and more searches on the ingredient retinol, she said. For fashion and apparel, there’s opportunity for traditional core replacement product. But what’s attracting Millennials is a package of six leggings for $29.99, a product that Mullen said would be “impossible for brands to compete” against. And one top-selling item is a private label men’s dress shirt selling for $39, which Mullen said could have been made in the same factory as a Brooks Brothers shirt. She suggested that brands looking to sell core products keep it simple with just five to 10 stockkeeping units for replenishment items. Another opportunity for fashion brands is to use Amazon to test specific products, such as for color. She also said that Amazon could be one way for brands to have an online outlet where they use the platform to clear promotional inventory.
Ryan Bonifacino, former chief marketing officer at Alex and Ani, spoke about the pros and cons of working partnering with Amazon. When he left the company in 2015, the accessories firm was doing $400 million in volume. Although Alex and Ani had its own web site, its core strength was in production, not logistics. Amazon’s fulfillment centers helped pack and ship orders to consumers; that help meant the difference between $10 million and $100 million, he said. But there was one negative that he noted: “When you share data with Amazon, you are sharing everything.” Bonifacino was referring to “copycat” products as, “Amazon came out with products exactly like ours.” While the relationship between the two firms eventually turned hostile, Bonifacino said the company owes a lot of its growth to the e-commerce firm.