It's a Jungle Out There: How Amazon is Changing the Online Landscape
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By changing the way that consumers shop, digital retail giant Amazon is redefining how manufacturers bring their products to market. Amazon reports that more than 50% of the products sold on their website come from small businesses. These items are marketed as a specially curated selection and sourced from manufacturers ranging from family-focused entrepreneurs, artisans, and innovator-makers to women-owned shops. Amazon’s distribution and fulfillment services reduce significant barriers-to-entry that these smaller producers face. With an increased opportunity to break into a new and potentially highly profitable market, shoppers (and businesses) are seeing a shift in the size and type of manufacturer whose product is accessible to the masses.
So what does this disruption, known as the Amazon Effect, mean for manufacturers?
The obvious outcome of this new dynamic: Consumers have more buying options. The upstream impact this has on manufacturing and product strategy is less evident, however. The differences between in-store and online shopping are further exaggerated by the Amazon Effect. Large manufacturers are now competing with smaller businesses for attention. Retailers are no longer solely focused on how to grab attention within the few crucial minutes a shopper spends at the shelf; they must now find a way to differentiate their product from hundreds of competing items within a few seconds. Not to mention, when compared to shopping online, a brick-and-mortar store offers a more sensory experience, which can be helpful in certain industries. Brands can entice buyers into a physical store with visual and audio cues, or even a pleasant smell. Online storefronts also lack upfront human contact–you instantly lose the level of service associated with a traditional salesperson. In an effort to replace the individualized service a retail store can provide, online retailers strive to create a memorable experience for their customers, with the ultimate goal of repeat purchase in mind.
Product Strategy for an Online Marketplace
Just like on the shelf, appealing package design can be an eye-catcher for consumers. However, there are several additional best practices that brands can follow when it comes to the visual presentation of their product on Amazon:
Whether it appears on the packaging or directly on the item, the brand name should be prominently displayed and legible in the tiny listing photo.
Take steps to earn Brand Registry on Amazon - ensure your brand name is trademarked in each country you wish to distribute your product. Doing so protects your hard-earned name from the threat of counterfeit products.
Your package design (and your listing) should quickly and clearly communicate what the product does.
Listing photos should be impactful. Show multiple angles of the physical product, as well as a branded package. Zoom in to capture useful details the full photo may not accentuate. Use good lighting and be sure photos are in focus.
Adding features and benefits on the front of a package helps differentiate your product from the competitors' product almost immediately.
For brands that exist in retail locations outside of Amazon, UPC codes are a crucial part of packaging. Amazon requires its brands to use a proprietary barcode. Prevent having to print multiple versions of packaging or needing to place a considerable amount of labels on your box by printing the UPC directly on every box, and using a label to replace the UPC with the Amazon barcode on Amazon-based product.
One additional thing to consider: Amazon fosters a more direct connection to the end-user, which means brands should more closely monitor their interaction with the consumer. Amazon shoppers often share their experience with a product or brand in the form of reviews; strong reviews boost product presence on the site. The best way to win this seal of approval from consumers? Personalization. Include a product insert that directly addresses individuals with personalized messages, provides a brief statement from the owner of the company or identifies how your product solves a problem they’re facing. Take the message one step further, and encourage participation from the consumer the way Warby Parker does with their packaging.
Image: Jungle Scout
An Array of Distribution Challenges
Even after nailing the branding and positioning for online retail, getting that stellar product to the customer poses a whole new challenge to companies looking to expand into a new market space. However, the burden of distribution is no longer solely on the producer. Fulfillment by Amazon allows manufacturers to store product in Amazon distribution centers. Amazon employees then “pick, pack, ship, and provide customer service,” allowing companies to scale their business more easily. Sellers receive access to Amazon’s exclusive shipping rates and Prime customers retain the benefit of free 2-day shipping.
While Amazon is lowering the point-of-entry for smaller businesses, large manufacturers must adapt and adjust to remain relevant. Amazon provides efficient distribution solutions, but manufacturers maintain a shared responsibility to ensure their products make it to the end-user in a timely fashion, at a reasonable cost, and in like-new condition.
As a result of the surge in popularity of online shopping, consumers have near-unlimited access to almost anything they can imagine. When ordered on Amazon, these items frequently ship together. Sometimes, consumers are even offered an upsell–the ability to select specific add-on items to include with their order. Add-ons are popular or relevant items that would be cost-prohibitive for Amazon to ship on their own. Listing these items at a reduced cost, with free shipping, makes the purchase enticing for consumers but these unpredictable sets of items create a new challenge for distribution. Shipping charges must, therefore, take into account both the actual weight and dimensional weight of an item to provide realistic pricing. With this in mind, manufacturers are taking steps to maintain efficiencies with shipping.
A Shift in the Packaging Paradigm
Amazon instituted its Frustration-Free Packaging program to reduce waste while minimizing damage to products. Products that are certified as Frustration-Free ship to customers in the existing manufacturer's packaging without the need for additional Amazon boxes. Consumers receive their orders in recyclable packaging that’s easy to open and shipping costs are kept at a minimum by eliminating unused dimensional weight. Manufacturers who participate in this program have seen a boost in sales, reduced costs, and improved customer experience. The manufacturing team collaborates directly with Amazon to streamline and test packing materials. Specifically engineered to protect the product inside, this method also leads to fewer damaged goods, which have a significant cost to replace when you're scaling to reach more consumers. Designed by Amazon’s own Lab 126, the Kindle DX ships in its own container made from more than 90% recycled materials.
Image: The Dieline.
Though the Frustration-Free initiative has led many companies to more deeply analyze their packaging, tried-and-true brands have many hurdles to overcome as they begin to address the distribution considerations that go along with online shopping. Reducing time to adapt is critical due to the increased competition created by the market's low point of entry. For companies with pre-existing packaging, redesigns can be costly; an all-encompassing solution wouldn't work for brands with a deeper or somewhat unique product line. For example, an ultra-luxury TV with an expensive price tag may face unique packaging challenges that the Kindle may not have.
On a serious note, package reviews explore how the weight and size of various materials affect shipping cost and the role that increased handling plays in durability. Eco-friendly solutions are in frequent demand as a result of the additional amount of global waste generated by packing materials.
Image: Packaging Europe
As P&G found out after releasing newly refined concepts of an Amazon-focused laundry detergent bottle, brand recognition and consumer education are also critical factors in the packaging overhaul. Consumers who are used to seeing a product boxed a certain way may mistake it for the wrong item when the structure of the package changes drastically.
Amazon has completely changed the game for online retailers. Both large and small brands have to adapt or risk losing out on an ever-growing online audience. Brands that have found success on Amazon play by the rules but also innovate when necessary. Selling on Amazon requires brands to re-evaluate the very things that brought them success in a brick-and-mortar store; everything from their branding to package design to how their UPC codes are handled can make or break their effort to gain traction in the Amazon Marketplace. It’s Amazon’s world, and you need to find your niche in order to survive.