[00:00:00] [SPEAKER_02]: Welcome to Unpacking The Digital Shelf, where we explore brand manufacturing in the digital age.
[00:01:09] [SPEAKER_00]: This has happened in the Amazon world since we spoke last time.
[00:01:13] [SPEAKER_00]: I always feel like the months are flying past, but yeah, now we are right in the preparation phase before the fourth quarter.
[00:01:21] [SPEAKER_00]: And I feel brands are still wrapping their head around how to kind of budget it there, 25 and to position themselves for success also for the end of this year.
[00:01:30] [SPEAKER_00]: So yeah, very excited for today and once again, thank you so much for having me back.
[00:01:34] [SPEAKER_02]: Yeah, it's great timing because you just finished your, you know, with the holiday all the holiday preparations and everything you just finished your your latest Amazon survey.
[00:01:42] [SPEAKER_02]: So let's just dive right into some of the key learnings. What is the state of the state of Amazon right now? What are they focused on?
[00:01:50] [SPEAKER_00]: Yeah, absolutely. I think before we dive into the survey results, so the survey was conducted together with rastering and climate bright also from stride up.
[00:02:00] [SPEAKER_00]: And what we were seeing is really that of course there are a lot of kind of changes happening not only in the vendor space or in the supplier space that cater to Amazon really, but also with Amazon themselves.
[00:02:13] [SPEAKER_00]: And I think there is still this kind of key conception about any jacias and you see, oh or lots of new CEO anymore of Amazon bring in a lot of change not only into the commercial aspects of the relationship that vendors in multinational brands have for
[00:02:28] [SPEAKER_00]: Amazon, but also in the operational way that Amazon really performs and streamlines its business in 2024, which we've seen. Yeah, even at the beginning of this year and which has really been
[00:02:41] [SPEAKER_00]: focused up until the end of this year so far. The key objective remains to be everything store, right?
[00:02:49] [SPEAKER_00]: But also to become the number one marketplace for grocery and especially for CPG items. And we see that through various kind of changes and various ways that Amazon operates this year.
[00:03:02] [SPEAKER_00]: And has begun to operate since a couple of years if you're being quite honest. We're seeing a lot of automation and offshoring.
[00:03:09] [SPEAKER_00]: So Amazon remains laser focused on really automating and offshoring any kind of repetitive tasks that could block its resources from a management and full-time head count perspective in, yeah,
[00:03:28] [SPEAKER_00]: and a lot of these kind of teams getting offshored to Eastern Europe and India if it's not being automatable, so to say the process that is underlying it, which of course grows the relative profit margin of Amazon even further
[00:03:40] [SPEAKER_00]: and paired with Amazon's low ASP focus, so selling products at below five euros, five US dollars to shoppers is really a kind of key focus for Amazon to elevate its bottom line and to maintain a healthy gross profit and net profit as well.
[00:03:58] [SPEAKER_00]: Two other kind of key trends that we're seeing really unfold is that Amazon has been reducing its inventory coverage, so the kind of inventory holding that Amazon has with most of its vendors quite drastically on average over 35% year over year.
[00:04:13] [SPEAKER_00]: Oftentimes we're seeing slight differences in the US compared to the US so while in the US Amazon is fairly a little bit more aggressive and only holds two sometimes up to four weeks of inventory of demand which actually is still quite a lot.
[00:04:29] [SPEAKER_00]: In Europe it's a little bit more relaxed here you see between three and five sometimes even six weeks of demand that Amazon keeps an inventory.
[00:04:38] [SPEAKER_00]: But the key underlying trend that we're seeing is that Amazon is really optimizing its operational excellence and is a lot more focused about delivering products to end shop as faster and of course also ensuring that vendors are going in the same direction.
[00:04:53] [SPEAKER_00]: Now oftentimes we ask ourselves why is that why does Amazon need to improve its shipping speed.
[00:05:01] [SPEAKER_00]: Especially when we look into the US where Amazon currently offers more than 300 million items with free shipping for the same or next day delivery.
