Expert opinion | Amazon of the future – how the marketplace will develop
Amazon is now 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 further in recent years and has reshaped the playing field for online retailers. Not long ago, many advertising opportunities were only available to vendors; now they are accessible to all sellers – no wonder given the revenue they bring to the online giant.
But how will all this continue to develop? Where is the journey heading? Will there be other and new tools, and will the development continue 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 Fulfilment by Amazon (FBA) in the coming years?
Igor Branopolski: FBA is one of the many services of Amazon and is part of Amazon Prime for buyers. Certainly, some processes will be improved thanks to technological advancements and the continuous growth of Amazon Logistics, so that the online giant can operate even more effectively. Effectiveness and speed will therefore, as in previous years, be prioritized. In addition, there is Amazon’s promise to achieve CO2 neutrality by 2040. We will likely see new innovative solutions, as well as observe pitfalls, such as recently with the AmaZen boxes for warehouse employees. Those who need to catch up in terms of logistics today are traditional transport service providers like DHL, DPD, Hermes, etc., in order to keep pace with Amazon.
Last year, at the beginning of the pandemic, there were bottlenecks and delivery restrictions for FBA. Suppliers of goods that do not belong to everyday needs could no longer send items to the fulfillment centers. Will FBA change and how can merchants protect themselves in the future from similar scenarios?
Igor Branopolski: In this case, Amazon will continue to prioritize its own items or urgent goods in the event of a pandemic or similar disasters, which is absolutely logical. Already at the beginning of the pandemic, many merchants switched to their own delivery of goods. Others fully utilized the capacities of Amazon’s warehouses, as long as the maximum inventory allowed it. This would just be a side note.
In general, many sellers already have their own warehouses or use other fulfillment options. In fact, if one relies solely on Amazon, there is a fundamental problem. Take the Christmas season as an example: in that case, even self-shipping can be better for the Buy Box, as the huge volumes of orders in the few weeks before Christmas overload Amazon’s fulfillment centers and slow down deliveries.
Ronny Marx: FBA will change to some extent. But Amazon will remain an extremely important channel. It is essential that merchants remain available for delivery.
A very important aspect is the theme of the One-Stop-Shop. If, for example, as a German merchant I sell abroad in Europe, and there is a significantly lower delivery threshold, exceeding this threshold makes me subject to taxation in the respective countries. For such a scenario, I also need my own organization or a tax consultant to advise my company in this regard.
Events like COVID or major disasters like a ship blocking the Suez Canal cannot be predicted. However, this demonstrates the need for flexibility in the flow of goods. I must organize my company in such a way that even unforeseen events do not completely halt the flow of goods.
Amazon Advertising
How will Amazon Advertising develop? What is your prediction?
Otto Kelm: Amazon is introducing innovations at such a pace that no one can keep up anymore. Even the tools and agencies can barely operate comprehensively. The emphasis is on a few simple approaches that work better. Specific uses are possible, but they take more time and are definitely more complex to use. Amazon needs to acknowledge this and simplify.
Today, thinking about direct access to Amazon DSP without mastering the basics is difficult and not advisable. The prediction is therefore that Amazon needs to slow down development. Merchants and users must continue to educate themselves; otherwise, separate developments may occur that are not productive.
Ronny Marx: Amazon Advertising has always been a very dynamic sector. This dynamism has accelerated in the last year and especially in recent months. A major driver of this development is the Sponsored Display Ads. These are similar to the previous Private Display Ads, but significantly more varied in terms of options.
Costs in the Search Display sector will also increase due to greater competition. This means, in turn, that sellers must define their goals more clearly so that the invested budget is justified: “What do I want to achieve, with what foresight.”
How will the DSP, or Demand-side Platform, develop? Will it also be useful for small businesses?
Ronny Marx: Amazon DSP – thus in the field of programmatic advertising – is a relatively new discipline in the realm of self-service. Although it has existed for a relatively long time in the managed services sector, Amazon is mostly completely disrupting this area.
So there will no longer be large campaigns managed by Amazon, but everything will go through service partners. I know this for sure because we are one of the four Premium Service Partners of 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 merchant can activate their advertising based on clicks, thus CPC. Behind it is a programmatic approach, which means that I, as a merchant, target users based on their characteristics, which lead to Amazon, their browsing and purchasing behavior, or because they fall into certain segments.
