If you haven’t seen Scott Galloway’s take on why Amazon is killing brands, you should.
He believes that Amazon and a billion consumers have effectively conspired to bring about the end of brands and retail as we’ve known it.
By his reckoning, eroding the premium commanded by brands through aggressively competitive pricing, Amazon has returned the ‘value’, or ‘cost’ if you prefer, of all that branding directly to the consumer, and consumers have been happy to take it.
It’s a controversial view, but one he demonstrates in his compelling talk very simply.
On-stage, in front of a live audience, he asked Amazon’s Alexa – their voice-activated interface – to order a pack of batteries. In her trans-human, velvet voice, the only brand Alexa would suggest was Amazon’s own brand, nearly half the price of a Duracell battery.
Without any of the visual cues (logo, packaging, messaging, placement) to nudge our decision towards Duracell, a tried and trusted brand, customers are more likely to accept the choice given. For those not satisfied with that, they can go online to check the customer ratings for the AmazonBasics battery compared with Duracell. As Galloway points out, the difference is so tiny, customers will obviously ask: is this difference really enough to pay twice the price?
If, as we like to say, a brand is a short-cut in evaluation, then Amazon’s tactic is to cut out the short-cut and replace the method of evaluation with their own – four stars out of five in this case.
Galloway believes this is only the beginning.
Amazon spent $13.3 billion on R&D in 2016, ahead of Alphabet (Google) and Intel. And the company’s expansion of own-brands into an ever-widening range of categories is astounding. Through investing in technology, Galloway sees a future when all essentials get delivered to your home or workplace automatically, without ever having to think about which brand to buy ever again.
Time will tell to what extent this really happens, but it does mean Amazon can no longer be seen as just a sales channel. Amazon is a competitor. And brand gatekeeper.
What now for brands?
Galloway’s is a controversial thesis, and it’s just one view.
Time will tell how far beyond FMCG products this trend goes. There are many kinds of products that may not fit with this vision, but Amazon’s growth as a major sales channel is certainly a challenge.
One irony is Amazon is still a ‘brand’, it’s just that their brand is built around technology and achieving scale over profitability. Jeff Bezos may want Amazon to become the only brand, but while they are working feverishly to become indispensable, they are still susceptible to changes in consumer behaviour, sentiment, etc.
Brand will continue to be important for many categories. While Amazon may present a challenge to how brands create a connection in consumers’ minds, brand strategy will continue to be about exploiting an opportunity to gain disproportionate advantage over the competition.
This puts even more focus on asking what real additional value do you, as a brand, bring to people’s lives? What is it that’s indispensable about your product or service for people? What consumer need or desire does it really meet, beyond the purely functional, and how easily can they meet it?
For some, it can be about providing expertise no other can provide. For others, it can be about a digital-first business reinventing the brick-and-mortar store to let experience drive the brand.
If necessity is the mother of all invention, then there are some interesting times ahead.