Expert Opinion | The Future of Amazon – How the Marketplace Will Evolve

Amazon has become indispensable in today’s world. A large portion of consumers shop on the online platform and even use it as a search engine to get an overview of offers and prices.

The company has evolved continuously over the past few years and reshaped the playing field for online sellers. Not long ago, many advertising opportunities were only available to vendors, but now they are accessible to all sellers – no wonder given the revenue they generate for the online giant.

But how will all of this continue to evolve? Where is it headed? Will there be different and new tools, and will the development progress at the same pace?

We consulted Amazon experts and tried to take a look into the future of Amazon, FBA, and trends together.

FBA Trends

How do you see the development of Fulfillment by Amazon (FBA) in the coming years?

Igor Branopolski: FBA is one of the many services offered by Amazon and is part of Amazon Prime for buyers. Certainly, some processes will be improved thanks to technological advancements and the continued growth of Amazon Logistics, allowing the online giant to operate even more effectively. Effectiveness and speed will be prioritized, just as in previous years. Additionally, there is Amazon’s promise to achieve carbon neutrality by 2040. We will likely see new innovative solutions, as well as pitfalls, such as the recent AmaZen boxes for warehouse employees. However, traditional transport providers like DHL, DPD, Hermes, etc., need to catch up in logistics today to keep pace with Amazon.

Last year, at the beginning of the pandemic, there were shortages and delivery restrictions with FBA. Suppliers of goods that are not considered daily necessities were no longer allowed to send items to the fulfillment centers. Will FBA change, and how can sellers protect themselves from similar scenarios in the future?

Igor Branopolski: At this point, Amazon will continue to prioritize its own items or urgent goods in the event of a pandemic or similar disasters, which is absolutely logical. Many sellers switched to their own delivery of goods at the beginning of the pandemic. Others fully utilized the capacities of Amazon’s warehouses as long as the inventory maximum allowed it. That would just be a tip on the side.

In general, many sellers already have their own warehouses or use other fulfillment options. Relying solely on Amazon presents a fundamental problem. Take the Christmas season as an example: even self-shipping can be better for the Buy Box because the enormous order volumes in the few weeks leading up to Christmas can overwhelm the Amazon fulfillment centers and slow down delivery.

Ronny Marx: FBA will change to some extent. However, Amazon will continue to be an extremely important channel. It is crucial for sellers to remain deliverable.

A very important aspect is the concept of a one-stop shop. For example, if I, as a German seller, sell to other European countries, and there is a significantly lower delivery threshold, I become liable for taxes in those countries once I exceed that threshold. For such a scenario, I also need my own organization or tax advisor to provide guidance for my business in this regard.

Events like COVID or major incidents such as a stuck tanker in the Suez Canal cannot be predicted. However, this highlights the necessity for flexibility in the flow of goods. I need to structure my business in such a way that unforeseen events do not completely paralyze the flow of goods.

Amazon Advertising

How will Amazon Advertising evolve? What is your forecast?

Otto Kelm: Amazon is introducing changes at a pace that no one can keep up with. Even tools and agencies are hardly able to operate comprehensively. The focus is on a few simple approaches that work best. While specific uses are possible, they are more time-consuming and significantly more complex to use. Amazon needs to recognize this and simplify it.

Thinking about having your own Amazon DSP access today without mastering the basics is difficult and not advisable. The forecast is therefore that Amazon needs to slow down the development. Sellers and users must continue to educate themselves – otherwise, there could be separate developments that are not productive.

Ronny Marx: Amazon Advertising has always been a very dynamic area. This dynamism has accelerated in the last year, especially in recent months. A major driver of this development is the Sponsored Display Ads. These are similar to the former Private Display Ads but are significantly more diverse in terms of options.

Costs in the Search Display area will also rise due to increased competition. This means that sellers need to define their goals more clearly so that the invested budget is worthwhile: “What do I want to achieve, and over what timeframe?”

How will the DSP, or Demand-Side Platform, evolve? Will it also be worthwhile for smaller companies?

Ronny Marx: Amazon DSP – in the realm of programmatic advertising – is a relatively new discipline in the self-service area. While it has existed for quite some time in the managed service sector, Amazon is largely discontinuing this area.

So there will no longer be significant campaigns managed by Amazon; instead, everything will run through service partners. I know this for certain because we are one of four premium service partners for Amazon in Germany regarding the DSP. This means we engage with Amazon at a very high level.

