With movement restrictions brought about by the pandemic, eCommerce has boomed. As customer demand rises, eCommerce must find ways to improve its services and profits. And with the biggest slice of the pie, everyone is on the lookout for Amazon’s next big thing. Indeed, when we examine Amazon trends, we can better understand what buying and selling will look like in the future.
In this episode, founder and CEO of Orca Pacific John Ghiorso shares his insights on how Amazon trends might change and possibly define the future of eCommerce. John also dives deep into retail media and how it can benefit businesses. Lastly, we learn the edges and pitfalls that eCommerce brands may encounter.
Tune in to this episode and find out the major eCommerce and Amazon trends that you should look out for.
Click here to read transcript
[05:02] So for the folks who maybe weren’t listening a couple of years ago when we recorded the first episode, let’s start off with who you are and what you do.
- Yeah for sure. So I am the CEO and founder of a company called Orca Pacific. Historically, we’ve been a full-service agency focused on Amazon. More recently, we are a full-service agency focused on global eCommerce so a lot has changed for us in the last 12 months. And just about a year ago, we announced a merger with MightyHive and S4Capital who’s a global marketing services firm across kind of all domains in digital marketing services.
We currently have about 60 folks here in the US, most of whom are in Seattle and kind of our home office. Then, we have about another 40 or 50 across global teams and happy to go into more detail on what we do but I think that’s the highlights.
[06:00] Okay, So very well established player in the world of online marketplaces, on Amazon in particular. And so what we want to talk about today is, we’re going to use the rearview mirror a little bit first, and then we’re going to use the crystal ball a little bit second. Over the last couple of years since you and I recorded an episode last, obviously, there’s been a lot of changes in the Amazon ecosystem and in eCommerce in general but think about the ones that have had the greatest impact on you and your clients’ business over the last 6, 12, 18 months on Amazon in particular. What are some of those?
- The first one that stands out is COVID and I won’t spend a ton of time here because I don’t want to repeat stories that people had heard now 10 times over. We all know what COVID did in terms of consumer demand and everyone was at home and buying things online, and happy to get into detail there if you want. But I do think probably the most important takeaway of COVID for our industry is that it did genuinely accelerate the adoption of eCommerce across North America, and I would argue globally by, I would say, probably three to five years. I think largely, the changes that you saw in consumer behavior were inevitable but they were basically sped up.
And as we’re coming out of COVID, at least in North America, we’re seeing a lot of that acceleration and consumer adoption of eCommerce being relatively sticky. Some people have gone back to stores, brick-and-mortar retail by no means is dead but more and more acceleration and adoption of eCommerce.
I think some of the other big trends over the last couple years, in particular with Amazon, has been the increase in pay-to-play nature of the platform. The dominance now of paid media in any Amazon strategy on… it is just complete table stakes. At this point, it is no longer negotiable in terms of whether you do or don’t want to play there.
And I would say third more and kind of across everyone outside of Amazon is the industry-wide, more or less, adoption of retail media as a revenue channel for both kinds of your established eCommerce extensions of traditional brick-and-mortar retailers. So target.com, costco.com, walmart.com, etcetera. All coming out with their own retail media offerings as a way to basically increase a very high margin revenue stream.
[08:43] Let me interrupt you there. For the portion of the audience who does not know what the phrase “retail media” means, let’s unpack that.
- Yeah, yeah. Happy too. So basically, retail media is an equivalent of sponsored ads on Amazon or formerly, AMS. So it’s basically the idea that an eCommerce retailer marketplace will monetize their traffic by selling ads on their platform. So they’re, of course, making money selling products that their core business but in addition to that, there’s a second revenue stream that they can offer, or they can capture by basically offering paid placements on their site.
Now, historically, a lot of retailers have done this in a way that wasn’t, and I’ll use another kind of industry buzzword here, but wasn’t programmatic, meaning was a human-driven, “Hey, we have some real estate on our site. We’ll sell this to you for 50 grand. You can put pictures of your stuff up on banners for a month.” Walmart.com has been doing that for 10 years. Now though, what we’re talking about is more of a self-service marketplace style, bid based platform to go in and buy that ad inventory, I would say, at scale without having to actually call someone up and say, “Hey, I wonder how much you’re going to charge me.”
