Amazon’s next stop: CPG

Already a world champion in pushing books, music, consumer electronics and general merchandise online, Amazon is entering the CPG space in the same way it conquered these other products: go big or go home.

Even though sales of food and beverage are just a small slice of Amazon.com’s reported domestic sales of $44 billion in 2013, the fact that roughly 20% of all e-commerce transactions flow through the e-tailer and one-third of all retail product searches begin on Amazon, make it a CPG player to be reckoned with. Let’s face it; Amazon.com is one of the most watched, and envied, retailers in the world and its arms of influence stretch broadly online and offline.

Of course, its aims for “global domination” in CPG (said half-jokingly) doesn’t necessarily mean Amazon is easy to partner with. For some marketers, challenges include relentless price drops to move products as well as being left to fend for themselves on the site. The e-tailer doesn’t really mind which brands get bought, as long as they move. This could change as Wall Street’s desire to see Amazon turn a profit alters the equation somewhat, driving the e-tailer to key in on the SKUs they offer.

For CPG marketers, the roadmap is still being drawn, but there are certainly growing opportunities for collaboration with Amazon’s various formats including Prime Pantry, Amazon Fresh and Subscribe & Save. Amazon is eager to start acting more like a grocer and increase trip frequency as well as basket size among its shopper base. The likes of P&G, Unilever and Kimberly Clark, among others, are forging new ways to solidify their relationship with Amazon in areas like packaging, distribution, search and co-op advertising.

Brand Marketer Roadmap

It may seem obvious but, unlike how you would work with brick-and-mortar retailers, the first piece of advice for brand marketers in regards to working with Amazon is to engage them on a technical level. This means perfecting the content and look of product pages on their site, considering the A+ page program, encouraging product reviews and exploring a Strategic Vendor Services contract.

Building a healthy business relationship with Amazon should go above and beyond the website. It should also encompass back-end components such as efficiency with packaging and distribution and optimization of the supply chain to keep delivery periods streamlined. Meanwhile, don’t forget about the front end, such as buying ads at the category page level and deeper pages on Amazon.com. Buying media gets factored into search algorithms, which can open up additional opportunities for marketers.

Yes, Amazon is still new to the CPG game and there’s a slew of testing and learning going on. Yet, their commitment to developing best-in-class programs in whatever they do means their learning curve is not likely to be very steep.

Winning at Amazon.com requires the same brew of media, shopper marketing and digital savvy as with other brick-and-mortar retailers. Stir in some relationship building and you have all the ingredients for success regardless of the retail format.

Have you migrated to the ecommerce space? Share tips in the comment below.