The size of the company is less decisive for Amazon DSP; it operates on a CPM basis, meaning Cost-per-Thousand – every time my ad is displayed 1,000 times, I am charged, regardless of whether it was purchased or clicked. This naturally requires a larger budget. The reason is simple: the algorithm initially needs a lot of data to see how users react. Therefore, one should be prepared to spend around 5,000-6,000 euros per month for a campaign. However, typically, it is more like 10,000-20,000 euros per month. Only then does it make sense to start entering this field.
What can be done with this? You can activate video ads, ads on Twitch, on Fire TV Stick or Fire TV, or even lock screens on Kindle. There are many things that can be done, but an adequate budget is needed to manage everything. However, in general, there will still be a lot of development in this area.
Due to COVID, Amazon has grown significantly. The number of sellers has also increased. What new trends and opportunities can help stand out from the crowd?
Otto Kelm: As always, offering good products targeted at a specific audience at fair prices with real added value. Furthermore, it is not about getting noticed on Amazon, but about taking a step back, where needs are awakened, where customers are looking for ideas and solutions – this is not Amazon!
The relevance of keywords and Amazon SEO has been greatly emphasized in recent years. How will it further develop? What relevance will keywords and Amazon SEO have in the future?
Otto Kelm: It has neither been overly emphasized, nor has anything changed or will change. Only some areas have received less or different weighting. For example, sponsored items in the search terms of organic listings are no longer pushed as high as they were years ago.
In addition, I recommend analyzing customer language with the respective tools or Amazon Brand Analytics. This will lead to a significantly greater output.
Advertising outside of Amazon
What trends are already emerging today in the advertising sector?
Otto Kelm: Amazon DSP and the new target groups of Amazon for Sponsored Display Ads show what is possible. Amazon provides its customer data in a structured and anonymous way for advertising and also uses it outside of Amazon. This is a trend that has already been gaining traction for about three years and will continue to grow.
The trend of advertising outside of Amazon, for example on social media and Google Ads, is becoming increasingly popular. What are the most important channels in this case? Will this last in the long term? What new opportunities will develop?
Otto Kelm: On one hand, it is important to take advantage of the opportunities on Amazon; on the other hand, there is a reason for the readiness on Pinterest or TikTok for brands. One must be present where the target audience gathers information or exchanges opinions, to attract or retain customers. Regardless of whether it is advertising or other content formats that the potential audience willingly accepts. Big brands have been doing this for years through radio, TV, print, etc. It is becoming increasingly interesting for small brands as well, as they can now reach customers in a much more granular way.
Ronny Marx: Social platforms are very popular. Pinterest has evolved enormously. Classic channels like Facebook or Instagram are still very valid. TikTok is one of the shining stars and will increasingly come to the forefront regarding professional campaigns, as we are used to seeing on Facebook and Instagram.
It is always about reaching the right audience. TikTok has a very young audience and is not a shopping channel, so it is more about product awareness and not direct sales in the sense of investing 3,000 euros and ultimately getting 20,000 euros by the end of the month. This does not work.
The primary focus, before concentrating on anything else, should remain on Amazon, the keyword being Retail Readiness. Create appropriate campaigns and ensure that this channel is maximized. If it works and I have enough resources, I will then focus on the next channel targeted to the audience. Before achieving that, the foundational work has not been done, and therefore one should not worry about social media, but rather about their revenue on Amazon.
Will Live Selling on Amazon be successful / increase?
Otto Kelm: It is difficult to say. In Asian markets, Live Selling is much more ingrained in the shopping experience, while in Europe and the United States, shopping has been shaped for decades. Amazon has been using this feature in the United States for years – whether and when this will actually provide added value remains to be seen.
Ronny Marx: I believe it is a nice gadget because it is something different, but it will remain a niche phenomenon. I want to buy my products when it is convenient for me. Live Selling means that I have a predefined channel at a set time and I need to have time for it. Then it is called Live. I could also say On-Demand Video Selling, so I can watch the “live video” when I am available. But Amazon and eCommerce have taught us that products are sold when users are ready to buy them. And not when a predefined time window imposes it.
What is Amazon Attribution and who should use it?
Ronny Marx: Amazon Attribution is about advertising, advertising activities, and marketing measures outside of Amazon. Here, sellers can see how these activities have influenced sales and impressions, thus the visibility of their products on Amazon. For example, it allows tracing which external action led customers to add your products to their cart.
