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Amazon’s much-discussed new program for direct-to-consumer brands will no longer be invite-only later this month.
Amazon on Tuesday announced that it will launch Buy with Prime, which embeds Prime services on direct-to-consumer ecommerce stores, into wide release for all US merchants on Jan. 31. An integration with BigCommerce will help roll it out.
In April 2021, Amazon made an ecommerce splash as only it can when it rolled out the new service. Buy With Prime allows brands and retailers to embed Amazon Prime checkout on their off-Amazon stores, and offer Prime benefits like free shipping and returns along with it.
With Tuesday’s announcement, Amazon shared a few updates that will be added with general release. Amazon said Buy With Prime will include a new tool that offers the ability to display ratings and reviews from Amazon on a DTC site. This will launch alongside marketing capabilities that include advertising for products on Amazon’s marketplace, and a badge that can be displayed on DTC stores. Amazon also claimed that the service increased shopper conversion.
“We’ve been working closely with merchants since the launch of Buy with Prime and have been thrilled to hear the results it’s helped drive for them so far,” said Peter Larsen, Amazon vice president of Buy with Prime, in a statement. “We’ll continue innovating and investing in new features, such as Reviews from Amazon, to help merchants of all sizes succeed and give Prime members the shopping benefits they love, whether it’s on Amazon or beyond.”
On initial release, many analysts were in agreement about Buy with Prime: This could be a game-changer. It means the Amazon brand is now extending beyond the #1 ecommerce marketplace's own site, and the Amazon's vast logistics network is available to many more companies that don't sell directly on Amazon. With a simple button, Amazon can extend its reach through the bits of ecommerce, and add to its client base of merchants on the atoms side.
If you felt like Amazon was already everywhere, this could make it even more ubiquitous.
Amazon’s track record in ecommerce carries with it the expectation that it can bend the internet to its will, and decide to turn on new paradigm-shifting features whenever it chooses. But success isn't guaranteed for Buy With Prime, even though it's Amazon. The launch cycle indicates that this is a new program, and it's coming during a tougher time for brands that sell directly through their own sites, whether because of the economic pullback or iOS changes that made advertising more challenging.
So, this year we'll be looking for signs to prove its success. Here are a few burning questions to keep in mind as the launch gets closer:
Will brands want to invite Amazon in?
DTC brands have long proudly stood apart from Amazon, building their own stores and in many cases communities. While Amazon had the crowded mall, DTC had the intentionally-placed and lovingly designed boutiques. This offered DTC brands not just independence, but control over how they executed ecommerce. Amazon is offering to lend its brand in exchange for a presence in the store, and even has additional advertising offerings and a badge to display. It is also now adding reviews, making the experience even more Amazon-like. But will brands want that? Will they fear that more Amazon will enter their store after this launch? Of course, another question is: Will they be able to refuse it?
What will Amazon do with the data?
In a related point, Amazon's checkout will give it a way to access the data of customers who buy using its Prime feature. How will it use that information, and, will it share that valuable info for marketing with brands? The answers could be make-or-break for many brands.
In an FAQ, Amazon said that it shares Buy With Prime data with brands, and collects data about how shoppers use the program.
"We do not collect information unrelated to Buy with Prime, such as non-Prime order information on your site," the company writes.
How will Shopify respond?
As we wrote back at launch, this feature looks like a direct bid by Amazon to move in with the entrepreneurial brands that are tried-and-true Shopify users. It's especially glaring at a time when Shopify is building out its own fulfillment network following last year’s $1.2 billion acquisition of Deliverr, and offering the "Shop Promise" badge to brands that use its services. Last year, Shopify already slid in a code-level warning to brands installing Buy with Prime about the potential for fraud and stolen data. With Amazon's wider launch, will it mount a more overt defense?
To be fair, it's still to be determined whether the companies will cooperate around this feature. On its third quarter earnings call, Shopify President Harley Finkelstein said the companies have been in communication about the implementation of Buy with Prime on Shopify, saying that Shopify wants to do it "the right way."
"What's important for merchants is they want to be able to manage their entire business from one centralized place," Finkelstein said. "They want all the information they need to make really, really good decisions. But at a high level, at a macro level, when great companies, or any company for that matter, makes infrastructure available to small businesses and does so in a way that levels the playing fields further for small businesses, that is a very, very good thing."
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The company is pulling back after breakneck pandemic expansion. Will it sacrifice the shopping experience along the way?
Amazon is in a period of rebalancing.
The company has long scaled at a relentless pace as it sought to not only provide a marketplace for commerce, but the infrastructure that enabled it, as well. Amazon found another level of overdrive over the last two years, as demand spiked to unseen heights during the pandemic and the company tried to build to keep up.
This wasn’t necessarily a period that saw the kind of invention that Jeff Bezos made an existential tenet of the company, but it nonetheless seems to be shaking out as a cycle that included risk and fallout.
