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The Pros And Cons Of Amazon For Vendors, Retailers

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The Pros And Cons Of Amazon For Vendors, Retailers
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Vendors and retailers have different strategies to face the competitive threat presented by Amazon.com, Inc. (NASDAQ: AMZN). While some view Amazon as another major point of distribution, others have a limit presence on the platform or have entirely avoided the company’s websites and services, Citi’s Kate McShane said in a report.

Amazon Outpaces Brick-and-Mortar

Traffic trends at US brick-and-mortar outlets have been under pressure over the past couple of years, declining by an average of 4 percent y/y every month since mid-2014. On the other hand, unique visitors to Amazon.com have risen by an average of 16 percent y/y per month over the same period. This ongoing shift is the main reason for heightened interest in Amazon, McShane commented.

Related Link: Ask Siri: How Will You Keep Up With Amazon's Alexa?

Pros Of Partnering With Amazon

McShane enumerated the benefits of partnering with Amazon as:

  1. High traffic levels: Allow to expose product to a wider base of potential customers
  2. Product referrals: Specific sections drive complementary purchases
  3. Lower relative spending requirements: Set up and maintain Amazon store at a significantly lower cost than owned ecommerce site
  4. Leveling of price-based playing field: Amazon is no longer undercutting other wholesale accounts on price

Cons Of Partnering With Amazon

The analyst mentioned the advantages of focusing on one’s own direct-to-consumer business as:

  1. Control over brand building: Amazon’s branding options are limited
  2. Creating a relationship with the customer: Visitors to Amazon sites are largely loyal to Amazon, rather than to a brand
  3. Products becoming commoditized on Amazon sites: Competition on Amazon is largely price based, eroding margin and brand equity
  4. Retailers following a store-based strategy: Retailers often attract customers with “the treasure-hunt aspect of the instore shopping experience, something that cannot (as of yet) be replicated online.”

Posted-In: Citi Kate McShaneAnalyst Color Top Stories Tech Best of Benzinga

 

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