Amazon is the case study in this, so everybody is chasing Amazon’s success. They now have a $3 billion run rate ad business which is an entirely incremental revenue stream and very, very high margin because you’re… unlike their core business where you’re selling products which is the hard way to make money, they’re selling bits. They’re selling digital real estate, yeah. It has almost zero cost associated with it. So very high margin business, but a very brilliant thing for them to do. And it’s been very effective. And now, all of their competitors are looking to go replicate their success. Some are further along than others.
[10:52] This puts a huge pressure on brick-and-mortar as though they didn’t have enough pressure already because brick-and-mortar doesn’t have the ability to do this. Brick-and-mortar needs to make a profit on every bottle of bleach, and every loaf of bread, and every can of dog food. From what it sounds to me, Amazon could literally sell all of this stuff at their cost and still make a ton of money every year because they’ve got $30 billion dollars and rapidly growing of ad revenue coming in that Target in a big box store, doesn’t have.
- Yeah. In a way, I do think that brick-and-mortar, especially grocery retail, has in some ways been notorious for trying to capture dollars outside of their actual product margin in terms of slotting fees, and marketing allowances, and other things. So they’ve found ways to kind of do the same thing. It’s a different approach. It’s basically leveraging their scale to just kind of squeeze their vendors and suppliers for more money which they’ve been pretty effective at.
Those fees are disconnected from any actual upside for the brand. Safeway charging you a slotting fee does nothing for you besides get your product on the shelf. I see the big difference with Amazon and other retail media is if it’s done right, it’s self-sustaining. Because right now, on Amazon, even though it’s gotten more competitive, in most cases, for every dollar you spend, you’re making a buck 30, or a buck 50, or 2 dollars in a data-driven demonstrable way versus just the retailer sticking their hand out and you’re kind of forced to pay up. So I think that unleashes…
[12:32] Let me interrupt though. Is that because when someone clicks on an ad, yeah, Amazon’s making money because they got the click. But also because now the manufacturer’s product is getting shown because of the click and some percentage of the people are going to buy that product. Whereas the shelf space fee, in theory, should do the same thing. The more shelf space you have, the more that you would sell, but it’s not as a direct relationship as an ad click.
- Yes. I think that’s a good way to paraphrase it. And I would say even the same goes for “marketing activities” in traditional retail where yeah, maybe you get a picture of your product in their newsletter they send out but everyone throws it away anyway. So it doesn’t really do anything besides ask you 300 grand to pay off so they keep your product in stock.
Where with retail media, again, if it’s done right because I’ve seen some examples of it, maybe not having the best ROI. But if it’s done right, it should be a really genuine kind of win-win for both the retailer and the brand. And that means, that when there’s a true, kind of, justifiable monetary incentive behind something, it will grow much, much larger than just, kind of, a way to extract more margin.
[13:53] On the shift from organic to pay-to-play on the Amazon platform, what has been the biggest complaint that you hear from your clients? Or are they not complaining? Maybe they’re cheering.
- Our clients, not so much, right? But I think that, I’ll speak to the industry more broadly. I think there’s a bias, and I would say any agency is going to have this bias, where if you have the types of brands that hire an agency, you’re going to have the types of brands that are generally more bullish on Amazon, right? There’s a bit of a bias when I look at our clients.
When I think about the industry more broadly, There is a level of cynicism around, “Well, Amazon just created another way to make us pay, to cough up dollars.” And you could argue that. I think it depends on what view you have. Probably the biggest complaint is that it used to be when you were on Amazon, everything was more, sort of, organic. Meaning the success or lack thereof of your product was more based around the, sort of, natural resonance it had with the customer. Now, there was a lot you could do with content and other things to help improve that.
But now, you could argue that even if your product is good, and it has good content, etcetera, half, five out of ten of the first placements on a given page are paid. So even if your product is good, and you have good content, good reviews, and all those things, if you’re not paying to show up on the paid side of it, you’re just going to get your share eaten away over time. So it’s a double-edged sword because there is that downside.
The upside, however, is if you’re a new brand, if you’re an upstart, or you’re just looking to go out and be more aggressive and capture share, you have a much bigger gas pedal now to slam your foot down on than you used to. So it goes both ways, right? If you’re on the more aggressive side, there’s a bigger upside. If you’re on the more conservative side, there’s a bigger downside basically.