In this case, the risk was not a new device like a smartphone or a move to bend the future to Amazon's will like drone delivery. Rather, it was an expansion that took its already-vast operations to new heights.
Nowhere was this more evident than the company’s logistics network. As CEO Andy Jassy described it to analysts Thursday on an earnings call, the company doubled the size of a fulfillment network it took a quarter-century to build in two years. It also built out a last-mile delivery network that was the size of UPS, which is one of the top two carriers in the U.S.
In 2022, all of that expansion ran into 40-year-high inflation, war in Ukraine and a pullback in demand for goods amid reopening. The company first admitted the problem: It had overbuilt.
But the solution is not to tear down. It had to keep expanding as only Amazon does, while still cutting back in a period of “belt-tightening,” as executives have put it.
That’s evident in watching developments out of the logistics network alone. Amazon pulled out of some areas, and canceled plans to expand into some new warehouses. Yet, as Business Insider reported, it still added 79 million square feet – a footprint that is equal to half of next-closest competitor Walmart’s entire distribution network. It is also expanding Buy with Prime, a new program that will allow direct-to-consumer brands to offer Prime benefits, and, by extension, access to Amazon’s logistics network. Another service, called Amazon Warehousing and Delivery, is designed for upstream storage, necessitating more space to be made available in the network.
At the same time, it will seek to keep doing more for consumers.
Jassy indicated as much when he was prompted to outline his priority areas. Beyond cost-cutting, he said speed is the second highest priority for Amazon. As if to conform this, he said later in the call that one-day shipping is getting off the ground in North America.
Selection is another priority area. At Amazon, that phrase translates to a few things, but top of mind is “expanding the third-party seller marketplace.” Third-party sellers accounted for 59% of sales in Q4. Beyond sales, Amazon’s work with the sellers who post their products on the marketplace is also lucrative for the company. Amazon allows these sellers to tap its logistics network to offer Prime through the Fulfillment by Amazon program. Its business segment called third-party seller services grew 20% year-over-year in the fourth quarter, right in line with the massively profitable cloud computing division Amazon Web Services.
Price, Jassy said, is another area of importance, especially with the consumer pullback on discretionary purchases being observed amid inflation.
“I think pricing being sharp is always important,” Jassy said. “But particularly in this type of uncertain economy, where customers are very conscious about how much they're spending, having the millions of deals that we put together with our selling partners in the fourth quarter was an important part of the demand that you saw.”
Finally, Jassy cited a priority of improving the customer experience. He said Buy with Prime would give subscribers the ability to use their benefits across the web, and noted that virtual try-on for shoes brings change to the shopping experience.
But it’s in this area that the tradeoffs that may be happening under the surface may rear their head again. GlobalData Managing Director Neil Saunders noted that online shopping generally is becoming “more difficult" on Amazon.
“While the Amazon marketplace is far from a terrible place to shop, it has become more complex and cluttered with a multitude of products, delivery options, and prices levels for shoppers to sift through,” Saunders wrote in note released at the time of the earnings call. “The result is that impulse buying has dropped and that more people are migrating away to other retailers. This is not yet a serious problem as erosion has only happened at the margins, but it is something Amazon will need to address and arrest to prevent further decline.”
Taking a rhetorical step further, the journalist John Hermann wrote this week that a “junkification” of Amazon is taking place, while arguing that “everything is going according to plan" for the company.
He placed the growth of the third-party seller marketplace at the center of this trend. But it also comes as Amazon grows its advertising business, with many taking note of a growing number of ads on the platform. The company also wants to keep growing Prime, and is now using content such as Lord of the Rings and NFL’s Thursday Night Football as key acquisition channels. Both had “record” signups of new Prime members, CFO Brian Olsavsky said.
“We see a direct link between that type of engagement and higher purchases of everyday products on our Amazon website,” he said.
It will have to do each of these things at once, while entering a period that will require it to be “more targeted with its growth ambitions,” as Saunders put it.
"Since its inception, Amazon has had a culture of throwing dollars at many different things to see where they led and what they could learn," Saunders said. "That approach worked well for a younger, fast-growth business. It works far less successfully for a more mature entity. In our view, management deserves credit for recognizing this and quickly responding. However, the shift requires a lot of care because Amazon needs to find a new balance between being ambitious and innovative and being more frugal with its spending – which will be very challenging."
Jassy said the changes of the pandemic made its logistics a "different network." That may be true of the whole company. Rather than an isolated cycle of overbuilding and pulling back, this may prove to be a period that changes Amazon altogether. The bets will still be there, but the risk will be magnified with fewer dollars that don't pay off to go around. As hinted by the logistics buildout of the pandemic and even Buy with Prime, they also may look more operational.
Less delivery robot, more delivery optimization.
As Jassy put it: “We're going to be very thoughtful about how we streamline our costs, and I think you see a lot of that, but we're also going to continue to invest for the long term.”
The recipients of those investments will say a lot about where it wants to head in this next year.