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What Amazon’s Earnings Foreshadow for the Ecommerce Landscape | DSI

“Competition is good for innovation. Amazon’s had a good spot for so long. They’re amazing executors. They are really great at innovation, too. The pressure of the Instacarts and the Walmarts is going to be good for consumers and it’ll be good for these retailers to innovate. So, we will see and the results will come in.”
— Melissa Burdick, Co-Founder and President, Pacvue

For at least the last decade, Amazon has sat on the ecommerce throne. 

Experts widely watch the company’s quarterly earnings reports not only to gain insight into Amazon’s short- and long-term strategic plans, but to read the tea leaves for signs about where the industry is headed.  

Melissa Burdick, co-founder and president of advertising platform provider Pacvue, spent 10 years at Amazon in a variety of online advertising roles. There’s likely no one better to talk about Amazon’s earnings and what ad growth and increased competition might mean for business with the ecommerce giant in 2021. 

Burdick shared her insights on all things Amazon during a recent episode of the Unpacking the Digital Shelf podcast, “Deep Dive: Amazon Earnings and Takeaways.” 

Here’s what the Amazon expert had to say. 

An Earth-Shattering Q4

To say Amazon had a great fourth quarter would be an understatement, notes CNBC.

Amazon had it’s best quarter of all-time from a revenue standpoint, with nearly $126 billion in sales. Burdick says the company’s advertising growth also surged, increasing more than 60%.

“Their advertising business just continues to accelerate,” Burdick says.

Though Amazon’s hold on the market is expected to continue, Burdick says she sees some weaknesses and increasing competition coming. They could pose more challenges to the ecommerce giant than it’s ever faced in the past.

Amazon’s MOAT — and Challenges

Though the pandemic largely fueled Amazon’s growth in 2020, great execution will continue to be the company’s overarching competitive advantage, Burdick says.

Amazon is one of the best places for consumers to discover new brands, giving brands a prime opportunity to make a good first impression and build lasting customer relationships. The company also continues to benefit from robust data operations and customers’ never-ending demand for convenience and fast service.

However, even with all these competitive advantages, the retail landscape is changing. Competitors like Instacart and self-serve platforms are right on Amazon’s heels.

“The competition looks like it’s going to get a lot fiercer for them, and there’s nothing they can do about it. They don’t have an exalted position in the marketplace that makes them impossible to compete with on some level. Their moat is great execution as opposed to something that’s like Google’s kind of monopoly.”
— Melissa Burdick, Co-Founder and President, Pacvue

The New Competitive Retail Landscape 

In 2020, many advertisers shifted their spending from TV to digital to capture the pandemic-related surge in ecommerce. 

Amazon benefited disproportionately from this shift, but so did Instacart, Walmart and other nascent retailers and self-service ad platforms

Many of these platforms may grow momentum as consumer packaged goods (CPG) advertisers craft a more targeted online advertising strategy based on their learnings from 2020. 

Big CPGs might spend their ad dollars with these programs first in 2021 because there’s less competition, it’s early, and the volumes are better compared to what they’d get on Amazon. 

Burdick says Instacart is a fierce competitor to Amazon in the grocery space. 

“When I look at the performance on Amazon versus Instacart, Amazon is much more mature but the CPCs [costs-per-click] are higher. So, Instacart has this first-mover advantage where the performance is really good and CPCs are low. We’re seeing people really lean into Instacart and are having a lot of excitement there.”

Burdick gave the example of the alcohol industry, which deals with really strict rules around advertising. They can’t advertise on Amazon or Walmart, but they can on Instacart in some regions. This gives these brands an opportunity to reach more consumers at a lower cost than they could on Amazon.

“Instacart, they’ve got really great opportunities, and brands are going to have to be making these decisions and trade-offs as they move their dollars and look at retail media.
— Melissa Burdick, Co-Founder and President, Pacvue

A Rising Aggregator Market 

A booming aggregator market led by companies like Perch and Thrasio also could pose a potential challenge to Amazon.

“It’s a $3 billion marketplace that popped up overnight. To me, they’re kind of the new resellers,” Burdick says about aggregators. 

These companies are largely focused on growing Fulfilled by Amazon (FBA) businesses and increasing their profit margins. However, Burdick says aggregators are consolidating Amazon’s resellers and creating what some experts have likened to a new kind of Procter & Gamble. 

Amazon does have a unique hold in this emerging market because, without this platform, these aggregators likely wouldn’t exist. However, aggregators may expand their footprint beyond Amazon — as Perch’s CEO recently suggested on an episode of Retailgeek — and try to grow these brands by taking them into brick-and-mortar retail, which might also boost the profile of retailer ad platforms like Walmart. 

The Threat from D2C 

Direct-to-consumer (D2C) ecommerce platforms like Shopify are also a threat to Amazon. 

Amazon, which hasn’t had as much success creating its own D2C brands, is clearly aware of this threat — which is likely why the company has removed the name and address of FBA sellers. 

Burdick says Amazon has a tight grip on the data on its platform, but “data is so critical to sellers that you [Amazon] might push them further into that Shopify D2C-kind-of- framework.”

Though consumers don’t really go to Amazon to interact directly with brands, a growing D2C market may force Amazon to offer brands richer experiences on its site to capture those higher-margin dollars from loyal brand consumers. 

The inherent risk for Amazon is whether more brands will forgo the site for their own D2C channels or other marketplaces. If enough major brands opt out of Amazon, then Amazon will become less of an “everything ecommerce destination” for consumers. However, the likelihood of this happening remains small. 

Still, Burdick says the ecommerce landscape has become more competitive — and much more interesting. 

“Competition is good for innovation. Amazon’s had a good spot for so long. They’re amazing executors. They are really great at innovation, too,” Burdick says. “The pressure of the Instacarts and the Walmarts is going to be good for consumers and it’ll be good for these retailers to innovate. So, we will see and the results will come in.”

Listen to the full podcast to learn more about the changing retail market and Amazon’s fierce competition. 



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