[00:05:09] [SPEAKER_00]: Well of course it has a commercial background and the seeing that research suggests in the wider industry that the annual spending at Amazon.com is.
[00:05:20] [SPEAKER_00]: Of course increasing when they're also able to offer more and more products at the same or one day or even a two-day shipping speed.
[00:05:28] [SPEAKER_00]: So shipping speed really remains critical for Amazon to drive basket size especially in those categories that are otherwise not really profitable so think of grocery categories think of.
[00:05:40] [SPEAKER_00]: Sometimes even health and personal care where products are often sold at very low prices which of course come at very high shipping speeds and shipping costs for Amazon as a result.
[00:05:53] [SPEAKER_01]: And when the last time we chatted we were talking about Amazon is pushing a lot more of the responsibility onto the brands are you seeing that trend continue where they're trying to automate a lot of things there having less inventory like has that continued to move forward and kind of put more on the brands.
[00:06:11] [SPEAKER_00]: Yeah so I think two key trends that we can certainly observe is first of all view of vendors have an active vendor manager coverage.
[00:06:22] [SPEAKER_00]: So that means that vendor managers are not as hands on anymore as in the past helping brands and vendors in particular on achieving their sales targets.
[00:06:31] [SPEAKER_00]: They are mostly focused if they reach out to brand or on of course they are net ppm so they are bottom line performance.
[00:06:36] [SPEAKER_00]: And second of all especially if you're a large amount of national brand that has a very strong relationship with Amazon.
[00:06:43] [SPEAKER_00]: You will see a very laser focused push towards backwards integration with suppliers from a supply chain and logistics point of view.
[00:06:50] [SPEAKER_00]: Why is that well because of course Amazon wants to improve its order inbound optimization and also the opportunities that it has to kind of improve because to serve and shoppers which Andy jaccy has also repeatedly stated and it's annual shareholder letter earlier this year.
[00:07:09] [SPEAKER_00]: It is a key target not only in the European Union but also in North America to kind of bring down.
[00:07:14] [SPEAKER_00]: While maintaining or even optimizing for this prime delivery speed so we're seeing programs such as a direct vendor fulfillment out of their own warehouses or vendor flex model being pushed far more by Amazon this year.
[00:07:28] [SPEAKER_00]: As over the past few years and this is really kind of a testament of this backwards integration focus.
[00:07:34] [SPEAKER_00]: Amazon tries to not even handle and store products that are very expensive for them to handle and ship to the end shopper in their own warehouses any longer and rather wants brands to kind of do that for them.
[00:07:47] [SPEAKER_01]: And to the one pverse 3p kind of selling model you mentioned that a bit and I know that was a big theme of the latest survey and something that brands are trying to figure out should it be one p should be 3p can you.
[00:07:59] [SPEAKER_01]: He talked about what you're seeing how brands are reacting to that because I know Amazon also changed some of their 3p requirements so curious what's happening there.
[00:08:08] [SPEAKER_00]: So let's dive a little bit into the survey results.
[00:08:12] [SPEAKER_00]: The key hypothesis that we wanted to confirm or falsify was first of all to understand brands that were able to reduce that trading terms in annual vendor negotiations.
[00:08:24] [SPEAKER_00]: What were their profile so where they in a better commercial position because they potentially had a hybrid setup or whether they're not in a more advantageous position because of.
[00:08:35] [SPEAKER_00]: Yeah, exclusive vendor relationships also to say and what we saw based on the overall survey results where we had over 200 participants 50% roughly from Europe 46% from North America with 60% of.
[00:08:52] [SPEAKER_00]: Yeah, vendor representatives being from non CPG categories and 40% from food and consumables categories was that the majority actually had increased that rate terms as part of the annual vendor negotiations in 2024 between.
[00:09:06] [SPEAKER_00]: Yeah roughly zero to a half percentage point and then 9% of those brands were able to actually reduce that trading terms here by year.
[00:09:16] [SPEAKER_00]: Now when we look at the profile of those brands that have been able to reduce that trading terms they generally had a slightly higher investment in terms of trade than the total sample that was being surveyed.