[16:06] Yeah, yeah. And I’ve been neck-deep in advertising, and studying advertising, and figuring out ways to make ads, my campaigns more effective and I’ve learned some pretty crappy things in the last week in particular. And so if I was a new brand, I would actually very much favor this because now I have more real estate where I can outsmart, hopefully, through my ad strategy, my competitors. Because in the old days, when ads didn’t occupy as much of that real estate, you had to give away a whole bunch of products, or do a bunch of coupons, or do whatever you could to stimulate sales velocity so that you could rank organically. Maybe you were doing it with ads, but there were a lot of other grey hat techniques that people were using as well.
- Yeah. And again, you can be just as aggressive. It’s just the strategies now have changed and a lot of that action is going to be funneled through paid media, basically.
[17:02] On Amazon, the clicks used to be all sponsored product ads predominantly. Now, I know there’s a lot of tools that are out there, sponsored video, and then a few other things that, I’m sure, you could do a better job of speaking through than me. Which are the go-to tools in the ad toolbox that one might use?
- I would still say sponsored products are probably 70, 80% of an average budget. It’s the lowest funnel ad placement. It probably always will be. You can’t really get much lower funnel than typing a very specific series of words and seeing a product that exactly matches that, that in three seconds you can purchase. That is as low funnel, high conversion as you get.
I think where you’re seeing a lot of the incrementality and what Amazon’s building is deliberate attempts to go up funnel, both mid. And I would say high funnel, meaning the customer’s not even necessarily searching in your category. Maybe they browsed your category two weeks ago, maybe you looked at your product, maybe didn’t. And now, you’re basing your targeting on demographics, on lifestyle, on category. Much, much higher funnel, launching new product, selling, promoting a brand, etcetera. And then that mid-funnel stuff is more kind of somewhere in between more actively shopping in the category but not necessarily searching for that specific item.
I think that the one you mentioned video and there’s a couple different betas in video, having to do with video right now, I think are super interesting. We’ve seen some really good results. What’s interesting to me about video is the creative becomes particularly important. Now, historically, Amazon’s ad units were so, kind of, basic and cookie cutter. There really was no creative leeway. Literally changing a few keywords around in a headline. Yeah, that matters. You should beta test it, but it’s not going to make a 10x difference one way or the other.
Now, with an ad unit being 15-second video, that video matters because you’re scrolling on your phone and that video is either gonna capture your attention or it’s not in about two seconds. So creative, now, starts to become a real kind of differentiator which has always been the case in traditional advertising. Creative’s been tremendously important. But historically, on Amazon, it hasn’t mattered as much and I think that’s starting to change, which is pretty interesting.
[19:39] And is that something that your agency is doing with your clients? You’re helping them to do the creative or do you outsource that to an actual video agency?
- We are working on it. So our broader company does massive, extensive creative work but more on the big brand enterprise, Superbowl ad, kind of, side of things. I think there’s, basically, a gap in the market where there’s not a lot of good options for more, kind of, practical creative, I would say. It’s kind of something that’s in process for us right now. We think there’s a real need.
[20:22] Can you think of any brands that are doing a really good job of this? Is there a certain video that you’ve seen or a collection of videos where we can speak about some specifics?
- It’s a really good question. On the video side, there’s not one that immediately jumps out at me. I wish I could just find one to play. I think generally, in terms of content and creative on Amazon, and they’re not a client of ours so I won’t give a self-serving answer here. I think Anchor is always one that has been continually buttoned up and impressive. They’re a consumer electronics company. They’re always a good use case of companies kind of pushing the envelope.
And it’s interesting, I think when you say that the term creative like somebody has developed this image of this brilliant award-winning ad. That’s not always what effective creative means. Sometimes, it’s a much more practical thing getting us further. The right information in the right way so they can buy a charging cable in 35 seconds. And that matters, especially at scale.
[21:31] I think people want to see authentic ads or authentic content more than they want to see polished ads. An example of that: yesterday, I ran an experiment to promote one of my blog posts and I just fired up my screen sharing and I put myself in a little bubble down on the corner. I said, “Hey guys. This is what this blog post is about. If you’re having this problem, you should really, totally read this blog post because it’s gonna help you with this problem.”