One of the PPC options is Sponsored Display Ads. This is a lite version of Amazon DSP, as the seller can run their ads based on clicks, i.e., CPC. It involves a programmatic approach, meaning that as a seller, I target users based on their characteristics that they bring to Amazon, their browsing and purchasing behavior, or because they fall into certain segments.

The size of the company is less critical with Amazon DSP; it operates on a CPM basis, meaning Cost-per-Mille – I am charged every time my ad is shown 1,000 times, regardless of whether a purchase or click occurred. This naturally requires a larger budget. The reason for this is simple: the algorithm needs a lot of data initially to see how users respond in various ways. Therefore, one should be prepared to spend around €5,000-6,000 per month for a campaign. However, it is generally more advisable to budget €10,000-20,000 per month. Only then does it make sense to gradually enter this area.

What can you do with it? You can run video ads, ads on Twitch, on Fire TV sticks or Fire TV, or even lock screens on Kindle. There is a lot that can be done, but you need a substantial budget to manage it all. However, in general, there will still be a lot of development in this area.

Especially due to COVID, Amazon has grown significantly. The number of sellers has also increased. What new trends and opportunities can help one stand out from the crowd?

Otto Kelm: As always, offer good products targeted at a specific audience at fair prices with real added value. Additionally, it’s important not to stand out on Amazon, but to take a step back to where needs are awakened, where customers browse and search for ideas and solutions – and that is not Amazon!

The relevance of keywords and Amazon SEO has been significantly emphasized in recent years. How will this evolve? What relevance will keywords and Amazon SEO have in the future?

Otto Kelm: There has been neither excessive emphasis nor has anything changed or will change. Only certain areas have received less or different weighting. For example, advertised items are no longer pushed as highly in the search terms of organic listings as they were years ago.

Otherwise, I recommend analyzing customer language using the respective tools or Amazon Brand Analytics. This will result in significantly more output.

Advertising outside of Amazon

What trends are already emerging in the field of advertising?

Otto Kelm: Amazon DSP and the newly introduced Amazon audiences for Sponsored Display Ads show what is possible. Amazon provides its own data about customers in a structured and anonymized way for advertising and also displays it outside of Amazon. This is a trend that has been gaining momentum for about three years and will continue to grow.

The trend of advertising outside of Amazon, such as on social media and Google Ads, is becoming increasingly popular. Which channels are the most important? Will this last in the long term? What new opportunities will develop?

Otto Kelm: On one hand, it is important to utilize Amazon’s capabilities; on the other hand, there is a reason why we talk about the Pinterest or TikTok readiness of brands. You need to be where your target audience is gathering information or exchanging ideas to attract or retain customers. Whether through advertising or other content formats that the potential audience readily accepts. Large brands have been doing this through radio, TV, print, etc., for years. It is becoming increasingly interesting for smaller brands as well, as they can now target customers much more granularly.

Ronny Marx: Social platforms are very popular. Pinterest has evolved significantly. Traditional channels like Facebook and Instagram are still very effective. TikTok is one of the shining stars and will increasingly come into focus regarding professional campaigns, similar to what we know from Facebook and Instagram.

However, it is always about reaching the right target audience. TikTok has a very young audience and is not a shopping channel, so it is more about product awareness rather than direct sales in the sense of investing 3,000 euros and turning it into 20,000 euros by the end of the month. That doesn’t work.

The primary focus, before concentrating on anything else, should still remain on Amazon, keyword Retail Readiness. Set up proper campaigns and ensure that this channel is fully utilized. If that works and I have enough resources, I will then approach the next channel in a target audience-appropriate manner. Until I have that, the groundwork is not done, and I should not focus on social media but rather on my sales on Amazon.

Will live selling become established/increase on Amazon?

Otto Kelm: It’s hard to say. In Asian markets, live selling is much more deeply integrated into the shopping experience, while in Europe and the USA, the concept of “going shopping” has been shaped over decades. Amazon has been using this feature in the USA for years – whether and when it will truly provide added value remains to be seen.

Ronny Marx: I believe it is a nice gimmick, as it is something different, but it will remain a niche phenomenon. I want to buy my products when it suits me. Live selling means that I have a pre-set channel at a pre-set time, and I need to have time for that. Then it’s called live. However, I could also say on-demand video selling, so I can watch the “live video” when I am available. But Amazon and e-commerce have taught us that products are sold when users are ready to buy them, not when a pre-set time window dictates that.

What is Amazon Attribution and who should use it?