[00:09:30] [SPEAKER_00]: They also face typically greater profitability challenges and they under indexed in terms of the overall growth performance compared to other brands that were able to invest more into Amazon year by year.
[00:09:41] [SPEAKER_00]: However, they were also more likely to sell hybrid so not only via vendor central but simultaneously also via seller central now this could be to the fact that they have strong distributor relationships so a distributor becomes a party seller themselves and sells on behalf of their brand.
[00:10:01] [SPEAKER_00]: To Amazon and to the end shop of via seller central or the brand as both a vendor and a seller central account themselves.
[00:10:10] [SPEAKER_00]: And I think the key learning here really that we can draw out of it which may sometimes be surprising but often not so much is of course that the more options you have to kind of reduce and diversify your risk away from the kind of suppression and decent center activities that Amazon vendor managers may enforce on your account during a difficult or critical negotiation.
[00:10:31] [SPEAKER_00]: The more likely you will be able to kind of come out on the other side of the negotiation with an improved trade investment result that is also more strongly aligned with the goals and objectives that you have set yourself ahead of the negotiation.
[00:10:44] [SPEAKER_00]: So risk diversification but also deceptive market-play strategies where a brand actively leverages certain strategies around hybrid certain strategies around marketing investments and how to funnel these to the right portfolio segments is becoming more and more important.
[00:11:03] [SPEAKER_00]: And when we looked at particularly how many brands are actively exploiting hybrid selling model.
[00:11:11] [SPEAKER_00]: Then the results were also quite interesting because as we all know when you're going on LinkedIn, when you're reading articles on certain agency websites, you often think that hybrid is the only way to actually survive in the vendor space today and this may be partly true but it's not necessarily the entire truth and this is why we also really wanted to dive into that.
[00:11:32] [SPEAKER_00]: Now, overall 44% of brands were using an actively hybrid model which can serve as a leverage point in challenging agents in particular.
[00:11:44] [SPEAKER_00]: The remaining parts of 56% of brands were basically not selling directly or indirectly through seller central so they were in what we would call one p vendor central exclusive relationship with Amazon.
[00:11:58] [SPEAKER_00]: What we need to keep in mind, even if we are talking to and about diversified brands that have a hybrid model.
[00:12:08] [SPEAKER_00]: Then of course Amazon is not just standing by and this looking at brands opening as a central account especially if you're talking about the US market here.
[00:12:17] [SPEAKER_00]: Amazon deploys their Amazon standards for brands policy which can effectively force brands to exclusively sell via vendor central to Amazon especially if you're a manufacturing brand.
[00:12:28] [SPEAKER_00]: So it's less necessarily an issue for distributors or wholesalers, but if you're a manufacturing brand and.
[00:12:36] [SPEAKER_00]: Repes or sellers central also not automatically guaranteed and guarantees higher margins.
[00:12:41] [SPEAKER_00]: Why, because of course the selling model and the requirements are significantly different as well as the hypothesis that a lot of brand leaders typically have that you can simply sell your products at MSRP levels is often not holding true because Amazon's pricing algorithms will still orient.
[00:12:57] [SPEAKER_00]: The pricing dance in which you can price your product as a seller based on how the product is being sold at which price point in the wider market segment.
[00:13:07] [SPEAKER_00]: So for example, if the product is sold at ten US dollars elsewhere and you want to sell it all of a sudden for thirty US dollars chances are that Amazon will simply suppress the buy box stating that this is not a competitive price that they would like to display to end shoppers.
[00:13:22] [SPEAKER_00]: And this really comes back to their flywheel business model that we are all accustomed with where Amazon says that of course selection paired with a good customer experience creates customer trust and really spends this flywheel that then enables shoppers as well as more brands to onboard and rise economies of scale.
[00:13:41] [SPEAKER_00]: And a key core element of this is to build customer trust and this trust Amazon doesn't want to jeopardize by allowing our manufacturing brands to simply skyrocket prices to uncompetitive levels that do not compare well to the offers that you would find as an end shopper when you would just do a price research yourself.
[00:14:01] [SPEAKER_00]: And it would find the products significantly cheaper at let's say for example a Walmart or target dot com.