And I did a split test comparing. Everything was exactly the same except one had a still image and one had video and I put it on Facebook. The video ad is crushing it. I’m sitting at my desk like this and it took me 90 seconds to make the video and it was done. Not a high production cost too. A video that you can think of, edit, create, shoot, and film in 90 seconds. So I can’t imagine that the experience on Amazon is going to be a whole lot different.
- Yeah. And essentially, your instincts are correct there because a lot of what we’ve seen being successful, especially with the video in search ads which is where that video plays as you’re scrolling, literally. You just scroll by it in two seconds. It is the really sort of practical videos that do well. Now, there are some that are funny, or eye-catching, or right away kind of suck you in. But for the most part, the ones that resonate, that do well are not splashy branding. They’re like you’re looking for a product. Here’s the solution. Here’s how it works. Here’s someone using it for 15 seconds. And at least that gets you interested enough to go to the detail page and that’s the idea and then hopefully purchase. But yeah, it is interesting.
A lot of this activity on Amazon, now they are trying to become more of a place where people sort of browse, and shop, and discover. I think they’re doing a good job but 90% of the purchases on Amazon are spear fishing. It’s “I need inserts for running shoes.” “I need a new shirt.” “I need a hat.” Whatever. And very specifically going after our category and trying to make a quick decision. I think there was a stat. I may get this wrong so I apologize if it’s off. But in rough numbers, I think it was something like 30% of purchases on Amazon, the decision is made in less than three minutes. It’s crazy.
[23:53] I’ll bet you 70% of my purchased decisions are made in less than two minutes on Amazon. Because I know what I’m looking for, I type it in, I look at the reviews, I have a quick look at the picture, I click checkout, done on my phone, and that’s why I love Amazon. Because you can just get it done so quickly. Alright, so we started this conversation off with the rearview mirror. Are there any other major shifts that you wanted to speak to before we whip out the crystal ball and tell everybody how the world’s gonna turn out?
- I could probably dig deep and find a few but I think the ones I mentioned are, to me, the big, big trends.
[24:30] Going forward, Amazon is facing an increasing amount of competition. Walmart is getting more traction than they have in the past. They’re growing very, very quickly. And many more marketplaces are being created or have been created as of late. All of this equates to an increasing amount of competitive pressure on Amazon who has a pretty significant lead at this point in time. Do you see that? How do you see all that playing out?
- This is a super interesting question and just to paint it, let’s say maybe on a five-year time horizon, which is long enough to have some reasonable predictions, right, not like science fiction future. So in five years, I see, generally, the competitive landscape looking similar to today in terms of share but eCommerce mean much more significant as a channel. But generally, the players maintaining their, sort of, relative share.
[25:27] So bigger pie, everybody has the same sized slice.
- Roughly, yes. But I think there are a couple exceptions to that. And I think one of them, in particular, is going to be in grocery. I think grocery is much less kind of, it’s much harder to predict. Let me say it that way. Because the idea that one of the biggest established players: Walmart, Target, Kroger, in particular, could really leapfrog Amazon in eCommerce. That is a real possibility. They have far better supplier relationships, they have far more scale, they have thousands of brick-and-mortar locations, which obviously can be used for things other than people walking in to shop. They’re being used as for distribution centers, they’re being used as a buy online, pick up in-store locations and all of that…
And then, I think even that term of “What is eCommerce? What is brick-and-mortar?” That gets very fuzzy but generally, in this sort of new commerce landscape, I would absolutely not count those guys out. They have a lot going for them and they could really pose significant competition to Amazon in that category. I think when you get into hardlines, I think Amazon’s basically won there and no one’s going to displace them. They already have just massive penetration in some of those categories.
And then I think softlines is interesting. I think softlines fashion is certainly where Amazon is pretty dominant in the basics. But in more of the true, sort of, inspirational fashion categories, they have room to improve, I would say. And I think they do face potentially a death by a thousand cuts phenomenon where there’s a lot of smaller marketplaces and niche players that could capture the majority of the eCommerce volume in fashion.
