Examining areas in which Amazon needs to innovate, as some rivals are beginning to outpace them.
Almost 27 years to the day after Amazon sold its first product, founder Jeff Bezos has now stepped down as the company’s CEO. But even under new boss Andy Jassy, the online retailer is likely to continue its e-commerce dominance. Yet despite all of its successes and Amazon’s reputation as the leading online retail platform for consumers, brand manufacturers and marketplace sellers, not all that glitters is gold for the retail giant. Hannes Detjen, founder and CEO of Remazing, analyses Amazon’s biggest weaknesses in his guest article for OMR.
As the head of an agency and provider of software for online marketplaces, I am often asked for my opinion on Amazon. Time and time again, the question comes up: “Given its growth and market dominance in online commerce, where are other sites actually better?” In fact, there is considerable room for improvement in some areas at the e-commerce giant. In this article, I analyze where the online retailer (leaving aside Amazon’s cloud and ad businesses) should step up its game. In order to take a comprehensive look at the chinks in Amazon’s armor, I spoke with various experts from our Remazing network. The result: an overview that I would like to present to Jeff Bezos’ successor as CEO as a “wish list” for Amazon’s further development.
Growth more via niche marketplaces
Let’s start by looking at the fashion sector. Even though Amazon is the largest fashion seller in the world purely in terms of figures, it’s fair to say this product category doesn’t really represent an area of focus for the company. Among other things, the presentation of fashion products and the consideration of seasonality could be optimized within the Amazon algorithm.
The Hamburg-based mail-order company Otto, for example, is showing how things can be done better. They are currently working on the transition towards being an online marketplace. As with the FBA model (Fulfilment by Amazon), customers can now be reached on another channel and have their own products sold. Flemming Kühl, founder of the backpack and bag brand Souleway is convinced by Otto’s approach. Souleway manufactures its products locally in Hamburg, from sustainable materials. The brand was among the first to tap into Otto as another channel to market. And for the record: Kühl sells more products via Otto than via Amazon.
Responsiveness and flexibility
It is not possible to compare Amazon and Otto directly, explains Kühl. The number of sellers on both platforms is extremely different. Nevertheless, there are some noticeable advantages to working with the German company. One point that strikes Kühl: “Opening and processing support requests is still a pain point for Amazon. Otto is trying hard in that regard and wants to score points with merchants by providing faster support.”
Likewise, the shopping experience on other platforms can be more pleasant for customers: Despite some strict rules, Amazon offers certain flexibility in how products can be listed, which is good for retailers, but makes for a sometimes bewildering shopping experience for the customer! Tidier product pages would be desirable!
Amazon has not yet made the same outward efforts with regard to the “social commerce” trend as its competitor Walmart, for example. The latter is already preparing itself in the U.S. for the next wave of online shopping thanks to its partnership with Tiktok andinitial tests of livestream shopping events. Likewise, “Amazon influencers on Tiktok are already earning substantial sums via affiliate marketing.
Amazon wants to transition from commercial to social
Amazon needs to revamp its approach here and kick on fast. According to Amazon expert Christian Kelm, VP Product at seller tool provider Amalyze, the internal programs in this area, such as Amazon Live, are already in place. Amazon is trying to raise the issue from the other side in order to maintain its own dominance: “Amazon is trying to move from commerce to social, rather than from social to commerce,” Kelm says.
This may be the logical step from the e-commerce giant’s point of view. However, greater emphasis on Amazon’s already obsessive focus on its own customers would be better here – they (still) prefer to find inspiration for purchases on Instagram, Facebook etc. Many customers still prefer to browse for purchase ideas on social media and then snap them up when they find a suitable offer.
The potential of Product Detail Pages
With Asian platforms, in addition to the ever-increasing expansion of livestreams, new directions are now being taken with Product Detail Pages (PDPs). “Overall, the PDPs are very long,” notes Chinese e-commerce expert Zhu. “But customers can find so many details about the products, all claims are described in detail, there are product stories with videos and significantly more pictures.” On Tmall, around 90 percent of all purchases are now made on mobile. On the smartphone, it sometimes takes a long time to scroll through the wealth of details and data provided, says Zhu. However, customers can usually make better-informed purchasing decisions this way.