[00:14:07] [SPEAKER_02]: The complexity of all of this just as as I'm thinking of.
[00:14:13] [SPEAKER_02]: You know our listeners who are deep into these negotiations and trying to get the best terms possible.
[00:14:22] [SPEAKER_02]: And yet you saying that there still I think it was 56 or 54% of brands forgive me for not remembering that are one p only.
[00:14:29] [SPEAKER_02]: And then you talk about some of them being forced to be that what does a brand leader do right now and you know what's within their control to be you know is every brand potentially able to run a defensive marketplace strategy or is it just is sort of those well it depends kind of answer.
[00:14:50] [SPEAKER_00]: I want to argue every single brand must design a defensive sales strategy to protect their own vendor margins from Amazon in the end because we all know that of course vendor managers today are employed and tasked with one goal only to drive profitable growth.
[00:15:07] [SPEAKER_00]: And that means that they want to of course improve the operations and the operational efficiency that they have with brands so really kind of looking at this backwards integration among the supply chain to drive potential cost savings and to remove also.
[00:15:21] [SPEAKER_00]: Variable cost structures out of their own p n l moving it over to the vendor worst case.
[00:15:28] [SPEAKER_00]: But then also to of course improve their own bottom line through incremental trade investment and if brands do not follow suit they're often confronted with.
[00:15:38] [SPEAKER_00]: And that's the reason we're not going to have a lot of our business in center of measures where Amazon may at least temporarily suppress the buy box or where Amazon will potentially not accept the cost increase that the brand wants to kind of push through with online retailers such as Amazon where effectively when both parties cannot find a solution you're finding yourself in a trade stop.
[00:15:56] [SPEAKER_00]: Where Amazon does not order from you or you even as a manufacturing brand you have to kind of deploy a trading halt where you do not fulfill any purchasing orders any longer because they're coming in at the old cost prices that you do not want to serve Amazon with any longer.
[00:16:12] [SPEAKER_00]: So it really raises the point that yes, if you are basically completely dependent on your Amazon sales.
[00:16:20] [SPEAKER_00]: In a time where e-commerce is of course dictated by Amazon when you're looking at it from a penal perspective then you better start thinking about how you can diversify your risk dependency from vendor central itself and there are a couple of ways to do that.
[00:16:36] [SPEAKER_00]: And they typically surround of course a hybrid selling model simply because during times of trade disruptions it allows you to continuously sell these items and to not lose your best selling rank because you can kind of capture these sales during times of a potential trading hold.
[00:16:53] [SPEAKER_00]: But it's also worth really to kind of entertain three other areas that are maybe not as obvious to brand leaders oftentimes when I speak to them because when you're thinking for example about this backwards integration focus then this does not only improve the bottom line for Amazon, but chances are it will also say few costs because you no longer have to ship goods via trucks to Amazon.
[00:17:20] [SPEAKER_00]: You do not have any kind of backlogs in their fulfillment centers doing peak quarters.
[00:17:25] [SPEAKER_00]: So I think it can also reduce your risk and also your dependency on programs where otherwise you would back almost your vendor manager or your AVS brand specialist toward a new items and where you can now if you're selling for example via vendor flex model.
[00:17:39] [SPEAKER_00]: Decide to onboard a product from day one without having to raise or get Amazon to raise a more expensive order.
[00:17:45] [SPEAKER_00]: Another area that I think is very unayutilized especially in consumer goods is the subscompensive program because experience is showing that what shows us that if you're in a difficult trade negotiation and Amazon is not willing to purchase goods from you any longer.
[00:18:03] [SPEAKER_00]: Subscribers save customer orders are usually exempt from that so Amazon will continue to sell and to honor the sales two words subscribe and save customer.
[00:18:13] [SPEAKER_00]: So if you're increasing your subscriber and save revenue share especially now during the fourth quarter that usually positions you fairly well during your negotiation send in the first quarter to not lose all of your sales and not all of your revenue whenever you're in a trade dispute with Amazon about your overall vendor negotiation and you at least have a baseline revenue.
