Amazon, Circa 2025 ... A Look at Future Commerce

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Amazon, Circa 2025 ... A Look at Future Commerce

By Michael Applebaum - 05/14/2018

How marketers can prepare for a future world of commerce dominated by – who else? – Amazon

For many companies, trying to predict Amazon’s next move must feel like an amateur chess player trying to defeat a world-class champion. The fact is, Amazon’s ability to make bold forays into new markets without fear of failure represents a level of risk-taking and innovation that traditional retailers and manufacturers struggle to match. “What makes Amazon such a formidable competitor is that the company is shaping some markets at the same time it is disrupting others,” says Tom Edwards, chief digital and innovation officer at Epsilon. “[Amazon’s] goal of relevant ubiquity across physical and digital is quickly becoming realized.”

In order to prepare for a future world of commerce in which Amazon is almost certain to have a greater stranglehold over disparate industries, marketers must make improvements in three key areas, argue Edwards and his team of experts:

  • Gain a better understanding of why Amazon is targeting specific industries and expanding into new categories.
  • Position brands to reflect how those businesses will be reshaped as a result of the company’s actions.
  • Strengthen the organization’s overall commitment to e-commerce and add resources and insights dedicated to working with Amazon.

“Today’s marketers must have a clear and decisive innovation strategy in order to deliver a unique proposition or solution that can only come from their brands,” says Heidi Froseth, executive vice president of the shopper commerce practice at Epsilon Catapult. “While technology will always be a helpful tool, it will eventually become commoditized – which means that marketers will need to create meaningful connections with consumers and shoppers in ways that allow brands to become uniquely empathic. Their main focus should be on telling human stories, not just delivering products.”

Where Is Amazon Taking Brick-and-Mortar?

From the initial wave of activation at Whole Foods Market to the recently unveiled Amazon Go store in Seattle (with more reportedly opening on the West Coast this year), the industry has received a few early clues about what Amazon intends to do with its brick-and-mortar stores. For one thing, Amazon shows no signs of wanting to reinvent the Whole Foods concept. Instead, the company has been using its vast expertise with purchase data analytics to reduce inventory levels and lower prices on high-traffic perimeter items, while also devoting limited floor space at some locations to displays of Amazon products (e.g., Echo) and pickup lockers for its click-and-collect service.

“Whole Foods as we know it is not going away, but it will continue to evolve,” says Angela Edwards, vice president of client services at Epsilon Catapult. “Amazon is not going to turn Whole Foods into a pure e-commerce entity. However, shoppers will notice changes as the stores become a more integrated hybrid experience.”

Early speculation about increased availability of mainstream CPG products at Whole Foods stores has dissipated. On the contrary, Amazon’s intense focus on increasing profitability may mean further consolidation in less perishable categories like packaged goods. “There may be less of a chance for CPG manufacturers to make distribution gains at Whole Foods stores as Amazon makes more room for other, more profitable products including books, Kindle and Alexa,” Angela Edwards says.

In addition, multiple CPG categories will face growing competition from Amazon’s private-label brands. These include cleaning supplies, paper goods and laundry detergent (Presto!); snacks and coffee (Happy Belly); diapers and baby food (Mama Bear); and health supplements (Amazon Elements). Amazon’s private-label expansion comes as traditional brands are increasingly struggling to gain share in its open online marketplace.

So what can CPG marketers do? “The best defense against Amazon’s private-label growth is a good offense,” says Patrick Lane, account supervisor at Epsilon Catapult. “Brands should take this opportunity to invest in their presence with clearly communicated and differentiated content, and build awareness for that presence through the right promotional and media mix. Brands will not succeed without these fundamentals in place.”

The Future of Automation

Amazon’s core mission to take the imperfections out of shopping is driving rapid innovation in automation and logistics. At the flagship Amazon Go store, the company is laying the groundwork to hand over many of the basic functions of retailing – not only checkout but also inventory management and customer service – to robots and computers. The question is whether this will prove to be an isolated experiment at Amazon Go stores, or whether a similar breadth of automation will expand into a larger arena such as Whole Foods. “Amazon Go shows the ability to create a business with little to no human interaction, and Amazon has the potential to apply the technology to a larger footprint as it becomes more affordable and easier to implement,” says Meredith Cunningham, account supervisor at Epsilon Catapult.

Meanwhile, major retail competitors are racing to catch up. Walmart, for example, has been testing shelf-scanning robots at 50 locations in an effort to improve restocking efficiency and reduce labor costs. Data and machine learning are also powerful equalizers in merchandising, although whether the human element can be removed entirely from the equation is an open question.

“’s millions of transactions and reviews dating back 10 to 15 years or more is a tremendously rich source of insight into subtle shifts in customer preferences,” says Ellen Foster, senior vice president of data design at Epsilon. “Many companies like Amazon leverage this type of data by deploying machine learning to derive recommendations. It is also easy for them to track multiple trends over time and across multiple categories to separate tiny, important signals from a whole lot of noise.”

