The Covid-19 Crisis and a recent move by Amazon have demonstrated once again the urgent need for brands relying on the Seattle tech-giant to re-think the way they engage with consumers. We’ve been saying for years that businesses relying on Amazon for online sales are akin to the Gingerbread Man, blissfully speeding forward on the snout of a wolf. And the company has once again given evidence that it is prepared to snuff out the profits and livelihoods of third parties operating in its eco-system without forewarning or negotiation. Let’s take a look at Amazon’s recent move, and some forward-looking brands that are looking to jump off the nose of this lupine predator and create blueprints for sustainable success.
The Commission Cut
Amazon suddenly announced last month that it would cut affiliate marketing commissions dramatically. What this means is that if you’re a media company who uses your site’s traffic to do marketing work for Amazon, the commissions you’ll now receive for generating sales have been essentially chopped in half. As reported by The Verge:
commission rates under the categories home improvement, furniture, lawn and garden, and pet products will see a commission rate of 8 percent per sale drop down to just 3 percent. For headphones, beauty products, and musical instruments, commission rates will go from 6 percent down to 3 percent. Many other categories — including grocery, sports, baby products, and outdoors and tools — are all dropping down to 3 or 1 percent, from 4 percent or higher.
This is a major blow to online content providers, who rely on these commissions to stay afloat. Many have spent years building the capacity to provide detailed product recommendations and reviews in order to access this revenue. And with Amazon and Wal-Mart moving to suspend digital marketing deals with leading online content providers, their message seems to be clear: in the current climate they no longer need to advertise, the “homebody economy” has left them overwhelmed with demand, and they’re willing to cut off revenue for thousands of businesses who’ve worked in partnership with them for years in order to maximize profits. The warning to any and all brands relying on Amazon for digital sales is chilling.
Brands That Are Taking Their Shot
If you can’t rely on Amazon to distribute your products for you anymore, what can you do? We’ve seen a few brands adopt an innovative approach that aims for direct engagement with the consumer as the pandemic rages on. In the UK, Heinz had taken a novel approach with their heinztohome service, which offers bundles of canned food, baby food, or sauces for home delivery within 2 days. They’re also offering free delivery to any front-line workers who find themselves in need of beans. With Amazon and most major supermarkets overwhelmed with orders for delivery during this difficult time, the move could keep some families fed, appropriately distanced from others, and grateful to the brand. Now is quite possibly the best time to get your customers accustomed to buying directly from you, allowing your brand to decrease your reliance on predatory platforms.
Retailers such as Morrisons and M&S have also hit on winning solutions for converting customers unable or unwilling to take a risky trip to the shops. Both are offering boxes of essential products for approximately 30 pounds which contain enough food to feed at least two people for a week. The fact that consumers can’t pick and choose items means that the retailers can pack and ship items more quickly, enabling them to offer next day delivery to the hungry, house-bound masses. And they have pledged to do their best to provide each consumer with bread, pasta, milk, meat, and, of course, a pack of toilet roll. The box allows retailers to manage their inventories, and generate loyalty by offering a lifeline to the elderly and at-risk.
Ready For The New Normal
The response from these brands and retailers lays out an excellent two-part blueprint for success in the current crisis and going forward. First, seek to be of service to your consumers, and do your best to earn their trust and goodwill. UK cafe and sandwich shop Pret A Manger received a flood of positive press when they announced their decision early on in the crisis to offer free hot drinks as well as 50% off on all other purchases for NHS workers. They followed that up with closing their restaurants before the government ordered them to do so in the interests of public safety, which earned further kudos, and even committed to leaving some locations nearby hospitals open so that hard-pressed health workers could grab a quick lunch or cup of coffee. Showing that your brand is willing to take steps for the greater good, even during trying times, is a recipe for success. Although profit margins are likely shrinking, you need to be aware that customers will remember whether you were doing your bit to keep society afloat during the pandemic.
The second part is probably even more essential. As transactions are being pushed online, and delivery services are gaining new converts daily, you need to find a way to ensure that you can get your product into the hands of consumers, without relying on Amazon or supermarket shelves. Whether that means investing in your own delivery program, partnering with a logistics innovator such as Ocado, or using add to basket technology that allows shoppers to choose their own method of delivery is up to you. But with Amazon poised to emerge from the Covid Crisis richer, more powerful, and more ruthless than ever, taking control of your distribution channels and sales platforms is the most important challenge for your brand.