[00:18:33] [SPEAKER_00]: That you can rely on which typically also helps you to kind of make the case towards you a senior leadership team that no not all of your revenue is lost, but you can actually continue the sales going forward.
[00:18:46] [SPEAKER_00]: Another way that I always look with especially my clients to deploy is to withstand the pressure of accepting larger bulk volume orders towards the end of the fourth quarter because you will have seen it if you're looking into your ordering patterns as a vendor usually towards the end of the fourth quarter Amazon orders a little bit more than it needs to to meet its first quarter demand.
[00:19:11] [SPEAKER_00]: Why is that well often because Amazon knows that they have quite difficult negotiations ahead of themselves and then stocking up on goods helps them to kind of also sustain a trade stop or a difficult vendor negotiation where they do not want to accept your cost price increase right away because they have more inventory in their real film and centers than normally.
[00:19:34] [SPEAKER_00]: And so the first strategy is really to kind of prevent your operational teams to simply just accept these larger orders, but even if you have a larger inventory position and it comes to the case that in the first quarter.
[00:19:49] [SPEAKER_00]: Your inner difficult negotiation spot potentially Amazon is stopping to order from you or you are no longer accepting orders from Amazon.
[00:19:59] [SPEAKER_00]: The intuitive way that a lot of brand leaders act and decide about their retail media spend is to simply to halt it because they are saying okay we do not have an active trade relationship, so let's not spend on advertising.
[00:20:12] [SPEAKER_00]: My recommendation in some cases and it's certainly something that you deal with not want to potentially evaluate is to actually accelerate your advertising spend during order suspensions.
[00:20:23] [SPEAKER_00]: Because if you're stopping you advertising that means you're extending Amazon's inventory coverage even further and demand that they are holding an inventory that would otherwise last for two weeks now maybe lasts for four weeks.
[00:20:35] [SPEAKER_00]: While that also means that your vendor manager has no interest for at least two to three weeks to return to the negotiation table.
[00:20:42] [SPEAKER_00]: If on the other hand you're accelerating your item media spend, you can shorten the time that Amazon has inventory in its fairhouses and thereby force almost to a vendor manager to return to the negotiation table much more quickly.
[00:20:56] [SPEAKER_00]: And all of these little tactics really can come together to wider defensive selling strategy that brands really need to entertain, especially if they are really targeting and having as an objective to right size the investments with Amazon in the 2025 annual vendor negotiation cycle.
[00:21:15] [SPEAKER_02]: And so Amazon has in addition in this period they've also introduced new selling fees right to three pea sellers over the last 12 months.
[00:21:28] [SPEAKER_02]: How, you know, first of all do you want just sort of lay out what those fees are and then again how can they use their defensive selling strategies to try and counteract summannis.
[00:21:43] [SPEAKER_00]: Yeah, of course, I think we've seen a lot of different new fees that sellers have been subject to in 2024 from the inbound placement fee.
[00:21:54] [SPEAKER_00]: Where Amazon aims to incentivize sellers to send goods to multiple overseas instead of just one to the lower level inventory fee which kind of penalizes sellers for understocking Amazon leading effectively to slow delivery speeds if that happens and of course as we discovered Amazon wants to avoid exactly that.
[00:22:10] [SPEAKER_00]: To also return processing fees where Amazon now targets parts with higher return rates.
[00:22:17] [SPEAKER_00]: Now, these fees often apply first and foremost to the US market we expect that they are also being rolled out in European markets later onwards but it also goes to show that sellers' central is not a safe haven when it comes to protecting your margins with the online retailer because while you at least can negotiate on vendor's central.
[00:22:37] [SPEAKER_00]: This is not necessarily the case in seller central right you just have to deal with whatever Amazon introduces in terms of search fees or new fees in order to right size it's on bottom line.
[00:22:48] [SPEAKER_00]: And that can directly affect your competitiveness in the category if you are trying to of course also sell your products at competitive rates so as we discussed in the past in our.
[00:23:01] [SPEAKER_00]: And so for that we are at the results where was on it it really comes down to distribution control and distribution strategy and not addressing a symptom that is effectively not the root cause of your low margin saturity with Amazon.