Amazon’s push to automate inventory control stands to increase the already intense pressure on manufacturers to deliver higher margins. At Amazon Go, automation allows for rapid testing and creates an environment in which products will move quickly based on performance. “Going forward, brands will have to offer an even stronger value position and perform more consistently at the shelf,” notes Cunningham.

Amazon is also shaking up logistics within the supply chain – both on the ground and in the air. Analysts believe that if and when governmental regulations are lifted, Amazon is (and other companies including Google are) ready to implement alternate rapid delivery options, which include drones. Drone service could have a major impact in categories like medical nutrition and prescription drugs, especially among elderly customers in need of fastest possible home delivery.

Given that delivery times from a variety of companies and services have been steadily shrinking over the last few years, manufacturers should already have built-in processes to address instant delivery in all aspects of product development, says Cunningham. “It is imperative for manufacturers to think on their feet and be nimble as the standards for e-commerce change. For example, pack sizes may need to be smaller, profitability expectations may shift and consumer purchasing patterns may see a change as well.”

Disruption In Healthcare

Amazon has sent some conflicting signals about its ultimate designs on the healthcare industry. The company has acquired pharmacy distribution licenses in several states and established an alliance with Berkshire Hathaway and JPMorgan Chase to reduce employee healthcare costs – moves that suggested the company was planning to make a major foray into the pharmaceutical business. In April, however, a report emerged that the company was shelving plans to sell drugs and medical supplies to hospitals through its business unit.

“Amazon is not necessarily backing off plans to sell pharmaceuticals to consumers,” says Angela Edwards. “However, its entry into healthcare will be tempered by the regulatory challenges inherent in the category. Amazon is positioning to compete in sectors that have more promising e-commerce potential – namely fulfillment of prescriptions – and have already been tested by companies like Express Scripts.”

Based on its current path, Amazon is likely to launch same-day delivery of prescriptions in markets that are already served by Prime Now or Fresh, opening the door for a much larger expansion of pharmaceutical delivery. (Prime recently surpassed the 100 million-subscriber mark in the U.S., and in May Amazon raised the price of Prime annual subscriptions $20 to $119.)

“In a market that is dominated by a few major pharmacy retailers, customers who have come to trust Amazon for low prices and great services are likely to explore the service due to the increased ease and cost savings,” says Lane. “If Amazon succeeds and reaches the expansion phase, major pharmacies will have two options: evolve to better meet customers’ wants and needs or lose share.”

And it may not stop there. Recent moves by major retailers into the healthcare space (including Walmart’s plans to acquire Humana, which came on the heels of the CVS/Aetna merger) suggest that a tectonic shift may be underway in the entire model for healthcare delivery. Even Apple is getting into the game, launching primary care clinics for its employees in California.

Still, it is unclear how much Amazon or other tech giants can own the end-to-end consumer healthcare experience. Major retailers like CVS have a built-in advantage on the treatment end with their in-store clinics – at least for now. “With the expansion of one- to two-hour delivery, consumer healthcare will become more transferable online and less dependent on the physical pharmacy,” notes Angela Edwards.

How CPG Companies Can Adapt

Winning in an environment increasingly dominated by Amazon requires marketers and their agencies to deploy a specific set of resources and insights. In recent years, CPG companies that have worked successfully with Amazon and cracked the overall code on e-commerce have embraced the need for change. Specifically, their leaders have recognized that attempting to retrofit a traditional sales and marketing structure to the current digital environment does not work. Traditional organizations are relationship-based in order to deal with brick-and-mortar retailers, while etailers are data/algorithm-driven and demand specific expertise in everything from product development and packaging to advertising and content creation.

While experts advise against adopting a one-size-fits-all approach, the most successful e-commerce organizations all have a few characteristics in common:

  • The ability to make decisions quickly: Given the rapidly changing nature of e-commerce, a company must be able to make major budgeting decisions almost instantaneously. Marketing departments can help to achieve this goal by giving decision-making power to those directly managing accounts and by establishing budget thresholds to be used at account managers’ discretion, in addition to advocating for ROI flexibility (i.e., adjust standards and expectations to allow for test and learn) as the industry evolves.
  • Forward-thinking leadership: The organization always needs to be thinking about where the industry will be two, three or 10 years down the road. This means installing leaders who are excited about the e-commerce evolution and see change as an opportunity. For marketers, the days of confining e-commerce to an afterthought are over. Marketers must bring e-commerce leaders to the table in all stages of the conversation, from initial planning all the way through specific campaign executions, and educate their teams about top priorities including content, branding and SEO.
  • A willingness to fail: There are growing opportunities for brands to emerge as winners across Amazon’s many platforms, but these strategies come with a significant amount of uncertainty and risk. Take Alexa Voice deals, for example. A brand may be the first item a consumer ever purchases via voice and then is included in that consumer’s purchase history, recommended by Alexa in the future for easy repeat purchase. But these rules are still being written and marketers have no guarantees of success.

