Where retailers are going?

Featured Image

The retail industry is in a state of flux. Legacy companies are still trying to navigate the move to ecommerce, and the new upstarts are learning why a physical presence is useful. Out of that turmoil, the retail landscape has come to be dominated by two firms: Walmart and Amazon.

Walmart has done a fantastic job of rebooting their ecommerce strategy in recent years. Marc Lore, who has run the ecommerce business unit since Walmart bought his company Jet.com for $3 billion in 2016, has taken what Walmart Labs was supposed to do and super-charged it with acquisitions and a laser-focused strategy.

Walmart has built out a brand strategy through the acquisition of companies like Bonobos, ModCloth, and Moosejaw. This lets them offer unique products that can’t be directly price shopped across retailers (Bonobos) while also leaning in to premium brands (through Moosejaw and ModCloth) for the customers who don’t consider themselves “Walmart shoppers.”

With that work underway and performing well, Walmart is focusing on additional customer experience points. Recode writes of two such projects, focused on a personal shopper experience for “high net worth urban consumers” as well as a rethinking of the in-store shopping experience. We’ll leave the latter alone for now because “fixing in-store shopping” could be a book’s worth of thoughts.

The personal shopper experiment, currently referred to as Code Eight and operating as a test in New York City, allows customers to receive product recommendations and make purchases through text messages. Most of these purchases can be delivered at no cost within 24 hours. This functions similarly to an Amazon Dash button, only instead of having a collection of 20 little plastic buttons on the inside of your cabinet door you can just write out or take a picture of what you want, text it to a number, and it shows up that same day. The Dash button may be a simpler experience, but it is also much more limited (one product per device) and does not offer a way for Amazon to recommend or cross-sell additional products.

But Walmart’s not the only company attacking a new flank. Amazon has decided that it’s ready to grow its digital marketing business beyond the $1B unit it has quietly already become. In fact, there is some thought that Amazon’s ad business will be larger than Twitter’s or Snapchat’s in 2018.

To achieve that, they will expand beyond just selling advertising on their own properties. For example, a source with knowledge about the situation says it is working with third-party mobile advertising companies such as Kargo to pair advertising on television and on mobile screens.

Amazon makes up less than 2% of the advertising market right now, so there is plenty of opportunity for growth. And expanding the ad revenue fits within their “pillar” strategy perfectly since anything drives more online purchasing activity is going to have an outsized impact on Amazon, where nearly 40% of ecommerce purchasing and 55% of product searches already take place (US activity only).

Digital advertisers are likely to have a very hot-and-cold reaction to this. On the one hand, anything that helps break the Google/Facebook duopoly is going to be welcome news, as it is likely to make reaching a large audience slightly less costly. Plus, Amazon has suggested that they will be more willing to share customer information back to the advertiser than either Google or Facebook has been so far. That means more data and, theoretically, more effective advertising on Amazon’s network.

On the other hand, many companies are wary of working with Amazon. They know they must have some kind of presence on the platform, but Amazon drives down margins, owns the relationship with the customer, and, in the case of some markets like car purchasing, threatens to completely upend the way companies do business.

With those kind of reservations already in place, it remains to be seen how open companies are going to be to moving more of their advertising budget over to Amazon.

Back To Job Listings
Back To Blog

Let's chat

What are you working on? Tell us all about it.

337 Elizabeth St NE, Suite E,
Atlanta, GA 30307
Get directions