[00:23:13] [SPEAKER_00]: Because effectively it comes down to Amazon being a marketplace that simply reflects and is a mirror of your distribution strategy.
[00:23:22] [SPEAKER_00]: So if you're selling your product to everyone everywhere and you give a lot of part discounts to wholesalers and distributors that is then being used by these wholesalers and distributors to pass these discounts onto the end shopper you're not doing yourself a favor and I think a lot of brands that are seeing a rise in the e-commerce revenue through Amazon and the overall P&L.
[00:23:43] [SPEAKER_00]: Or the next couple of years will have to re evaluate okay how do we actually reduce our trade investment.
[00:23:49] [SPEAKER_00]: How do we ensure that we are becoming more sustainable in the way that we pass on discounts to our retail partners that may actually not retail partners anymore on Amazon but potentially we're finding here our own competition because they are just passing this discount onto the end shopper at our own brand image and brand reputation.
[00:24:08] [SPEAKER_00]: And I think this is really where it goes above and beyond defensive selling strategies such as the ones that we've discussed but also really having honest conversations internally to understand okay what is the product flow which kind of.
[00:24:22] [SPEAKER_00]: Retail us or retail partners upset our trade relationship with Amazon and then to effectively work with minimum advertising policies as well as selling policies to enforce the kind of card rails.
[00:24:35] [SPEAKER_00]: As a brand and to ensure that you're not diluting your brand from a pricing perspective that then effectively lowers your bottom line outlook and thereby increases the pressure on Amazon's net ppm.
[00:24:47] [SPEAKER_01]: And it speaks to the fact that if you don't have an omnichannel strategy and you're just focusing on and looking at Amazon in a silo you're not going to be able to catch all of the issues that you might face when you're just putting all of your eggs in one basket.
[00:25:02] [SPEAKER_01]: So I think this is proof to any brand that's listening who doesn't have an omnichannel strategy that you have to just because of the way that Amazon is selling with their first matching and just the their focus on their profitability.
[00:25:14] [SPEAKER_01]: So I just want to call that out for our listeners because I think it's a great proof point to be able to expand your overarching strategy.
[00:25:24] [SPEAKER_01]: And one of the other updates that I think has created some noise in this space a bit is that Amazon is going to be creating a marketplace that similar to Timo which has disrupted a bit some of the kind of profit and how consumers are interacting and
[00:25:44] [SPEAKER_01]: shopping so how do you feel about this and what do you think this means for brands.
[00:25:53] [SPEAKER_00]: So I think overall it's an expected move by Amazon they have to respond to Asian based competition that has seen such a huge rise in market share and relevancy and a lot of the countries that we're operating in right they cannot simply ignore it.
[00:26:09] [SPEAKER_00]: It's quite interesting because if you're looking at the likes of Timo they are trying to kind of build more domestic warehouses now in Europe and as well as the US though they are trying to become more like Amazon whereas Amazon tries to kind of create a Timo like storefront that really aims to kind of cater to discount oriented shoppers.
[00:26:28] [SPEAKER_00]: And I think here the key place for Amazon to of course also segment shoppers between its main marketplace offer and offering and the storefront that will kind of mimic the Timo like store experience.
[00:26:41] [SPEAKER_00]: So I don't think that most brands especially in CPG categories will be affected by it.
[00:26:47] [SPEAKER_00]: We will see some probably more affordable beauty and HPC brands.
[00:26:51] [SPEAKER_00]: Loading this discount store, but I think if you are having a lot of brand equity and you're utilizing that not only offline but also on Amazon to all of the available.
[00:27:32] [SPEAKER_00]: I would say shoppers that will certainly purchase that.
[00:27:37] [SPEAKER_00]: Now will it kind of really eat away your sales and margins from your key kind of marketplace offering with Amazon?
[00:27:46] [SPEAKER_00]: That is I think the key question that we do not have the answer yet for because we don't know how Amazon will support brands in the discount storefront to advertise their products.
