“There’s no rest. We can’t rest on our laurels,” said Jeff Bezos at a recent Amazon shareholder meeting.
Like most incredibly successful businessmen, the Amazon CEO doesn’t stop to admire his work for too long–he’s on to the next thing.
And that’s a key part of Amazon’s success: the ability to adapt and pivot quickly into lucrative product categories.
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In 2017, we saw Amazon take great strides in apparel and furniture, and now wedding supplies. Next, we heard rumors about Amazon getting into pharmaceuticals, and we recently discovered an Amazon listing for AWS that hinted at a potential foray into the travel industry.
Should brands and retailers in these areas be worried about Amazon overtaking retail? Where’s Amazon headed next?
Amazon specializes in categories people don’t currently buy online.
“Amazon’s always ahead of the game–they’re looking to fill those selection gaps and go after the product categories that aren’t yet advanced in the online world,” explains Carina McLeod, Amazon Consultant.
Don’t be surprised if you see Amazon in future categories that formerly seemed firmly rooted offline.
Private Labels Over Acquisition
We’ve written before about Amazon’s interest in private labels for apparel.
However, it’s unlikely they won’t make another acquisition. So what will Amazon put greater weight on in the future: private labels or acquisitions?
According to Tanya Zadoorian, Marketplace Analyst at CPC Strategy, Amazon will place a bigger focus on expanding private labels for most categories.
“Amazon has the resources and money to create new labels that are successful,” explains Zadoorian. “We saw it with the apparel category, and I anticipate we’ll see it in other categories in the future.”
Part of the reason Amazon tends to veer towards private labels rather than acquisitions is because other companies can be tough to integrate.
Pat Petriello, Senior Marketplace Strategist at CPC Strategy, explains:
Much like their hiring philosophy, Amazon looks for companies and individuals that exhibit the Amazon leadership principles as opposed to trying to “convert” them to the Amazon way. This is why Amazon is much more likely to continue their own private label expansion and own the process from the beginning than they are to identify existing companies that already [reflect Amazon’s methodoligies].
Now, let’s talk about where Amazon’s been making the news.
Amazon’s Recent Categories
Amazon has focused on expanding categories that are high margin, such as apparel, footwear, and luxury products, according to McLeod, who used to be a buyer at Amazon.
Unlike the plethora of cheap electronics on the marketplace, products in these categories can stand on their own–basically, not add on items.
Enter: Wedding supplies and high-fashion apparel.
You can’t talk about high margins without talking about weddings, right?
In 2017, the U.S. wedding industry produced a jaw-dropping $72 billion. Additionally, the average wedding cost in the United States just reached $32,329 in 2016, according to a survey of 13,000 brides and grooms.
So when Amazon announced the launch of the Wedding Shop from Handmade at Amazon in May, it wasn’t a huge shocker.
The shop includes everything from wedding rings to honeymoon travel supplies and is guaranteed to become a go-to destination for wedding planning.
Amazon was already a hot destination for wedding registries, but now it’s a contender against other handmade wedding goods sites, including Etsy.
Just take a look at the chart below, which illustrates how the Google search term “Amazon wedding” has widened the gap from “Etsy wedding” in just five years:
It’s one thing for Amazon to successfully sell yoga pants, and it’s an entirely different thing for Amazon to sell high fashion.
According to McLeod, Amazon’s biggest challenges in high fashion include:
- The seasonality of products only being available for one season
- Difficulty drawing big high fashion brands due to their “bargain” reputation
- Problems with the UX appeal of their apparel shopping experience
Fashion is a key category with plenty of opportunities, but Amazon’s facing an uphill battle with high fashion–partly due to the poor browsing experience.
“I worked in apparel with brands, and often, they’re very passionate about the adjacency of a product. You don’t want a $300 pair of jeans sitting next to a $10 pair of jeans. Amazon has to ensure these products are very well separated–there’s a snobbery. You wouldn’t go into a department store and see luxury brands next to bargain brands.”
Amazon likely won’t win the battle to drop their “bargain” platform perception–but they can certainly make changes to their platform to set apart high fashion brands in a stylish way.
And they’re on their way. When we checked out Amazon’s job listings, we saw a post for just that: “Amazon Fashion is looking for a UX Designer to craft engaging, usable experiences and interactions for high-profile fashion shopping experiences.”
Amazon’s Potential Up-and-Coming Categories
In 2016, US prescription sales were ~$465 billion, and ~$106 billion of those were mail orders.
This isn’t necessarily set in stone, but we’ve heard rumors of Amazon getting into pharmaceuticals. Will they be successful?
Our experts had a lot to say about this one.
The answer is yes–but with caveats.