Ronny Marx: Amazon Attribution is about advertising, promotional activities, and marketing measures outside of Amazon. Sellers can see how these activities have impacted their sales and impressions, meaning the visibility of their products on Amazon. For example, it allows sellers to trace which external Amazon actions led customers to add their products to the cart.

The prerequisite for this is that you have your own brand and have registered for the Amazon Brand Registry. I highly recommend this to everyone, as without it, you are truly limited in your options, especially regarding advertising opportunities.

As a rule of thumb, it can be said: more data is always a sensible thing, and you should utilize these opportunities as much as possible.

Amazon Strategy

In recent years, more and more opportunities have been made available to sellers that were originally only accessible to vendors. Will this continue at this pace? What other opportunities could there be?

Ronny Marx: The alignment of Amazon’s partnership models for sellers and vendors will definitely continue. It is still difficult to say to what extent and in what form. For example, there is speculation that Vendor Central will no longer exist as a separate model but will be integrated as an add-on to Seller Central.

In general, I believe that the vendor model will only be worthwhile for the very large players, while the seller model will continue to grow. However, at this point, it remains a look into a crystal ball. But yes, I can well imagine that sellers will continue to be a priority for Amazon. Exciting times!

The trend is increasingly moving towards multichannel selling. What is your view on this? Is it still possible to be successful if you only sell on Amazon?

Igor Branopolski: You can sell exclusively on Amazon and even be very successful, but it can also be very risky and is especially outdated. Nowadays, sellers have many options to automate the largest areas of their business. With inventory management systems, you can sell on all marketplaces with just a few clicks, so why would you forgo that and risk something going wrong on Amazon? Additionally, if you don’t engage in multichannel selling, you miss out on a large target audience that, out of spite, does not shop on Amazon.

Otto Kelm: Unfortunately, this has been completely misimplemented; instead of multichannel, everything was simply listed everywhere, and they just waited to see what would happen. Very few set goals for each platform and adapted product areas to the respective target audiences. The topic has been simplified by interface tools to the point that people no longer think critically, but rather “outsmart” the respective markets blindly – mostly without relevant success – as long as everything is everywhere.

Of course, one can be successful solely with Amazon – but as mentioned earlier, you need to reach customers “before” they get to Amazon.

Ronny Marx: Sure, you can do that. There is often talk of having a second pillar and how important it is. It sounds nice in theory, but it often doesn’t work in practice. What is currently skyrocketing – at least in terms of user numbers – is Shopify and other cloud shopping solutions. I can imagine that the themes of shopping and customization for certain products that need to be better explained can definitely work. However, the majority will still run through Amazon. You will just need to invest more money and pay close attention to which area you enter.

In recent years, customers have increasingly moved away from brand awareness. Does this favor private labels, or is commercial goods still attractive?

Igor Branopolski: Commercial goods will never die out and will always remain attractive to many. Brands, whether small or large, have their unique qualities and will continue to play a significant role: they set trends and create demand through influencers or sophisticated marketing campaigns, meet certain quality standards, or reach target audiences that have been overlooked, even outside of Amazon & Co.

I wouldn’t even frame the question that way: Private label or commercial goods? Every seller makes their own decision – both have their advantages and disadvantages and cater to their target audiences. Customers no longer see things in black and white either. While they often search for brands rather than items, they don’t just buy a gaming console but specifically look for a PlayStation 5. At the same time, when searching for a showerhead, they may opt for a cheap product made in China rather than a hansgrohe at double the price.

Otto Kelm: I cannot understand that at all. Brands are searched for on Amazon. Brands are purchased. We do not see a decline in brands. We only see that smaller target audiences are simply unprofitable for large brands. This allows small providers to achieve sales and profits in their niche that are acceptable for them – but ultimately not scalable. Overall, this is good – every pot finds its lid and vice versa.

Ronny Marx: The topic of reselling is not dead, but it is dying out. It works in a few cases, for example, when one has exclusive sales rights in certain countries, or when talking about huge margins with over 1,000 sales a day, where there is still enough left over to build a business from it.

Private label can work if you put a lot of thought into it. Simply sourcing something from China, slapping your logo on it, and hoping for big sales because the niche is currently not saturated can work, but it is very temporary. The manufacturers in China also think, “Why should I let them sell my stuff? I’ll just put my own logo on it, send out my review armies, and then the product will shoot up.” So, you need to think carefully and specialize in products that are “unique.” It sounds buzzword-y, but it is indeed the case.