[00:27:57] [SPEAKER_00]: And as long as Amazon is keeping almost like a Chinese wall as we call it between its marketplace offering as well as the Timo like storefront I think the impact will be moderate.
[00:28:08] [SPEAKER_00]: However, from a monetization point of view it will make certainly sense for Amazon to offer brands the opportunity to also then like they are advertising and media placements on those PDPs of established brands.
[00:28:20] [SPEAKER_00]: And I think this is where it becomes much more interesting because if Amazon opens those floodgates well then of course you are.
[00:28:28] [SPEAKER_00]: You are.
[00:28:28] [SPEAKER_00]: Pacing a question as a customer do you want to buy the branded product or the 90% discounted non branded equivalent that may serve the same purpose right I mean think about certain computer cables like USB C cables do you need to spend 10 dollars on it and how do you kind of communicate that to an end shopper that this is better than the non branded equivalent.
[00:28:49] [SPEAKER_00]: That is sold for less than a dollar for example. So I think the messaging of brands will have to evolve and also the proctubility strategies when it comes to NPD selection.
[00:29:00] [SPEAKER_00]: It offers new opportunities and I think every brand has to evaluate for themselves whether they see that as a threat or whether they are utilizing this opportunity to potentially also launching a separated discount portfolio which can cater to different shopper segments.
[00:29:17] [SPEAKER_01]: I think the interesting piece about team who and potentially this new marketplaces on team who you might have a lower cost but it might take you 14 days to get it so.
[00:29:27] [SPEAKER_01]: Consumers are weighing the price to time ratio so I'm wondering will Amazon close the gap in terms of how fast it is that you're going to get the product and have the cheaper price and how will then that impact consumers that we're going to team versus Amazon it.
[00:29:45] [SPEAKER_01]: And I'm just curious what that dynamic is would love your thoughts on that.
[00:29:50] [SPEAKER_00]: Yeah, I think look nobody will be able to answer this question other than Amazon themselves when we're looking at the actions of Andy Jesse we are certainly seeing that.
[00:30:00] [SPEAKER_00]: I think speed domestically is prioritized we also seeing that vendors across direct import supply chain models vulnerable to all of the kind of conflicts that we've seen in the Red Sea for example over the last few months and years almost now.
[00:30:16] [SPEAKER_00]: So of course, I mean Amazon is not invincible and they will have to kind of operate in the real world.
[00:30:23] [SPEAKER_00]: But I don't think it's necessarily the ambition to become faster than a team.
[00:30:27] [SPEAKER_00]: I think it's primarily a defensive selling strategy of Amazon themselves so that they are not losing these shoppers to other platforms and they need a competing offer and I think once Amazon is opening this store towards the end of the fall I believe of 24 we should know more.
[00:30:44] [SPEAKER_00]: And we're pointing out that this store will also be available to US customers first and then potentially later to other markets such as in the European Union.
[00:30:53] [SPEAKER_00]: And I think this will also tell us a lot about how serious is Amazon about the expansion plan of a discount or like storefront because we do not yet even know okay in which countries will Amazon launch it or if it's just US only for now.
[00:31:06] [SPEAKER_00]: But as we know if you're looking at the previous patterns of the area from Amazon typically when something works in one country that fairly quick to then expand it elsewhere as long as legal and other regulations do not come in their way.
[00:31:24] [SPEAKER_02]: Martin, when you think about.
[00:31:28] [SPEAKER_02]: So, Amazon clearly you know we we talk about it's often enough on the program about you know money being no longer free et cetera et cetera and so profitability being the driver.
[00:31:41] [SPEAKER_02]: And now with with the introduction of.
[00:31:45] [SPEAKER_02]: This offering and if it is prime eligible something it just seems like.
[00:31:50] [SPEAKER_02]: Like you say it's a defensive strategy but it.
[00:31:53] [SPEAKER_02]: We won't know whether or not they're just sort of all right we'll put something up here just so that we can capture and sort of keep some of it but but in some ways it's it's interesting because it's the everything store but now it's sort of.
[00:32:10] [SPEAKER_02]: There whatever quality.