The condition for this is to have your own brand, thus being registered for the Amazon Brand Registry. I highly recommend it to everyone, as without it, you are truly limited in your options, especially regarding advertising opportunities.
As a general rule, it can be said: more data is always a useful thing, and these opportunities should be leveraged as much as possible.
Amazon Strategy
In recent years, more and more opportunities have been opened up for sellers, which were originally only available to suppliers. Will this pace continue? What further opportunities could there be?
Ronny Marx: The alignment of Amazon’s partnership models between sellers and suppliers will certainly continue. It is still difficult to say to what extent and in what form. It is speculated, for example, that Vendor Central will no longer be a separate model, but will be integrated as an addition to Seller Central.
In general, I think that the supplier model will only be advantageous for the large ones, while the seller model will continue to grow. But for now, it remains an uncertain forecast. However, yes, I can imagine that sellers will continue to receive priority on Amazon. It’s an interesting thing!
The trend is increasingly shifting towards multichannel selling. How do you see it? Is it possible to succeed by selling only on Amazon?
Igor Branopolski: It is possible to sell exclusively on Amazon and also be very successful, but it can become very risky and is not particularly up to date. Today, merchants have many opportunities to automate the main areas of their business. Thanks to inventory management systems, one can sell on all marketplaces with just a few clicks; why should they give this up and risk something going wrong on Amazon? Furthermore, by not practicing multichannel selling, one misses out on a large audience that, by principle, does not buy on Amazon.
Otto Kelm: Unfortunately, this has been completely implemented incorrectly; instead of a multichannel approach, everything was simply listed everywhere and it was seen what happened. Very few have set goals for each platform and adapted product areas to their respective target audiences. The theme has been simplified so much through interface tools that it no longer reflects reality, but rather blindly “deceives” the various markets – mostly without significant successes – as long as everything is everywhere.
Of course, one can succeed only with Amazon, but to do so, as mentioned earlier, one must reach customers “before” Amazon.
Ronny Marx: Of course, it is possible. The second pillar is often talked about and how important it is. This sounds good in theory, but in practice, it often doesn’t work. What is currently taking off – at least in terms of the number of users – is Shopify and other cloud shopping solutions. I can imagine that the themes of shopping and personalization for certain products, which need to be better explained, can work. But most will continue to go through Amazon. One will just have to invest more and pay attention to which sector they enter.
In recent years, customers are increasingly moving away from brand awareness. Does this favor Private Labels or is commercial merchandise still attractive?
Igor Branopolski: Commercial merchandise will never disappear and will always remain attractive to many. Brands, whether large or small, have their own peculiarities and will continue to play an important role: they set trends and create demand through influencers or well-crafted marketing campaigns, meet certain quality requirements, or reach audiences that have been neglected, even outside of Amazon and similar platforms.
I wouldn’t even phrase the question this way: Private Label or commercial merchandise? Every merchant makes their own decision – both have advantages and disadvantages and have their own target audiences. Customers no longer see things in black and white either. They often look for brands and not just items; for example, they don’t just buy a gaming console, but a Playstation 5. At the same time, when looking for a showerhead, they opt for a cheap Made-in-China product rather than hansgrohe at double the price.
Otto Kelm: I can’t even begin to understand. Brands are searched for on Amazon. Brands are purchased. We do not see a death of brands. We only see that smaller target groups for large brands are simply not profitable. This allows small suppliers to achieve revenues and profits in their sector that are acceptable to them – but ultimately not scalable. Which is overall positive – so every pot finds its lid and vice versa.
Ronny Marx: The topic of reselling is not dead, but it is on the decline. It works in a few cases, for example, when one has exclusive selling rights in certain countries, or when there are huge margins, with over 1,000 sales a day, where in the end there is still enough left to make it a business.
Private Label can work if one reflects in the long term. Taking something from China, putting one’s own logo on it, and hoping for high revenue because the niche is not so crowded can work, but it is very temporary. Chinese manufacturers also think: “Why should I let someone sell my things? I’ll put my own logo on it, send my armies of reviews, and then the product will shoot up.” So one needs to reflect and specialize in products that are “unique.” It sounds like a trendy term, but it really is the case.
More and more often, businesses on Amazon are being acquired. How will this situation develop and what impact will it have on sellers, prices, etc.?