Even if we can assume that Amazon is continuously optimizing its platform to ensure the highest possible levels of conversion, I would still like to express my own (personal) wish with regard to PDPs: Things could be simpler and clearer here. On the one hand, a high level of product information is good for customers, but on the other hand, the visual user experience should not suffer too much. Zalando can be cited as a positive example: The Berlin-based online fashion marketplace, just like Amazon, is generating record result after record result, but makes a much stronger impression with its tidy product presentation.
Amazon’s advertising options overwhelm some advertisers
Let’s move on to the area of advertising, specifically PPC (Pay per Click). In this area, Amazon has managed to set new standards including new metrics, from ROAS (Return on Advertising Spend) to search terms and conversion rate, as well as improved reports at all levels, whether category benchmark, impression share of the search term or budget distribution over the day. There are also new advertising formats such as sponsored display ads on target groups and after remarketing as well as video ads. You could argue that Amazon is now an advertiser’s dream come true!
Nevertheless, the constant new updates to the advertising area are increasingly difficult to keep up to date with. Every few months there are new definitions or new bid optimizations for Sponsored Display, where you have to decide to chase either clicks or sales. Christian Kelm of Amalyze says: “The air is getting thinner for everyone – even seasoned pros like me are losing track!”
For the first time, there are different attributions in one form of advertising; target groups are assigned according to the day of the sale for interest groups and the day of the click for remarketing. But sellers and vendors, for example, still have separate attribution models and there is no overview of how much is bought on mobile devices or on desktop. Similarly, Kelm says there’s little portrayed about brand halo effects or mixing with CPM-based advertising.
More support for merchants
“It feels like Amazon PPC users, and myself, are still at day zero, while Amazon itself has already reached day ten,” Kelm said. The distance between the advertising offers and possibilities and the manageable usability, controllability and the necessary understanding to leverage them has reached a level that can only be made up with time and knowledge, according to Kelm.
Amazon is on its way to becoming one of the largest global ad platforms – the advertising opportunities and data are there – but in Amazon’s day-to-day business there is often a lack of time and staff to make full use of this. Amazon would therefore do well not to abandon merchants and professionals who are focused on its own platform with all its advertising potential and instead offer more support where they can.
“Customers don’t belong to you”
Another area with potential for improvement is feature testing: Amazon will undoubtedly subject every change in the expansion of its platform to comprehensive A/B testing. Unfortunately, merchants in the vendor program and sellers are not currently offered this same opportunity. Although initial tests are underway in the USA, these only relate to A+ content, product titles and images. Other e-commerce platforms are much further ahead here. Shopify in particular offers its customers extensive options for A/B testing.
Amazon, on the other hand, gives the impression that the group is concerned with driving as large a wedge as possible between the merchants and their target group. “You don’t own the customer, so to speak,” Amazon expert Gassmann complains. “You are more or less just an agent for the sale of the product.” In fact, for Gassmann, Amazon’s contact with customers is becoming increasingly limited. Access, however, is an important prerequisite for a seller to know and ideally increase customer lifetime value, he said. After all, in the words of Gassmann, Amazon is one of the few retail marketplaces that allows any form of testing at all.
Amazon’s “classic” weak point
Once again, it’s worth taking a look at Asia to see the potential of how things could be improved: Expert Moonie Zhu once again cites Tmall as an example to indicate how a platform can meet the needs of its merchants: “Tmall can be highly customized to your target group and numerous things can be tested to increase conversion rates,” explains Zhu. Should Amazon be inspired by Tmall, the most useful features from our point of view would be: Performance measurement of images, videos, and product titles (as already tested in the USA), as well as for product descriptions (including bullet points), ads, and brand stores.