Amazon businesses are being acquired more and more frequently. How will this evolve, and what impact will it have on sellers, prices, etc.?

Igor Branopolski: The acquisition of entire seller accounts is partly due to the abundance of free money in the market and the fact that money is currently very cheap – low interest rates and a lot of capital that is practically crying out to be invested. This trend is also known in the real estate sector. However, the proportion of accounts available for acquisition on Amazon is not that high. This has always existed and will continue for the time being. Until the prices are so high that acquiring them is no longer profitable, while competition on Amazon continues to grow.

Otto Kelm: You will quickly see this in 2022. You can then track live whether these mysterious super-good acquirers can do everything as well as they claim or if the investment bubble bursts. The impact will be positive for the skills shortage in the Amazon world. More workers may switch from seller A to seller B, etc. I see only a few promising approaches. Simply acquiring businesses will not lead to growth – you need data and expertise, not just five large, well-performing brands.

Which tools are really needed to sell successfully on Amazon in the long term, as larger areas of e-commerce can be automated through tools?

Igor Branopolski: Tools are always a good investment; manual adjustments are a thing of the past. The minimum requirements are an inventory management system, a repricer, and a PPC campaign optimizer. When the solutions are intelligent and used sensibly, they take on more and more work. Sensibly means that the user engages with the tools and optimizes them for their own business.

Taking the SELLERLOGIC repricer as an example, the most commonly used strategy is the Buy Box. If the seller sets the min and max prices incorrectly when configuring the repricer, they cannot fully utilize their margin. The seller either sells too little because they do not win the Buy Box with their price, or they sell too cheaply because they are in the Buy Box with the wrong price. As mentioned, the seller must engage with their tools to harness their full potential. That’s why we offer our customers comprehensive onboarding, and our Customer Success Management team is always available for questions.

Otto Kelm: Every area can be sourced through tools, agencies, or services. Each area has its validity. Ultimately, it depends on the individual capabilities of each seller what they can do and what they need. The market is well penetrated, but it is far from being at its end. Currently, too few tools, agencies, or service providers are being acquired or merged. Logistics, inventory management, price control, or tools for handling discrepancies or managing marketplace data are absolute basics that one should have.

What do you think the Amazon business of the future will look like?

Igor Branopolski: Selling on Amazon is generally becoming increasingly difficult as more hurdles arise: low-quality products are being removed, as consumer satisfaction becomes even more important. The EAN connection has long been a requirement for selling products. It will be interesting when the CE safety directive is implemented. CE has been around for a long time, but now more checks and inquiries will be made by Amazon. It is not unlikely that Amazon will collaborate with additional providers like TÜV Süd and similar organizations in the future.

It is highly likely that many Chinese sellers will have to leave the marketplace due to the lack of CE compliance for many items. This creates significantly more potential for online retailers at the European level, who have always been legally required to obtain CE certification. Now, platforms are also being held accountable to ensure this compliance. In any case, the customer will be even more in focus, which will not only impact quality but also lead to even more service, faster delivery, and greater customer friendliness.

Otto Kelm: I cannot answer that. There are too many uncertainties regarding laws and economic factors to consider. A ship is stuck, and the world is trembling! However, I see the direct path of manufacturers as brands to the customer as the future, leading to the elimination of many intermediaries or resellers.

Ronny Marx: Private label, yes, but designed differently. We will likely see a small dip in online retail as people are now looking forward to offline shopping again. This will normalize by the end of the year. However, e-commerce will remain significantly boosted by COVID. Many people have come to know and appreciate the advantages of Amazon during the pandemic. The question to ask is: “How do I respond to such a trend?”

The work environment is also changing sustainably towards remote work. This opens up many use cases for private label sellers, whether through wrist supports, specific lighting, cable management products, or microphones. One must remain creative and always be prepared for the fact that products that are not “unique” and sell successfully will eventually be overwhelmed by Chinese competitors. This means there is always only a limited time window to place a product, maximize its potential, and then move on. Alternatively, I might get lucky and be acquired by one of the large M&A groups, make a quick profit, and then look for new opportunities with that money. Otherwise, keep an eye out for products that are used frequently at home. I believe travel items will continue to decline. However, home office products and, of course, items used at home are the future trend that will continue.

Marketplace Pulse reports higher requirements for “Seller Fulfilled Prime” for the US market. Only shipping methods that allow for Saturday processing are to be used. Is something similar planned for Germany? What impact will the change in the US have on other marketplaces?