[00:32:14] [SPEAKER_02]: Whatever the sense of quality is that comes with the Amazon brand and I'd love your thoughts on you know how strong that is as part of Amazon there sort of.
[00:32:24] [SPEAKER_02]: Promise to their customers does that change in this environment where you know I know recently my husband bought some stuff for the first time off with team who and it came and wow it's not.
[00:32:37] [SPEAKER_02]: It's not the picture say it's not the quality that I mean I suppose when you're paying that kind of price you're sort of kind of putting yourself out there but I'm just wondering about the fit of.
[00:32:51] [SPEAKER_02]: Of this approach with you know with the Amazon brand do you have thoughts about that.
[00:32:57] [SPEAKER_00]: For sure I think what we're going to see is that Amazon will put much more emphasis on products safety and compliance and also that ingredients and a lot of the products are probably more accurately reported than what you would see on.
[00:33:09] [SPEAKER_00]: And of course like she nor team, which are of course pretty much extension focused and not necessarily concerned about a lot of regulations and safety.
[00:33:17] [SPEAKER_00]: I mean in fact they're trying to exploit all of the loopholes that exist right so I think it will eventually come down to mixture of.
[00:33:26] [SPEAKER_00]: And so we're going to have some more recommendations from governments and anti trust.
[00:33:29] [SPEAKER_00]: Regulators as well as of course also Amazon's involvement in past lawsuits where they are trying to now paint a picture not only to end shoppers but also to regulators that they're doing it's a little bit better than their Asian based competition.
[00:33:42] [SPEAKER_00]: And a lot of regulations in the US as well as in the U of course require retailers to ensure and marketplaces as such to.
[00:33:51] [SPEAKER_00]: Yeah almost guaranteed the kind of safety of products and I think this is where Amazon will put much more emphasis on so I would not be surprised if you see a much smaller.
[00:34:02] [SPEAKER_00]: As saltment in the beginning on which Amazon is then expanding over time, which is also why Amazon has announced I think this news about a discount like storefront very much in advance.
[00:34:16] [SPEAKER_00]: And it wasn't really ready to be launched to end shoppers simply to kind of please shareholders and to ensure that they can get the customer experience right because as you rightfully say if you are.
[00:34:26] [SPEAKER_00]: Messing up the customer trust that you have built over the last 20 or so years I mean this is gone in a matter of seconds and could harm Amazon's established vendor as well as sell our marketplace business significantly so.
[00:34:38] [SPEAKER_00]: This is very likely something that Jesse as well as this leadership team are trying to avoid but they will also find different ways to cater to the customer experience so I wouldn't be surprised if they're able to kind of.
[00:34:51] [SPEAKER_00]: I've similar to what they do in the established marketplace business discount events such as a prime day or so black Friday and cyber Monday specifically cater to more price sensitive shoppers and trying to differentiate themselves to this election that they're offering as well as this safety aspects that they can kind of combine it with.
[00:35:12] [SPEAKER_02]: Well, as always with Amazon it won't be dull.
[00:35:16] [SPEAKER_02]: And we'll always be keeping our eye on really the you know the e-commerce leader around the globe so more to come Martin thank you and into your partners that's straddably for putting this survey and I believe.
[00:35:31] [SPEAKER_02]: On the partner section of the DSI website will our members and others can access a copy of that report am I saying that correctly.
[00:35:41] [SPEAKER_01]: You are Peter go to the partner section of digital stuff institute dot org and you can be the results.
[00:35:47] [SPEAKER_02]: Fantastic Martin again so grateful for you coming and sharing this depth of information and just all of the moves that Amazon's making to try and get their profitability up and that how vendors can respond super valuable.
[00:36:05] [SPEAKER_00]: Thank you so much for your time and thanks for having me back really looking forward to the next time as well.
[00:36:10] [SPEAKER_02]: Thanks again to Martin for all the latest insights on an Amazon defensive strategy.
[00:36:14] [SPEAKER_02]: Head to our partner resources site at digitalshelvinstu.org for their report and become a member while you're there.
[00:36:21] [SPEAKER_02]: Thanks for being part of our community.