And then I think you have this sort of wildcard, relatively new entrance in this whole dynamic, which has traditionally been big brick-and-mortar retailers, eCommerce sites. And now, it’s kind of in the dynamic for a decade. But now, you have Instacart. I think it’s very impressive, and they’re doing some really interesting things. And I think they pose a legitimate, across the board, a competitive threat to Amazon. You have Shopify and other direct-to-consumer players that have the opportunity to, sort of, circumvent Amazon in a way that no one has really been able to do in the past. So I would say my…
[28:20] Sorry to interrupt you. I want to go down the Shopify rabbit hole for a minute because it was about a year-ish ago, they announced that they were going to offer two-day shipping, I think nationwide. They were going to build up fulfillment centers. There was a lot of excitement at the time about them becoming a real competitor to Amazon because they have this huge network of stores. They were going to be able to leverage that infrastructure combined with what they were going to build out to make the two day shipping. Is that playing out according to plan? Is it ahead of schedule? Behind schedule?
- I’m actually not super in the weeds on Shopify, just to be transparent about my expertise. Historically, and still, I’m really focused on retail and marketplace platforms. So to me, Shopify is a little bit over here. I think it’s super interesting. I will just say, generally, I’m not probably as up to date on my news as others are. But I think anyone who’s trying to build a fulfillment network to rival Amazon, that is a very serious undertaking.
One thing that people tend to forget is that Amazon has been around for 25 years. This isn’t something they just figured out in the last five or ten years. They’ve been building this physical infrastructure for almost three decades. And that’s how long it actually takes to build this stuff. That is still probably their single biggest competitive moat. It’s their actual physical infrastructure because it’s so much harder to… You can’t shorten that build cycle. You can do that with digital infrastructure, you can build it very fast but the physical buildings and everything that goes into that is tough.
So that’s when you think of these big competitors, that actually is why Instacart is probably the most interesting competitor right now for me because theoretically, they don’t need physical infrastructure. They’re using a network of basically freelancers to serve that function and the existing physical infrastructure than of all the upstream stuff that the other retailers have already built over a hundred years. So they’ve potentially solved the access to the customer and the last mile issue. And that, I think, poses a really significant threat to Amazon.
[30:45] Which is a great segue to the drones. Where’s Amazon at with their drones?
- Where are the drones? I thought we’d have some by now. I thought I’d see one or two flying around Seattle. I don’t know. I think the problem with drones is the same problem that you have with autonomous vehicles, in general. Because by the way, if the drones aren’t autonomous, they’re pointless. If you need a drone driver for every drone…
[31:10] That doesn’t scale.
- So the issue with drones is that if one time, one of those things falls out of the sky onto someone’s head, that just cost you a hundred million dollars. The same thing with self-driving cars. It doesn’t work if it’s 99.9% effective. It’s not good enough. So it’s that last portion of a percent that they have to get right before they can release it into the wild.
I will say two years ago at a conference, at the MARS conference, they didn’t do this past time because of COVID. But two years ago, they showed some kind of first data, announced the first release footage, I’m sure they’re far beyond this now, of their latest drone. And it was incredibly impressive. It could use machine vision to identify a clothesline from 50 feet in the air in someone’s backyard to make sure they didn’t land on that. Something that a human eye could not see. Dog ran out, raise back up.
I think they’re getting close. I really do. And actually, I did see, for the first time in Seattle, one of the little autonomous delivery robots they have on wheels. Though I think it was stuck when I saw it. I was driving so I couldn’t get out and mess with it. I think in five years, we’ll start to see that. Although I also thought we’d have self-driving cars by now, to be honest. So did a lot of other people. Just hasn’t happened yet, but we’ll get it.
[32:39] How about Amazon’s experiment with the brick-and-mortar stores where you can walk in, and just put stuff in your bag, and walk out?
- That, I think, is a game-changer. I think it’s totally brilliant. I think in five years we’ll have hundreds, if not thousands of locations with this technology. Including the 400 or so Whole Foods but also a lot of other physical retail formats they’re testing. To me, it takes one of the biggest pain points of physical retail out of the equation, which is checking out is annoying. And it takes time, and you have to wait, and it’s not a great experience.
[33:15] Oh, come on. People love standing in line.
- Yeah, yeah. This is why I don’t go to Costco. I love Costco except for standing in line. I refuse to go there. I also think there’s one other sort of… well there’s two other really interesting, maybe less obvious, plays here besides just the fact that customers don’t like waiting in line.