Igor Branopolski: The purchase of entire seller accounts is also due to the fact that there is too much free money in the market and money is currently very cheap – low interest rates and a lot of capital that is practically begging to be invested. This trend is also known in the real estate sector. However, in reality, the percentage of accounts to be purchased on Amazon is not that high. It has always existed and will continue to exist. Until prices are so high that purchasing is no longer profitable, while competition on Amazon continues to grow.
Otto Kelm: We will see this quickly in 2022. It can be followed live to see if these mysterious super-skilled buyers can do everything as well as they claim or if the investment bubble bursts. The impact will be positive for the labor shortage in the Amazon world. There may be more workers moving from seller A to seller B, etc. I only see a few promising approaches. Simply buying will not lead to growth – data and expertise are needed, not just 5 big brands that perform well.
Through tools, increasingly broader areas of e-commerce can be automated. What tools are really needed to succeed in the long term in selling on Amazon?
Igor Branopolski: Tools are always a good investment; manual adjustments are now outdated. The minimum requirements are an inventory management system, a Repricer, and a PPC campaign optimizer. If the solutions are smart and used sensibly, they increasingly reduce the workload. Sensibly means that the user engages with the tools and optimizes them for their business.
Let’s take the SELLERLOGIC Repricer as an example. The most commonly used strategy is the Buy Box. If the seller incorrectly sets the minimum and maximum price during the repricing setup, then they cannot leverage the margin. The seller either sells too little because they do not get the Buy Box with their price, or too cheaply because they are in the Buy Box with the wrong price. As mentioned, the seller must engage with their tools to fully leverage the power. That is why we offer our customers a complete onboarding process, and our Customer Success Management team is always available for questions.
Otto Kelm: Every area can be purchased through tools, agencies, or services. Each area has its legitimacy. Ultimately, it depends on the capabilities of each seller, what they can do, and what they need. The market is very well penetrated, but it is by no means at the end. Currently, there are still too few tools, agencies, or service providers that are acquired or merged. Logistics, inventory management, price control, or tools for incorrect registration or market data management are absolute basics that one should have.
What do you think is the future business of Amazon?
Igor Branopolski: Selling on Amazon is generally becoming increasingly difficult, as additional obstacles arise: low-quality products are being excluded, as consumer satisfaction becomes even more important. EAN integration has long been a fundamental element for selling products. It will be interesting when the CE safety directive is implemented. The CE has existed for a long time, but now there will be a need for further checks and requirements from Amazon. It is not excluded that Amazon may collaborate with additional providers like TÜV Süd and similar in the future.
It is very likely that many Chinese sellers will have to leave the market, as CE compliance for many items is not present. This creates a much greater potential for online sellers at the European level, who have always been legally required to have CE certification. Now platforms are also called to check this. In any case, the customer is even more at the center of attention, and this will not only affect quality but will also require greater, faster, and more customer-oriented service.
Otto Kelm: I cannot answer this question. There are too many unknowns regarding the laws and economic factors to consider. A ship is sideways and the world is shaking! However, I see the direct passage of manufacturers as a brand to the customer as the future, thus eliminating many intermediaries or resellers.
Ronny Marx: Private Label, yes, but in a different way. We will probably see a slight decline in online commerce, as people are now looking forward to returning to offline shopping. This will normalize again by the end of the year. Fundamentally, however, eCommerce will remain extremely stimulated by the pandemic. Many people have come to know and appreciate the advantages of Amazon thanks to Covid. The question one must ask is: “How do I react to such a trend?”
The work life is also sustainably changing towards working from home. This opens up many use cases for Private Label sellers, whether through hand supports, specific lamps, cable management items, or microphones. One must remain creative and always prepare for the fact that products that are not “unique” and sell successfully will eventually be overwhelmed by the Chinese. This means that there is always only a temporary window in which I can position a product, extract the maximum from it, but then I must move on. Or I get lucky and am acquired by one of the large M&A groups, make a quick euro, and can look ahead with that money. Otherwise, one must pay attention to products that are used a lot at home. I believe that travel items will continue to decline. But working from home and, of course, things that are used at home are the future trend that will continue.
Marketplace Pulse reports higher requirements for “Prime by Seller” for the US market. Only shipping methods that also allow for Saturday processing should be used. Is something similar expected for Germany? What effects will the change in the United States have on other markets?