Amazon’s advantage is their vast distribution network, according to Ryan Burgess, Marketplace Analyst at CPC Strategy:
With their vast distribution network and Amazon Prime Now 1-2 hour delivery, Amazon has the potential to enter this market [successfully]. Can you imagine seeing your doctor, having them send a prescription for antibiotics to Amazon instantly, going straight home, and having your Amazon Prime Now driver deliver your medicine within the hour? I believe Amazon has the power and ability to pull it off.
We can see a distinct advantage against traditional pharmacies and even some big box retailers with pharmacies, but what about other prescription delivery services?
According to Zadoorian, the efficiency of their shipping will set them apart. However, the same asset could also be their biggest weakness:
The biggest problem here is the potential to mislabel or send in the wrong medication that can be detrimental to health. We see it now with Amazon orders being mislabeled and ultimately, customer dissatisfaction with a product. As a customer, you could be on your last pill and then receive the wrong medication from Amazon. The consequences here can be life-threatening. Amazon would need to establish a system to triple-check prescriptions before they are sent.
While Amazon will certainly be a contender if they do enter the pharmaceutical space, Petriello doesn’t believe Amazon will entirely run drugstores out of town:
The convenience of thousands of brick and mortar locations will always make physical drugstores valuable, especially in more suburban/rural areas where same or next day delivery is not available. However, only a portion of prescription drugs is made up of acute medications, while about 70% are chronic medication prescriptions. Amazon’s logistics and distribution capabilities, along with the existing Subscribe & Save program, are already positioned to add value to pharmaceutical consumers even if acute medication is not available.
The bottom line is Amazon won’t replace drugstores (at least not for a while), and their success will likely be made in fast and accurate deliveries of chronic medications.
This category will likely produce the most headaches–and we’re not sure Amazon’s ready to swallow that pill yet. (No pun intended, seriously.) But if they do, it’s likely we’ll see a few hiccups as the team figures out how to tackle their most complex category yet.
There’s no doubt Amazon’s been working hard to make their auto parts buying experience as simple and useful as possible. They say it all in a recent job listing for an Automotive Senior Vendor Manager:
“Our mission is to create a world-class Automotive store where customers will discover, research and buy Earth’s Biggest Selection of automotive parts & accessories and develop long-term partnerships with key brands within the automotive industry.”
While Amazon’s currently focused on car parts, we have a feeling Amazon may want to get their hands on the whole enchilada–aka car–fairly soon.
Petriello explains this theory:
I expect we’ll see continued development of Amazon’s involvement in the auto industry. Amazon Vehicles and Amazon Automotive launched recently to as valuable resources for current and prospective automobile owners, but purchasing a car on Amazon is still not available. With Amazon establishing themselves as the go-to spot for automotive related shopping, it wouldn’t be surprising to see them get directly involved in auto sales in the future.
While this category isn’t really a candidate for drone deliveries, it’s certainly within Amazon’s reach. Expect to see big movements in this category in the next few years.
Update 6/12/2017: According to CNBC, Amazon is venturing into car sales in Europe, with Britain as a “possible pilot market.”
Move aside, Ticketmaster.
“Amazon Tickets is a start-up business with a vision of becoming Earth’s most customer-centric ticketing company, a place where event-goers can come to find and discover any ticket they might want to buy online.”
Of course, the platform also includes a specific section for Prime members only. This includes exclusive offers such as a “complimentary glass of champagne” at your seat and other VIP deals that can’t be claimed by non-Primers.
There could be opportunities for brands to offer swag or showcase goods within those sections–but that remains to be seen.
You might be wondering why we put this category here as a potential because Amazon’s been down this road before.
Amazon’s short-lived travel booking site, “Amazon Destinations,” shut down abruptly in 2015.
In a recent job listing for AWS, Amazon calls for a head of worldwide business development in travel. Their description aptly points out some challenges the travel industry is facing that AWS could potentially solve:
“[The travel] industry is under pressure to improve traveler experience, grow revenue, protect margins, and is looking to the Cloud to modernize operations and improve resilience.”
When we read that, we can’t help but think Amazon’s rethinking a move towards the travel industry. After all, this industry has challenges and some big margins (just Amazon’s type).
You’ll find Amazon tinkering around wherever there are high margins and opportunities for improvement, and all of the above categories are proof of that.
We’re sure Amazon has plenty of initiatives brewing leading up to 2018, but we have a feeling we won’t be that shocked. A day will come when virtually every product and service is sold online, and no product category is exempt.
If you’re not staying up and keeping ahead of what your customers want, the risk of being overcome by a competitor is impending–whether it’s Amazon or another breakthrough brand or retailer.
Where in the world is Amazon going next? Share your thoughts in the comments below.