One is that you can make much smaller formats for a brick-and-mortar store. So think about basically a walk-in vending machine. The size of, let’s say, a small walk-in closet. That would never work before because the entire square footage would have been taken up by the checkout counter and the person that has to stand there. Now, airports, malls, and lobbies, you can have something that’s bigger than a vending machine but smaller than the smallest store. I think that’s really interesting.
Two, you can potentially monetize the data stream that those physical interactions are throwing off. So you basically have this physical world consumer data because all this is done with cameras and sensors that mirrors the level of data you’d have in an eCommerce environment versus what a traditional grocery store has which is what did you buy when you checked out and what phone number is attached to your cart. That’s it. That’s all they have. Now, you have the entire customer journey basically datafied, probably not a word, from start to finish, linked back to the prime account. I think that’s going to be really important at scale.
[34:52] Let’s finish off our discussion today going back to Walmart. I read recently Walmart’s growth rate, I believe, has accelerated as of late. They’ve really been getting a lot of traction. I personally don’t shop. I’ve shopped in a Walmart store but I almost never, ever, ever go to walmart.com. I would assume that that’s probably the second biggest platform for you and your clients. Would that be a correct assumption? Okay. So what’s going on with Walmart and what are they doing to curb, to make their slice of the pie bigger given the headwinds called Amazon that they face?
- I think that Walmart is finally putting real effort behind this idea that their physical stores and infrastructure are an asset not a liability. They’ve given lip service to this for a number of years and I think finally, they are leveraging that. In particular, their focus so buy online, pick up in-store, it has been extremely successful during the pandemic.
Frankly, if you ever use it’s just a great customer experience. I spent some time in rural Oregon, and Walmart’s your only option, really, out there. And it’s a great customer experience. You get everything you want online, it’s super easy to shop, you show up, they just load in your car, and you’re done. In fact, I would say it’s in some ways easier than having someone deliver it to your house and have to go through all the bags and put it, do all that.
So anyway, I think that’s been super successful. I think they’re also continuing to innovate in their actual eCommerce platform. Realistically, their eCommerce platform is not largely differentiated from Amazon or anyone else. So I think it is that connectivity back to the store that is kind of their best opportunity to remain relevant and continue to succeed. And I would say especially since the pandemic, I think they’ve really used that to their advantage and to the advantage of their customers.
[37:04] Now Walmart bought another online marketplace a number of years ago, and I’m struggling on the name.
- Yeah. Marc Lore got them.
[37:17] Help me out. We’re both…
- Yeah, sorry. Yeah. Jet. Is that what you’re talking about?
[37:21] Yeah. Was Jet toast now? Shut down, nothing but a memory?
- More or less been merged just into the, sort of, standard walmart.com offering. I think that they picked up a lot of good people, they picked up Tag, they picked up some, probably met new customers. But for the most part, I think what they were buying when they bought Jet was an internal, sort of, eCommerce theme that was failed. I would say that probably was a win for them. Marc Lore has stuck around for a number of years and I think generally, it was probably a good investment to accelerate their eCommerce operation.
[38:03] Okay. So on a less formal note, more on a comedic note. I’m only asking this because I live in Idaho and you mentioned rural Oregon or Eastern Oregon recently. Did you know that part of Eastern Oregon wanted to, I don’t know if I’m using the word correctly, secede, or something like that, and become a part of Idaho?
- So embarrassing. Yeah, it was pretty funny. I guess Idaho was on board, right? They were like, “Yeah, sure. Come on over.”
[38:34] Oh probably. Yeah.
- I think from a constitutional standpoint, impossible. That was never going to happen. But some local politician got to be famous on the internet for a day, so there you go.
[38:48] Indeed, indeed. Good comedy. Good comedy around with when you’re having a couple of beers with your buddies. All right. Well, it’s been a pleasure to have you back on the show, John. If anyone wants to get in touch with your company, the website I believe it’s Orca Pacific or OrcaPac.com. Which one is it?
- It’s OrcaPac, yeah. OrcaPac.com
[39:13] All right. It’s been a pleasure to have you back. Thank you so much for making some time to be on the show.
- Yeah, thanks Trent. Appreciate it.
[39:20] For today’s episode, go to bright ideas.co/374. And if you enjoyed this episode, I would love it if you would take a moment on your favorite podcast listening app and like, rate, and review the show so that the algorithm will make other people aware of the show, and that’s the best way that we know how to help the audience grow. So if you would take a moment and do that you have my sincere gratitude. Thank you so much for tuning in. I look forward to having you back in another episode soon. Take care. Bye-bye.