Igor Branopolski: In SellerCentral, there is a setting that allows for delivery on Saturday and Sunday, but it is not mandatory. The difficulty in Germany is that this option simply does not exist – no provider delivers 7 days a week. There have always been discussions about this, but this position has always been maintained, and it is very likely that nothing will change in the near future. Therefore, I do not see any impact of the US circumstances on the German market.
Produkte
During the Covid pandemic, the demand for work clothes significantly decreased, while the demand for home clothing increased significantly. What product trends do you see for the coming years?
Igor Branopolski: During the Covid pandemic, trends such as masks and sanitizers faded very quickly. It is very difficult to predict something like that over a longer period. One must always observe trends and, if necessary, adapt their product range. However, what we will hear very clearly in the coming months is the scarcity of resources due to the container ship incident in the Suez Canal. This will likely lead to a global increase in raw material prices and, consequently, also in the prices of items.
Otto Kelm: It can be like the last 6 months with the Hula Hoop or any other item promoted by TikTokers or influencers or a new trendy color. This is the beauty of these things – no one knows them in advance, and those who jump in quickly will succeed in the short term – then they must already have another ace up their sleeve or continue shopping from DHDL.
Ronny Marx: It is unknown what will happen in the next five years. For consumers, I see good years ahead, as prices in many sectors will drop. Many stores that are currently failing still have merchandise in stock, in warehouses, or in containers. As soon as the current situation normalizes, some sectors will be flooded with products from failing sellers, who will say: there are thousands of microphones, headphones, etc. from sellers who no longer sold them. And then they will put all their products on the market. When that happens, prices in certain sectors will drop dramatically, and the second wave of problems will begin. For example, for sellers who are doing well now but then will no longer be able to achieve good margins, as the market is flooded with items from failed competitors. This could also become an interesting “trend,” in quotes.
Can you give a final assessment: What is your forecast for the coming years? What trends will establish themselves in the long term, or do you perhaps even see trends on the horizon that we haven’t thought of yet?
Igor Branopolski: The market will continue to change constantly as in previous years. It is essential to be extremely flexible and not to rely on just one option. Anything that is rigid and not automated simply will not make it. Therefore, only businesses that are highly automated, extremely customer-oriented, and always act with a keen eye on trends will succeed in the long term and continue to grow.
Otto Kelm: Amazon and sellers need to seek and find an alliance! Seller sales have increased from 35% to over 65%. Amazon must move away from customer-oriented thinking and do more to collaborate with sellers!
Sellers must abandon the idea of selling only items. Too many fundamental aspects remain neglected, whether it is content, SEO, or advertising – there are untapped potentials everywhere.
The trend of Amazon DSP will certainly find increasing use. Additionally, Amazon B2B is still absolutely undervalued. Here, even more growth can be achieved with the right items.
Furthermore, Amazon, as already seen in the new app, will increasingly move away from the role of a search engine and will focus more on navigation and inspiration. 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. There, 350 million packages are delivered each year and distributed throughout Europe. That’s almost a million packages a day. But there are also other multi-brand platforms, such as ASOS from the UK or Cdiscount in France. Galaxus in Switzerland generates over a billion in revenue – just in Switzerland. These are all established platforms, and this is a trend that will continue to establish itself. So, one should think three times about whether to build an online store and then maybe create a marketplace, or vice versa. If something doesn’t work in the marketplace, why should it work in the online store? Unless one is so specialized and has such a precise target that they can promote and reach online. Then the next question is: how do I drive traffic? On Amazon, you can do this with direct advertising; in your store, the right payment methods must be offered, and so on. So, the principle is: first do the homework on marketplaces; marketplaces will remain, they will not disappear. And if all this works, then it might be worth considering the store as well and doing multi-channel.
Fazit
Amazon will continue to evolve and keep its sellers on their toes. It is important for sellers to keep up with these developments and build a business that is resilient and flexible at the same time. They should not blindly chase every trend, but rather question whether it is worth it for them and their business to hop on this train.
It is essential, above all, to engage customers and not lose sight of them despite all the automation. However, this does not mean that one should not focus on automation. On the contrary: to build a successful long-term business, one should use automations that provide support. However, these tools must work dynamically and intelligently, rather than being rigid and rule-based.
Image credits in the order of the images: © ra2 studio – stock.adobe.com
