This is the latest installment of the Amazon Briefing, a weekly Modern Retail+ column about the ever-changing Amazon ecosystem. More from the series →
Amazon made big moves this year to maintain its spot as the go-to e-commerce platform.
Advertising, for example, became a major growth driver. In October, Amazon announced that its advertising revenue has topped $12 billion in the third quarter — thanks to big offerings like NFL on Prime — up 26% from the year before.
Over the last few years, many retailers increased their advertising budgets on Amazon, partly because the company added many new ad units aimed at wooing larger advertisers interested in splashier brand campaigns.
However, Amazon still faces threats from competitors like Walmart, Meta and TikTok. In response, it’s focusing more on emerging technology, beefed up ad units and working to include AI offerings in its retail business.
These changes indicate shifts in how Amazon works with competitors and brands. Here are 3 predictions analysts and experts have shared with Modern Retail as to how the Amazon landscape will change in 2024.
Amazon may become more amenable to partnerships with competitors
Amazon is notorious for undercutting competition. For example, in November, the FTC alleged that Amazon was punishing its own sellers who sold cheaper products on Walmart’s e-commerce platform, Jet.com. But in 2024 we may see Amazon start to form bigger partnerships with its e-commerce competitors — namely Shopify.
One about-face this year hints at a change in strategy. When the feature was first announced in April, Buy With Prime competed directly with Shopify’s instant checkout, Shopify Pay, which was quickly gaining traction and striking huge deals with Facebook and Google. Buy With Prime let brands use their Prime credentials for purchases off of Amazon.
Shopify went on the defense by dissuading its sellers from using Buy With Prime, warning sellers that it will not protect merchants who use Buy with Prime against fraudulent orders, and telling merchants that Amazon could steal customer data and charge customers incorrectly, according to a memo sent to sellers.
However, by September, Amazon and Shopify partnered on Buy With Prime, allowing Shopify sellers to advertise, sell and use Amazon delivery to fulfill orders. Amazon’s attempt to undercut Shopify with Buy With Prime in April evolved into a mutually beneficial relationship, or a “truce” between the two companies in September, according to Mark Lewis, founder of Netalico Commerce.
The move points to the possibility that Amazon may be rethinking how it works — or doesn’t work — with other competitors.
“Shopify has grown enough,” Lewis said. “And the merchants on Shopify have grown enough that [Amazon] realized that they can’t just squash them… they’re better off trying to partner with [Shopify] and get some revenue.”
Lewis predicted that as Amazon makes further investments in advertising, we will continue to see big partnerships with competitors as Amazon fights off bigger threats from Tiktok and Meta.
Amazon could start leveraging its huge investments into the cloud to pull ahead in the AI race
While many of Amazon’s artificial intelligence tools aren’t consumer-facing yet, the company has made huge investments into AI in its cloud computing arm, AWS.
In April, Amazon introduced Bedrock, a service that allows customers to build generative AI applications using AWS. Then, in November at AWS re:Invent, Amazon’s annual cloud conference, Amazon introduced Q, a generative AI chatbot for businesses. Amazon claims the tool helps companies create and monitor content, data and code based on a firm’s existing information.
For Steven Dickens, vp at analyst firm Futurum Research, it’s a matter of time as to whether Amazon will use AWS to try to bring more AI offerings to the consumer side.
While Amazon has already started using generative AI to help sellers quickly write product descriptions, Dickens said he would be “shocked” if Amazon doesn’t continue to push its existing infrastructure with AWS to try and pull ahead of the e-commerce race against Walmart and Tiktok.
“AWS has got comparable tools, if not better, in certain spaces — equally on a par with Google and Microsoft that are a technical advantage over somebody like a Walmart or Target or a TikTok because they’ve got that technology in-house,” Dickens said.
Corporate brands are leaning heavily into Amazon, and smaller brands might get lost in the shuffle
Amazon won big in advertising this quarter, which is why Laura Meyer, founder of the agency Envision Horizon, said Amazon will continue to make huge investments into TV and streaming advertising.
Amazon has been building out its ad platform over the last few years, using primetime media partnerships like the Thursday Night Football to offer advertising units that focus more on brand awareness. That means large brands, which historically haven’t invested heavily in Amazon’s marketplace-focused ad units, will start putting more money into bigger marketing campaigns with Amazon TV and other properties like Twitch.
However, Meyer warns that as bigger brands start selling on the platform, smaller brands might need to fight to really succeed on the platform.
“Now that the bigger players with deeper pockets and notoriety are getting attention, [smaller brands] are going to get lost in the shuffle now, so they have to really fight for buyer’s attention and figure out a way to break through the noise on Amazon,” Meyer said.
Amazon news to know
- Amazon’s push into video advertising will increase its revenue by as much as $5 billion, according to a Bank of America report.
- Amazon workers say the company is “quiet firing” them — essentially trying to force them to quit rather than implementing layoffs, Business Insider reports.
- There’s a growing cottage industry of law firms helping Amazon sellers restore their suspended accounts, writes the Financial Times.