Igor Branopolski: In Seller Central, there is an option to deliver on Saturdays and Sundays, but it is not mandatory. The difficulty in Germany is that this option simply does not exist – no service provider delivers seven days a week. There have always been discussions about this, but it remains the case, and it is very unlikely that anything will change in the near future. Therefore, I do not see any impact of the US circumstances on the German market.

Products

During the Corona pandemic, the demand for business suits has significantly decreased, while the demand for homewear has risen sharply. What product trends do you see for the coming years?

Igor Branopolski: During the Corona pandemic, trends like masks and hand sanitizers faded very quickly. It is very difficult to predict such things over a longer period. One must continuously observe trends and adjust their product range accordingly. However, what we will feel very clearly in the coming months is the resource scarcity due to the container ship blockage in the Suez Canal. This will likely lead to a global increase in raw material and thus product prices.

Otto Kelm: It can be like the hula hoop from the last 6 months or any other item that TikTokers or influencers promote, or a new trend color. That’s the beauty of such things – no one knows them in advance, and those who jump on quickly will be successful in the short term – then they need to have the next ace up their sleeve or constantly shop at DHDL.

Ronny Marx: You never know what will happen in the next five years. I see good years ahead for consumers, as prices will decrease in many areas. Many businesses that are now going bankrupt still have goods in stock, in warehouses, or in containers. Once the current situation normalizes, some markets will be flooded with products from bankrupt sellers who say: There are thousands of microphones, headphones, etc., from sellers who could not sell them. They will then throw all their products onto the market. When that happens, prices in certain areas will dramatically drop, and then the second wave of problems begins. For example, for sellers who are doing well now but will no longer be able to maintain good margins because the market is flooded with items from bankrupt competitors. This may also become an interesting – in quotation marks – trend.

Can you provide a final assessment: What is your prediction for the next few years? Which trends will establish themselves in the long term, or do you see trends on the horizon that we haven’t even thought of yet?

Igor Branopolski: The market will continue to change just as it has in previous years. It’s about being highly flexible and not putting all your eggs in one basket. Anything that is rigid and not automated simply will not succeed. Therefore, only businesses that are highly automated, extremely customer-friendly, and always have their finger on the pulse will achieve long-term success and continue to grow.

Otto Kelm: Amazon and the sellers need to seek and find a partnership! Seller revenues have increased from 35% to over 65%. Amazon needs to move away from a customer-centric mindset and do more to cooperate with sellers!

Sellers need to let go of the idea that they are only selling products. Too many basics are neglected, whether it’s content, SEO, or advertising – there are opportunities being missed everywhere.

The trend of Amazon DSP will certainly see increasing usage. Additionally, Amazon B2B is still greatly underestimated. There is potential for even more growth with the right products.

Otherwise, Amazon, as already shown in the new app, will move more away from being a search engine and more towards browsing and inspiring. Additionally, Amazon needs to build a social network, ideally as a social media commerce network.

Ronny Marx: I need to remain flexible and keep my eyes open. For example, Alibaba has established a new foothold in Liège. Every year, 350 million packages are delivered there and distributed across Europe. That’s nearly a million packages per day. But there are also other multi-brand platforms, like ASOS from the UK or Cdiscount in France. Galaxus in Switzerland generates over a billion in revenue – just in Switzerland. These are all consolidated platforms, and this is a trend that will continue to prevail. Therefore, one should think carefully about whether to build an online shop and then perhaps create a marketplace, or the other way around. If something doesn’t work on the marketplace, why should it work with the online shop? Unless you are very specialized and have a precise target audience that you can promote and reach online. Then the next question is: How do I drive traffic there? On Amazon, you can do it with direct advertising; in your own shop, the right payment methods need to be offered, and so on. So, the principle is: First, do your homework on the marketplaces; marketplaces will remain and are not going away. And if all of that works, then it might be worthwhile to also go through the shop and engage in multi-channel selling.

Conclusion

Amazon will continue to evolve and keep its sellers on their toes. It is important for sellers to keep pace with these developments and build a business that is resilient yet flexible. They should not blindly chase every trend but rather question whether it is worthwhile for them and their business to jump on that bandwagon.

It is especially important to engage with customers and not lose sight of them amidst all the automation. However, this does not mean that you should not rely on automation. On the contrary: to build a long-term successful business, you should implement automations that support you. However, these tools need to operate dynamically and intelligently rather than being rigid and rule-based.

Image credits in the order of the images: © ra2 studio – stock.adobe.com