One of the biggest takeaways in the above set of guidelines is that where others may see risk or failure, Amazon sees an opportunity. The company can also redirect quickly, just as it did by integrating the operations of Amazon Fresh with those of Prime Now earlier this year.

In terms of its next moves, there are several possible openings. “Amazon has always operated very opportunistically. I wouldn’t be surprised if they made a play to own baby and kids categories now that Toys “R” Us is in bankruptcy,” notes Angela Edwards. 

Another big growth target is the connected home. With its various smart home devices including Alexa (which is selling in the tens of millions worldwide, according to the company), Amazon is likely to expand further into categories that lend themselves to voice technology such as entertainment and services (e.g., home repair), says Angela Edwards.

Alexa’s compatibility with Amazon’s Fire TV, for example, could allow a fashion marketer to suggest a way for users to purchase an item of clothing worn by a character in a movie. Or, a food marketer could create recipe demos aimed at the home cook, given that Echo Show’s touchscreen allows users to play videos while in the kitchen. In addition, Amazon’s recent purchase of smart home security firms Blink and Ring are indications that the company believes it has innumerable opportunities to further influence how consumers not only shop but live.

As these developments play out, Amazon is likely to remain a step or two ahead of the competition. Marketers may not be able to predict Amazon’s next move, but they can –  and must – prepare for what lies ahead, says Froseth. “Marketers are natural innovators and solution seekers through their alchemy of active listening and empathy with their customers. They still have the capacity to surprise and delight their customers – and frankly make all of our lives a little easier – in a marketplace that, as consumers, we have the ultimate control over our choices.”


By Heidi Froseth, EVP of the shopper commerce practice, Epsilon Catapult

Heidi Froseth

Amazon seems to have its eyes set on ruling the entire commerce world. And with its bullish, smart, test-and-learn approach to innovation, it’s not such a pipe dream. Either because it makes great business sense or because it cannot fight the trend any longer, Best Buy, for example, has reluctantly partnered with the Seattle-based giant as Amazon started rolling out its new TV models equipped with Amazon Fire.

Amazon provides many brands the chance to enter the mainstream. The commerce giant provides brands a testing platform to prove their viability and create the kind of demand that can launch them into mass, grocery, specialty or even its own unique boutiques – without all the risk. Or else, it lays the groundwork for being bought by larger CPGs and becoming part of our greater vernacular. Of course, there are some organizations that would prefer to do e-commerce on their own but are experiencing challenges that require them to partner with the dynamic giant. Ironically, consumers and shoppers still feel like Amazon is enjoyed on their terms, created from scratch, without huge brick-and-mortar experiences. Uniquely, no matter how big Amazon gets, it still manages to act small, approachable and responsive.

So what’s a brand, retailer, or emerging fledgling brand or company to do as it attempts to compete with Amazon while keeping its own brand in play, relevant and growing? Here are some guidelines:

  • Develop a clear and decisive innovation strategy. This may require investing in a center of excellence and capability focused to create, test/learn and ultimately deliver a unique proposition or solution that can only come from the marketer’s own brand. Get used to creating disruption based on future telling or emerging behaviors.
  • Consider evaluating a combined practice that merges the forces of shopper commerce; consumer and shopper insights; and category management together on the inside of the firewall working in concert to create the best offerings and interactive presentation to an ever-bifurcated, blurred and always-on consumer/shopper.
  • Create or significantly increase the company’s 1:1 media strategy, rooting it in machine learning and data to help the organization better own its communication with the consumer. Be prepared for some of the larger retailer media moguls to further tighten engagement with their sites to the point of a potential iron curtain. This can be countered by increased indispensability through unique solutions with retail partners.

About the Sponsor

Epsilon Catapult is a comprehensive global marketing innovator with a best-in-class practice in shopper marketing. Our unrivaled data intelligence and customer insights leadership combined with our world-class technology including loyalty, email and CRM platforms and data-driven creative, activation and execution create the best possible solutions and growth for our clients, their retail partners and shared shoppers in the marketplace. We curate personalized marketing to consumers across offline and online channels, during their moments of interest, that help drive business growth for brands. Recognized by Ad Age as the #1 World’s Largest CRM/Direct Marketing Agency Network, #1 Largest U.S. Agency from All Disciplines, #1 Largest U.S. CRM/Direct Marketing Agency Network and #1 Largest U.S. Mobile Marketing Agency, Epsilon employs over 8,000 associates in 70 offices worldwide. Epsilon is an Alliance Data company. For more information, visit and follow us on Twitter @EpsilonMktg.

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