L2 released an animated video today with its Intelligence Report: Amazon. Here are a few highlights:
– Amazon spends ¾ of its operating expenses on fulfillment and technology.
– Amazon is muscling brands in a fashion that makes Walmart in the 90s look cuddly.
– Amazon accounts for 26% of U.S. and 6% of global e-commerce.
– Amazon’s success is based on three principles: low price, large selection, and fast and expensive fulfillment. The network of third party sellers ensure almost all brands have SKUs on the platform whether they want to distribute on Amazon or not. Pricing algorithm change prices as often as several times a day to ensure having the lowest price. Amazon has also made investments in fulfillment centers with an eye on same-day delivery.
– Nearly every CPG brand has adopted the retailer as an official distributor. Amazon has introduced Pantry to incentive bulk orders of household items. Procter & Gamble has entered a partnership with Amazon in which the e-tailer uses P&G warehouses.
– Amazon has rebranded sectors of its market to lure luxury brands to distribute on the platform. Burberry has traded distribution of a limited set of its products (fragrances) in exchange for help controlling the gray market that used to sell its products on Amazon. LVMH and Estée Lauder have stated a no-engagement policy with Amazon. Yet, thousands of their products can be found on the platform.
– To avoid looking like befuddled prey, brands are responding to Amazon with loyalty programs, last mile partnerships, and in-store mobile apps. For more on close to 30,000 SKUs from 315 brands across the six verticals of Beauty, Hair Care & Color, Home Care, Fashion, Personal Care, and Watches & Jewelry, download an excerpt of the study.