Thanks very much for listening to the Bright Ideas Podcast. Check us out on the web at bright ideas.co.
Alright. Show’s over. I’m tired.
John’s Bright Ideas
- There is Value in Leveraging Retail Media
- Use the Right Ad Tools in Your Toolbox
- Aim for Effective Creativity
- There are Opportunities for Amazon’s Competitors
There is Value in Leveraging Retail Media
An effective way of getting your product out there is through advertising. As a result of the pandemic, more people are occupying digital spaces and making online purchases. eCommerce platforms could adopt retail media as a second revenue stream.
Retail media is when an eCommerce platform, such as Amazon, sells ad space. Selling digital real estate can generate a considerable income. It also has the added benefits of being self-sustained and a win-win for both retailers and the platform. Meanwhile, physical ads are starting to hold less weight. The amount you earn from these manual ads doesn’t offer significant benefits.
John shares, “If [retail media] is done right, it should be a really genuine kind of win-win for both the retailer and the brand. And that means, that when there’s a true, kind of, justifiable monetary incentive behind something, it will grow much, much larger.”
There may be reservations about retail media, especially for more conservative brands. There are concerns that it takes away the organic customer attraction, shifting emphasis to ad placement over product quality. But the reality remains that strategies are changing. And a lot of the action will be funneled through paid media.
Use the Right Ad Tools in Your Toolbox
Sponsored products — the lowest funnel — take up around 70-80% of an average budget. Mid-funnel targets customers who are browsing your category. However, they’re not necessarily looking for the exact item that you’re selling. High funnel means that customers are not searching in your category, yet the paid ads will still appear.
One of Amazon’s previous trends was for their ad units to be basic and cookie-cutter… There was no leeway for creatives. However, there is a growing emphasis on creatives, especially when it comes to sponsored videos.
Sponsored videos are an effective way of attracting customers. In particular, videos that show you how you can solve your problem are the most effective. These videos aim to get you to click onto the details page and hopefully purchase the product.
Aim for Effective Creativity
There are several approaches to making sponsored videos. Some brands choose to be funny, while others try to make their content eye-catching. But it’s often the more straightforward and practical videos that generate more success in grabbing people’s attention.
Note that creativity doesn’t mean that you need to develop a video worthy of an award. Practical and functional creativity is simply presenting information to your customers in a practical way. Furthermore, John says that there is a “gap in the market where there’s not a lot of good options for more practical creative.” This is something that brands can explore further.
People value authenticity rather than flowery ads. Mixing the correct information with the proper execution is key to attracting customers.
There are Opportunities for Amazon’s Competitors
John goes on to predict the future of eCommerce. He shares, “In five years, I see generally, the competitive landscape looking similar to today in terms of share, but eCommerce being much more significant as a channel. But generally, the players maintaining their, sort of, relative share.”
Amazon is undoubtedly a behemoth in the eCommerce industry. With 25 years under its belt, it might be intimidating for other eCommerce brands to compete with it.
Despite that, John believes that Instacart is Amazon’s most significant competitor.
The reason behind it? Instacart has an edge of not needing the physical infrastructure that Amazon took decades to build. It also has the potential to solve the access-to-customer and the last mile issue. Other brands that pose a competitive threat to Amazon include:
- Walmart — Their physical stores are an asset, not a liability. They are leveraging this by opening up the buy online, pick up in-store option.
- Shopify and other direct-to-consumer brands — These companies have the potential to circumvent Amazon.
- Smaller and niche marketplaces — These retailers could overtake Amazon in their fashion categories.
Given that, brands that are building physical infrastructure know that you can’t take any shortcuts. That remains Amazon’s most significant moat. On that note, Amazon is also constantly coming up with innovations. Amazon trends to look out for include delivery drones and cashier-less stores.
What Did We Learn From This Episode
- With consumers taking up more digital space, eCommerce brands can increase their revenue and convert customers.
- Retail media is beneficial for both the brand and the retailer.
- Choose the appropriate format, funnel, and platform for your ads.
- Applying effective creativity will attract more customers.
- Be aware of your brand’s strengths and weaknesses and use them to your advantage.