The “classic” weakness of the Seattle-based company is perhaps already apparent: Their unwillingness to share data. As is well known, Amazon does everything to make its customers happy. Unfortunately, it makes less of an effort when it comes to the merchants on their platform. A few weeks ago, a survey by the Online Retailers Association (OVH) caused a stir in the local e-commerce industry. Many of the marketplace merchants surveyed for the survey, who use Amazon as a sales platform via the FBA model (fulfillment by Amazon), criticized the lack of cooperation they have received from the company as a partner. The points of criticism are well known: Seller accounts blocked for incomprehensible reasons, inadequate support and lengthy waiting times – factors that can sometimes lead to a complete standstill of the business and thus to high financial losses.
Clear rules, no exceptions
Amazon is very aware of its market power and makes great use of it. The platform lays down strict rules for sellers. For example, certain words may not be used in product descriptions. Anyone who doesn’t play by the rules and tries to use these words, gets in trouble! Other online marketplaces may also be strict with their specifications, but one rarely hears of terms as restrictive as those of Amazon. In particular, Ambiguous account suspensions are a big, big problem for sellers on Amazon and placing a greater overall focus on resolving issues like this for sellers is a massive development area for Amazon.
Things don’t always run smoothly on the vendor side either: We only have to look at the well-known example of the partnership with Amazon and Nike. After a test pilot, the sportswear brand took all of its products off the platform at the end of 2019/a>, because Amazon had not fulfilled previously made agreements regarding the removal of counterfeit Nike products.
A lot of patience and several attempts
But few direct-to-consumer brands and merchants are in a position to turn away from the platform, as Nike did, if they don’t like its behavior. Many of those who are active as suppliers on the marketplace will therefore know from their own experience the other factors that can be frustrating when working with Amazon, many of which Felix Gassmann has already highlighted, and will simply have to put up with them.
There are quite frequent technical difficulties too, Gassman highlights: “The system is unfortunately relatively fragile due to the rapid growth of the platform,” says Gassmann. When it comes to technical support, there are often language barriers, depending on the national Amazon Marketplace, meaning that problems can usually only be solved with a lot of patience and only after several attempts. With half an eye on better-positioned competitors, Gassmann, therefore, appeals to Amazon to work on the stability and usability of its systems.
“Everyone knows what they’re getting into”
On the other hand, Gassmann sees a growing problem in the way Amazon places its own-brand products: “It’s virtually impossible for third parties to get certain ad placements or search rankings if Amazon is competing with its own product in a certain category.”
For these reasons, the expert believes the competition is better positioned when it comes to partnering. Ebay, for example, works much more collaboratively with merchants. However, as Gassmann has already outlined, many of these problems are well-documented. “Despite the weaknesses mentioned, merchants know what they’re getting into when they offer their products on Amazon.”
A retail first-world problem?
Despite the above criticisms, anyone who has been on such a triumphant march as Amazon for well over 25 years now can’t have done too much wrong! The company is not the epitome of global online retailing for nothing! As an “everything store,” Amazon cannot and does not necessarily have to see itself in direct competition with a vertical online marketplace such as About You. It is also understandable that with Amazon’s unparalleled growth, some developments may not be driven internally at the same speed as others.
Nevertheless, a look at the disciplines in which Amazon is not (yet!) top of the class, shows that there is certainly a lot of room for alternative platforms that have better understood what retailers need and customers want. If Amazon is giving them this head start, this may be for strategic reasons rather than resource issues. Could it be that the company that revolutionized online retailing is now taking its next giant strides forward in the background? One only has to look to Apple as an example of this: The tech giant has invented very little of what makes the company so successful today – but it has instead almost always optimized these features better than anyone else.
About the author:
Prior to founding Remazing in 2016, Hannes Detjen (LinkedIn), he got up close and personal with the (at the time not quite so massive) eCommerce giant. After spending four years with the Otto Group, he was a member of the Amazon team at company HQ in Seattle. During his time there, he explored the vast company ecosystem and spent a great deal of time making contacts. Through his full service agency Remazing Detjen provides strategic consulting on Amazon and other marketplaces. His company supports companies such as Beiersdorf and Henkel with campaign management and content optimization services. Furthermore, Hamburg-based Remazing has a proprietary monitoring tool, Remdash, which assists Amazon vendors and sellers.