- Think outside the box and offer innovative services to your customers, as is the case with Amazon trends.
[05:07] – John introduces himself
- John is the CEO and founder of Orca Pacific.
- His company has transitioned from a full-service agency focused on Amazon to global eCommerce.
- Orca Pacific has merged with global marketing firms, MightyHive and S4 Capital.
[06:39] – eCommerce and Amazon Trends
- COVID has influenced consumer demand and the global acceleration of the adoption of eCommerce.
- eCommerce is gaining traction; this will stick even post-COVID.
- One of the most notable Amazon trends in recent years has been the increasing pay-to-play platform.
- Brick and mortar retailers are starting to adopt retail media as a revenue channel. They do so to increase revenue streams.
[08:51] – What is retail media?
- Retail media is the monetization of traffic by eCommerce retailer marketplaces. They do this by selling ads on their platform.
- By selling digital real estate, retail media provides eCommerce platforms a second revenue stream.
- Amazon is the blueprint for retail media.
[11:18] – The challenge for brick and mortar retailers
- Brick-and-mortar stores leverage their scale to pump more money out of their vendors and suppliers. However, they do not present any significant benefits for the brand.
- Meanwhile, retail media is autonomous and has more significant financial returns.
- Paying money to obtain more shelf space is not as direct as getting an ad click.
- If done correctly, retail media could be beneficial for both the retailer and the brand.
[14:07] – The industry’s responses to Amazon trends
- There is cynicism in that Amazon is finding another way to extract money.
- The biggest complaint on the pay-to-play shift is the erosion of organic customer attraction. Product quality doesn’t matter as much as paying to be advertised.
- For newer and more aggressive brands, this shift provides opportunities to accelerate their presence.
[17:21] – Equipping your ad toolkit
- Sponsored products are the lowest funnel you can reach for.
- High-funnel ads target customers that are not necessarily browsing in your category.
- Mid-funnel ads target customers who might be searching in your category but not specifically looking at the item you’re selling.
- Sponsored videos are effective tools in attracting customers.
- With its emphasis on creativity, videos can grab customers’ attention in just a few seconds.
[19:49] – What is effective creativity?
- There’s a lack of practical creatives in the market.
- Effective creativity doesn’t mean creating top-notch images and videos. It’s the practicality of presenting the appropriate information in the right way.
- People prefer authentic ads over polished ads.
[24:56] – Amazon trends to look out for and predictions on its competitors
- eCommerce could become a more significant channel. The players in the competitive landscape may be maintaining their relative share.
- Groceries could leapfrog Amazon in eCommerce.
- Amazon is strong on the hard lines, but they can improve on their fashion categories.
- Smaller and more niche players could overcome Amazon.
- Instacart, Shopify, and other direct-to-consumer brands can be a threat to Amazon.
[28:55] – Will Instacart and Shopify overtake Amazon?
- Amazon has built its physical infrastructure for almost three decades.
- There are no roundabout ways to build it easier and quicker. And so, Amazon’s physical infrastructure is its biggest strength.
- Instacart is their most interesting competitor because they don’t need physical infrastructure.
[30:50] – Amazon trends: drones and cashier-less stores
- Drones will be put into action in five years and only if they’re 100% perfect.
- Cashier-less stores solve the customer pain point of having to wait in line.
- These stores minimize the formats of brick-and-mortar stores and monetizing the data streams.
[35:26] – Walmart’s customer experience
- Walmart is starting to treat its physical stores as an asset.
- It’s convenient to buy your groceries online, show up at their store, and have the goods loaded onto your vehicle.
- Walmart’s biggest advantage is the connectivity back to their physical store.
- Jet was a good investment for Walmart because they picked up many new people, tags, and customers.
John Ghiorso is an eCommerce thought leader with a reputation for articulating industry perspective and forecasting shifts within the Amazon marketplace. He is the founder and CEO of Orca Pacific, a full-service agency dedicated to growing the Amazon business of consumer product brands.
He leads a team of over 50 former Amazonians and industry experts who develop digital marketing strategies on the cutting edge of eCommerce. John’s insights have been featured in prestigious publications such as The Wall Street Journal, The Washington Post, Vox, Modern Retail, and Digiday. He speaks at mainstream industry events on a range of topics from retail and advertising strategies to the future of eCommerce.